Dr Carole Nakhle
When Thomas Edison patented his incandescent light bulb in 1879, the primary market for oil — or then kerosene, which was used for lighting — nearly disappeared. But with the advent of the internal combustion engine, oil found a new market in transportation, which still dominates demand today. And when waves of nationalization hit the assets of major oil companies across the Middle East and North Africa, they ventured into new territories, such as Alaska and the North Sea — a very different beast from the easy oil of Arabia.
The whole history of the oil and gas industry has been one of continuous challenges, matched by adaption and innovation. Many of the world’s largest private oil companies started their business in refining oil products (the so-called downstream part of the business), then gradually moved into exploration and production (upstream) as they attempted to diversify their activities and reduce their exposure to volatility of supplies and prices.
The oil and gas sector has, from its outset, always been wide open to innovation and every kind of modern technology. Technological advances have constantly shaped and re-shaped every stage of the industry, from exploration right through to final usage.
The modern collection and analysis of seismic data, for instance, is a very far cry from the simple “hit or miss” approach followed by the early explorers. Floating production storage and offloading (FPSO) and floating liquefied natural gas (FLNG) vessels are more examples of how far the industry has come.
Lately, the combination of horizontal drilling and hydraulic fracturing (or fracking) techniques has allowed the commercial exploitation of the massive unconventional oil and gas resources, particularly in the United States, that were previously considered uneconomic. This has pushed the fear of the world running out of oil (the so-called peak oil supply), which dominated the first decade of this century, at least a couple of decades further down the line.
The View From the Industry
The recent survey presented in the Newsweek Vantage report Technological Frontiers in the Oil and Gas Industry demonstrates the overriding perception in the oil and gas industry that competition is a driver, not a threat. Technology is being pursued and applied primarily to enhance the industry’s efficiency and competitiveness, which translate immediately into higher returns.
At the same time, oil and gas companies are also investing in “new” products, such as hydrogen and renewables, to support the global energy transition to a greener, cleaner future — although these remain a small proportion of the companies’ portfolio, as their commercial benefits are less secured. The decision by BP, once the classic “big oil” company, to invest massively in forecourt electricity supply points is a perfect example.
There is no reason why the oil and gas sector should be in collision with the age of renewables, with world emissions restraint, with electrified transportation or major changes in energy use or the pattern of energy demand. Big shifts have already taken place with the exponential growth of tight oil and shale gas production (along with big falls in costs) and impressive new recovery techniques in conventional oil and gas areas.
Ahead lie many more developments. The pressure for new methods is constant, and the opportunities are widening all the time. This is already being reflected in the structure of the energy industry. As elsewhere, while the major players will adapt and survive (providing they show strategic agility), new niches are opening up for smaller firms all the time, whether upstream, midstream or at the distribution and retail consumption levels.
Artificial intelligence (AI) applications and the new possibilities of digital technology will also play their part. As the new frontiers of technology open out, and systems such as carbon capture and storage (CCS), hydrogen utilization, and electricity storage become commercially viable, these will provide not setbacks, but rather exciting new opportunities in combination with the hydrocarbon sector.
Supported by real case studies and interviews with industry leaders, the findings of the Newsweek Vantage survey reveal how the oil and gas industry is taking advantage of technological innovations — both energy-related and more general applications — to come out leaner, greener and more resilient. The sheer scale of investment oil and gas companies are undertaking in breathtaking technologies is one major indicator that, indeed, they are not going anywhere any time soon!
These technologies are shaping the industry’s operations and its offerings, marrying old and new practices and products, unlocking resources previously considered unattainable, and resulting in improvements in efficiency and productivity — all while reducing the impact of operations and products on the environment.
The report is yet another testimony to the industry’s continuous efforts to overcome contemporary threats, armed with technology and taking a long-term view.
The article was first published in the AspenTech Blog
“Vendors eyeing $25b augmented reality solutions market for energy and utility sector”, Dr Carole Nakhle, Nov 2018
“Oil and gas pins its hopes on new technologies”, Dr Carole Nakhle, Nov 2018
“New Technological Frontiers in the Oil & Gas Industry”, Dr Carole Nakhle, Sep 2018
“The Impact of Digitalisation on Employment in the Oil and Gas Industry”, Access for Women in Energy, Oct 2018