Companies’ revenues have fallen by about two thirds because of the collapse of the oil price over the past year.
What is more, exploration is getting trickier and more hazardous, yet demand for energy will only rise. These are challenging times for the industry but, historically, downturns lso throw up opportunities.
The industry has for decades lived in a bubble of high prices, which has stifled innovation. Those days are gone for now, opening the door to a new era where disruptive technologies can transform an industry in need of modernisation.
Some technologies are already in use, while others are in the embryonic stages. Digital oilfields, drones, unmanned underwater vehicles and the Internet of Things can all play a part in helping the industry develop.
Which of these are most deployable in the short term? Aerial drones with high-resolution cameras are already simplifying and reducing inspection times on offshore oilrigs.
A flood of new start-ups specialising in this work is entering the market, and a host of oil majors is already using the technology.
Other technology such as the Internet of Things is changing how data is analysed in real time at oil drilling platforms. Electrical pumps operating at variable speeds are connected to the Cloud so they can be monitored hundreds of miles away from a control room. Data is collected using sensors and fed to engineers, providing real-time information on temperature and flow rates. What is more, engineers will be alerted instantly when a problem is detected.
Real time analytics are also being used in enhanced oil recovery technology, maximising output at ageing fields.
More uncertain is how technologies that require an internet connection would be deployed. Cost and safety issues have so far meant there is a reluctance to install Wi-Fi on the some of the hazardous offshore platforms.
It is true, though, that deployment presents big innovation challenges for upstream companies. Nearly 75 per cent of companies say the difficulty of using technology is a key barrier to innovation, according to this year’s Lloyd’s Register Oil and Gas Technology Radar survey.
While most companies rate themselves as better than their peers at conceptualising and developing new technologies, more than half rate themselves as no better than, or below, average at deploying them.
Why is this? Oil and gas companies must meet ambitious objectives in a tighter cost environment, making the price of innovation failure very high. This risk means that there is not yet the collective will in the industry to move forward, because companies do not want to be first to use new technologies in case they go wrong.
The oil industry also needs more time to adjust to a low price era. With prices only having fallen in the past year, there has hardly been enough time for any great shift in innovation to take place.
With oil sitting at under US$50 per barrel, there has never been a greater need for the industry to collaborate – not just with itself, but with other sectors. Collaboration between upstream companies has been limited. This must change.
Crossover technologies must also flourish from aerospace, defence and even the automobile, IT and telecoms sectors. Aerospace is of particular interest to oil and gas companies because both industries require equipment that can withstand huge pressure and extreme conditions.
Upstream companies have only scratched the surface when it comes to innovation, and they must adapt to and embrace technology that will improve safety and maximise returns.
But it is not as straightforward as that – the industry needs, in tandem, to develop new ways of interpreting and integrating data to drive quicker and more accurate decisions. This will lead to myriad benefits, not least finding resources at time when it is getting harder to do so.
John Wishart leads the Energy business of Lloyd’s Register, where he is responsible for worldwide operations as well as strategy and business development.
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