Baker Hughes more than doubled its investment in research and engineering between 2001 and 2008. (Image courtesy of Baker Hughes Inc.)

Technology has long been the backbone of the oil and gas industry, and technology will provide the means of meeting tomorrow’s challenges. Drilling complex reservoirs in high-pressure/high-temperature environments, in deep water, and in harsh conditions will only be possible if there is continued investment in research.

Derek Mathieson, vice president and chief technology and marketing officer at Baker Hughes Inc., spoke at the RMI Oilfield Breakfast in early April about some of the difficulties the current market conditions place on technology development and how companies are meeting those challenges head on.

From feast to famine

“As the oil price swung very high, almost everyone had a project,” Mathieson said. The market conditions that pushed the price of oil to US $140 per barrel drove significant growth, creating a “massive change” in technology available in the market place to address challenges such as those associated with producing heavy oil and deepwater areas.

“Because of the high level of technology in the field, there was a high level of customer involvement and collaboration,” Mathieson said. “Service companies developed intimate relationships with customers.” And those relationships have become essential to the industry’s success. “If we lose this component, it will have enormous impact on R&D,” he said.

Many of the customers Mathieson referred to (independent, international, and national operating companies) still need the experience and expertise of service companies to continue their R&D projects. A fair number of operating companies have published plans for continued investment in technology for 2008, and some of that investment, according to Mathieson, is going to be spent in conjunction with service companies.

This collaboration is essential because it will allow the industry to develop the critical technologies that will allow complex fields to be developed when the economy turns around. “What we don’t want to do is stop technology investment in areas the industry will need at the upturn,” he said. In the past, collaboration has led to the accelerated deployment of new technology, and the industry cannot afford to lose that edge.

Preparing for adversity

To ensure technology is available when it is needed, companies involved in technology development need to understand the forces working against them, Mathieson said. There will be a reduction in technology projects over the next two years, and many companies will see an excessive reduction in their technology budgets.

And once again, the industry will have significant layoffs of engineers and scientists. The personnel issues the industry has been dealing with over the past decade will be even worse when the economy turns around.

One of the greatest dangers Mathieson cautioned against was the possibility of fewer collaborative projects and reduced access to rig sites, a combination of circumstances that would dramatically slow the adoption of new technology.

Another danger is the possibility that the financial uncertainties companies are contending with today will distract management from the value of new technology. “We are all pretty distracted,” he said.

If a company is going to succeed in this challenging environment, capital investment will be critical. Mathieson said. And management will have to consider the long-term cost of losing skilled and experienced workers.

In the end, successful companies will find ways to retain the people who will help them to gain ground and will continue to fund R&D through partnerships that broaden the asset base and reduce the cost.