Innovating versus Surviving: How the US energy sector innovates amid a belt-tightening business environment

24-02-2021
Joseph Dischinger

Covid-19 is taking a toll on the global energy sector, and the United States was not spared. Demands are down and there are pressures for suppliers to hold back outputs to support prices.

With a volatile global market and uncertain national political situation, there is a need for companies to future-proof operations and be on top of solutions and strategies available in the market, including technological solutions. Renewables need to further drive their unit cost down to compete with traditional energy sources, while traditional energy companies see the need to diversify and explore emerging business streams.

To shed light on how innovations are playing a role in a challenging business environment that US energy companies are in now, we asked our US partner Joseph Dischinger to answer the following five questions.

 

We know that the energy sector is walking a tightrope now given the instability brought by Covid-19 and demand uncertainties. Do you think there is still space for companies to introduce innovations?

Absolutely, but Innovation is a big bucket. Is the innovation quickly implemented and going to have an immediate material impact or is it a long-term expensive investment? It has really been a balance sheet exercise this past year I think for most in the energy industry. There is tremendous pressure on cost reduction. How do we reduce costs immediately to stay in business? Companies tend to focus on reducing salaries, wages and benefits because these are dominate costs. Work still needs to be done, but now with less resources. How can we do more with less? There is a focus on automation, digitalisation, and data analytics/machine learning because there is a perception these have the greatest potential to rapidly reduce cost and keep the business going.

But companies need to continue to think about the future and plan what to do when things are more profitable. They need to be ready to move quickly when the business environment improves to invest in longer term innovations, otherwise they will be behind competition. And this is where technological innovations come into play.

So, yes. There is plenty of room for innovation. It is just a function of timing and cost. Companies are always trying to innovate with the right value proposition. The challenge, however, is selecting the right innovation AND just as important, deploying it effectively.

 

What do you see as top priorities for energy companies to innovate on?

Digitalisation, maintenance, and integrity are all tied to cost and production. These are areas that should be constantly focused on to stay competitive. Constant focus on cost reduction, increased production, and overall profitability; and innovations on the mentioned three priorities are necessary. Safety is also a constant priority, a given one in every business.

Nevertheless, how much a company prioritizes one of these depends on what the base business is and how it can be enhanced. For instance, for a production company productivity and cost-effectiveness is important: automation to drive costs down, integrity to ensure fields are running constantly at the highest efficiency, and maintenance to ensure there are no stops in production.

Carbon emissions can be considered more of a regulatory concern for US energy companies right now, hence this also forms part of their innovation strategy. Finding smart ways to reduce carbon emissions, such as sequestering and utilizing carbon are areas of active innovation. Understanding your carbon footprint through technologies allow companies to proactively reduce emissions while getting ahead of regulatory requirements as a license to operate.

 

How do you think innovations will help them deal with slowed demand in the sector as well as changing political and legal environments?

Regarding slowed demand, technologies that can reduce cost, the other side of the equation, are important: again, automation, machine learning, artificial intelligence, remote access and monitoring. The ability to optimize production and to make real time adjustments accordingly is the part of the vision for the digital oilfield. The idea is to reach an optimized production rate where companies can make rapid adjustments to changes in the production environment automatically maximizing production. Currently, many times these discrete discontinuous production-related decisions are still made by humans, which takes time and can be prone to suboptimal adjustments.

Changing political and legal environments always impact the energy industry landscape. People forget that when oil became an important commodity 120+ years ago, it was considered a green energy. It replaced much of the whaling industry for lamp oil in the early days. There is a lot of potential for innovation to help energy today in an environmentally friendly manner. Innovations that can help to reduce flaring, reduce carbon, that help to use all products that are produced, present an opportunity for traditional energy companies to be sustainable and remain relevant as we push for energy transition.

 

What do you think are companies’ main concerns in introducing technological innovations?

We should remember that innovation is not always invention. Sometimes it is using existing technology in new ways, using new workflows. There are so many technology choices available, and companies are concerned about making the right choice with the highest positive impact. A major concern is around the value proposition, what is the uplift from the change compared to the cost of that change, what are risks associated with the change, and how can we execute a fast and smooth transition in the business units. Not all companies, especially these days, have access to information needed to make the right decisions. Nor do they have the time to go through each of the technological options available in the market. Recognizing the right innovation is a huge challenge.

So, the question now is: how can they make sure they get it right on selection AND deployment?

This is where technology valuation methods are important and yet still a challenge in the energy sector. Companies need to ensure they conduct a good inventory of available technologies in the market, study the reliability of chosen technologies and ensure appropriateness based on company needs. Choosing an effective innovation to be successful is often times dependent on a company’s ability to deploy it effectively to make a positive impact ahead of competition.

This process, at every level, can be painstaking and time consuming. In some cases, there is a need to share risks with other companies, even with your competitors. In data analytics, for instance, it might be critical to pool anonymized data from the industry to have a statistically meaningful dataset for machine learning. Any one company might not have enough data to create meaningful models. These factors can be barriers to technology uptake, and most companies are missing the opportunity to benefit from innovations available in the market today.

Introducing technological innovations can seem like an impossible task, but it is doable with the right partner that can either take charge or assist you in selecting the right technology and deploying it with highest chances of success.

 

With all the mentioned factors, what could be the best way to be up-to-date with technological and industry innovations without spending too much time and money?

The idea of traveling for tech exhibitions or conferences today is still a major challenge, it was even before COVID. The level of effort needed to stay ahead of the fast-changing technological environment requires a lot of effort. Just attending doesn’t do the trick, knowledge management and intelligence management of technologies just as critical as recognizing technology itself. Yet in challenging times like this, most companies cannot afford to maintain a team to do just that.

By crowdsourcing their technological needs and solutions, companies are making the world work for them. With a global platform such as TechnologyCatalogue.com, technology providers can parse their technologies into themes on the platform for you. Technologies that are all over the world and are not accessible through conferences or exhibits are all in an electronic catalogue within reach. Companies from other industries are able to showcase their technologies that can be new, but relevant and appropriate to the needs of the energy sector. Companies can enjoy a portal, current and evergreen, updated by suppliers. With a proprietary ring fenced platform, you can manage your interactions, share ideas and share newly found technologies within your organization. You can also have access to external reviews of tech experts and end-users who have experience deploying the technology.

What is strategic about a partner like TechnologyCatalogue.com is that they can also develop filters for your company based on your unique needs and focus areas. A list of technologies can be prepared after a series of interviews with company executives on what their business is and what challenges they want to address. This list will contain readiness level and business impact metrics, among other indicators to give the company as much information as needed to make decisions.

 

About Joseph Dischinger

Dischinger has more than 20 years of experience in the oil and gas industry. He has worked in various upstream operations and technology leadership positions at ExxonMobil.

Dischinger managed the global geoscience technology portfolio where he helped develop and implement a geoscience technology strategy for enterprise-scale deployment. Most recently he was Disruptive Technology Advisor for Upstream Research and Technology Development. He focused on innovation and next-generation upstream technologies. Currently, he serves as TechnologyCatalogue.com’s partner in accelerating the uptake of technology and expanding the company’s offerings to the United States Market.

(Majority of this blog was first posted on Pipeline Oil & Gas News. Click here to see the article.)