Since the early 1980's hydrocarbon finding and development costs measured in $/BOE declined steadily reaching a low in the mid 1990's. This improvement in Capital Efficiency was driven by the adoption of technologies such as PDC bits, improved drilling fluids, and dual activity rigs, which help reduce costs as well as technologies such as horizontal drilling, and advances in well completion technologies which significantly improved well recovery. Additionally, advances in seismic and other exploration technologies significantly improved the exploration success rate and hence increased reserve additions.
However, since the mid 1990's finding and developing costs have been rising steadily as the rate of discoveries and additions in mature basins decline and fields become smaller resulting in higher costs as more wells and infrastructure are required to exploit these reserves. Furthermore exploration and production activities have moved to ever more demanding regions such as deepwater offshore, and harsh environment areas such as the Arctic requiring ever more costly wells and infrastructure to develop resources in these areas.
Technological innovation drove the improvement in capital efficiency realized during the 1980's and early 1990's. Since then the pace of technological innovation has slowed due in part to the desire to minimize technical and commercial risk as exploration and development activities move to these more demanding environments. The consequence of this is deterioration in capital efficiency. In particular the efforts to control costs have created barriers to the development and application of new drilling technologies which could significantly reduce the current 25 - 30% non productive time experienced drilling wells today.
This paper discusses a phased approach to technology evaluation, development and adoption which seeks to minimize the risks, both technical and economic associated with applying new drilling technologies or innovations.
Beginning in the early 1980's until the mid 1990's, significant improvements in Exploration and Development capital efficiency had been realized (fig.1). Much of this improvement can be attributed to improvements in exploration efficiency brought about by the introduction of improved seismic methods such as 3D seismic and better understanding of subsurface issues resulting from advances in computing capability. Additionally, well construction efficiency improvements resulted from the broad adoption of innovative technologies such as PDC bits, improved mud formulations, horizontal drilling and completion techniques and significant improvements in rig design (4th and 5th generation drilling rigs) and drilling equipment such as the topdrive and iron roughneck.
As noted above the adoption of new or innovative technologies can yield significant economic improvements in hydrocarbon exploration and development activities; however the rate at which these innovations are adopted varies widely (Fig. 2). The variance in technology uptake is influenced by a number of factors and it is out with the scope of this paper to examine these in detail.
A number of authors (1, 2) have discussed the challenges in developing and commercializing new or innovative technologies and in particular how the following "barriers" are overcome; how is the technology development funded? How is the technology valued? How is it introduced and how is it priced? In an effort to address these "barriers" industry has adopted a number of management practices focused on improving the efficiency of the innovation process (3)
These include establishment of:
Centers of Excellence
Corporate Venture Capital
New Business Incubation
Cross Functional Project Teams
Standardized Alliance Management