Oil and gas innovation is in a slump. According to the Oil and Gas Technology Radar report prepared by Lloyd’s Register Energy, 47% of executives claim they have fallen short of their innovation goals. This is double the amount from 2014, and opens the discussion about the role of innovation in today’s oil and gas industries. What has changed, and what can be done to reverse the trend? We’ll dive into this important discussion, and also show innovation efforts that are moving forward today.
What’s behind the lack of innovation?
Until last year, oil and gas in the United States was experiencing a renaissance. Technological innovations such as fracking opened production in new reserves and restarted it in others. United States oil production was at its highest levels in decades. This was supported by rising oil prices, which gave companies the financial incentive to invest in growing technology.
Today, the industry is different. Oil prices dropped to half of what they were at their peak, and firms have changed their approaches to investing in innovation technology. The Technology Radar report outlined the following findings for upstream oil and gas companies:
- Crossover Technology: Firms today understand the need to collaborate with firms outside the oil and gas industries. Upstream firms are using outside knowledge to improve areas including drilling, modeling and surveying.
- Cultural Barriers: Unfortunately, company culture has hindered innovation due to the unwillingness to work with third parties within and outside the industry. 40% of survey respondents believe working with third parties is vital to their innovation performance.
- Data Collection: Despite the improvements in data collection and analytics across all industries, oil and gas executives have admitted they aren’t fully utilizing these metrics. This is due to lack of data integration and relevancy.
- Deployment of New Technology: This is the biggest challenge for firms: 42% of survey respondents said their firms lacked a “culture of innovation,” meaning this idea stems from a deeply rooted habit of being slow to adapt and change.
- Negative Impact of Lower Oil Prices: Projects with shorter maturity dates are likely to be fast-tracked, while the rest are likely to be halted. Most companies are focusing their innovation goals on reducing costs and boosting efficiency.
The shift in innovation
The beginning of the Technology Radar 2015 report explains that the cyclical downturn of the past year should be a driver of innovation, not a hindrance. During the oil and gas boom, cost-heavy innovations were the focus and included deep-water and extreme condition exploration. While lower oil prices have driven a cost-reducing environment, the report explains this can be used to focus efforts on data-driven innovations. In other words, innovation should shift, not go away.
Forbes also discusses the influence of data-driven technology in these industries. The people entering the workforce grew up on technology, and will expect it to be an integral part of the workplace. If anything, their desire for data-driven efficiency and decision-making should align with employers’ growing pressure for cost-reduction.
Technology also spans various industries, meaning that the opportunities for collaboration have never been so numerous. Going back to the need to create “cultures of innovation,” 43% of survey respondents describe themselves as selective collaborators. In other words, these firms are only willing to work with a limited number of outside parties. The innovation shift needs to include a more receptive mentality toward working with downstream firms, government agencies, other upstream firms and universities.
Progress is being made
While innovation has slowed in the oil and gas industries, progress is still being made. The Eagle Ford explains in an article that massive technological innovation is being poured into the Bakken region of North Dakota. New and developing technologies include aerial pipeline surveying, automated production, and cloud-based data systems. The Technology Radar report explains how the United Kingdom’s National Oceanography Centre is working with firms to develop autonomous underwater vehicles (AUVs). Using these vehicles in place of manned ships for pipeline inspections and explorations would reduce costs.
Innovation progress isn’t limited to upstream firms. Last month, the Oil & Gas Innovation Centre (OGIC) and the High Value Manufacturing (HVM) Catapult announced their plan for collaboration, which aims to help the oil and gas industries access advanced capabilities that can help reduce costs and enhance material use.
