Oil & Gas Innovation Centre (OGIC)
New intellectual territory for energy…
Profile: Oil & Gas Innovation Centre (OGIC)
ADMIN HUB: Heriot-Watt University
FUNDING: £10.6 million (initial investment)
New intellectual territory for energy
“We are setting the agenda for the next chapter in the North Sea,” says the chair of the Oil & Gas Innovation Centre (OGIC), Paul de Leeuw. And that new chapter promises to be more challenging and more rewarding for thousands of businesses and academic researchers in Scotland trying to develop innovative solutions for the oil and gas industry in the UK as a whole – and beyond.
The figures are impressive – and the stakes are incredibly high. The North Sea has already produced about 42 billion barrels of oil equivalent (BOE) over the last 40 years, and the industry estimates that there could be as many as 24 billion BOE still in the ground. Even if there are only 12 billion BOE left, they could add up to at least one trillion dollars in revenues at current oil and gas prices, and innovation could make the critical difference – locating new reserves and making production more efficient and economic.
To put this in perspective, de Leeuw points out that investing about £5 million a year through the OGIC is a fraction of the circa £20 billion spent by the UK oil and gas industry in 2013 in exploration, development and production. But even a small budget can make a very big difference to universities and companies in Scotland, as well as major operators, if the money invested translates into business results.
The oil and gas industry is a major employer and investor in the UK. It employs over 200,000 people in Scotland alone, and there are over 2,300 companies in the UK oil and gas supply chain, ranging from the large and well-known service providers to small entrepreneurial companies.
Scotland has 12 universities doing research and providing oil and gas-related courses, and according to a recent survey by the OGIC, we now know there are over 450 people directly engaged in research – a capability that the new organisation will rely on to make future breakthroughs.
The technical challenge is daunting, says de Leeuw, who has 25 years' experience in the industry, including senior posts with Shell, Marathon Oil, Amoco, BP, Venture Production and Centrica. Most of the North Sea oil produced until now has been relatively easy to find and extract, but exploration is moving into deeper and more remote waters, where the costs will be much higher and the risks also greater – in technical, financial and environmental terms. According to de Leeuw (left), the challenge is to improve the exploration success rate to more than 35 per cent, increase the “average oil recovery factor” to more than 50 per cent and increase production efficiency to 80 per cent, at the same time as reducing decommissioning costs – with innovation leading the way.
The new organisation is designed to fill a gap in the innovation life cycle and accelerate delivery of innovative services and products, by making sure that it's in tune with industry needs and helping academic researchers and companies access research and development funds. In some cases, it will also help set up new university spin-outs, in partnership with organisations such as Scottish Enterprise and Highlands & Islands Enterprise.
For de Leeuw, it all starts with access to data, funding and know-how, and making connections between different stakeholders. By finding out what operators need and what their problems are, the OGIC will feed this information back to companies in that particular field and identify the academic partners who are best equipped to help them deliver results – knowing there’s already demand for the service or product. This ‘matchmaking’ function should not only accelerate the development of new market-ready solutions, but also help to nurture the companies’ growth and the strength of the sector in general.
At the moment, says de Leeuw, development of new technologies can take as long as 8–15 years, from initial idea and concept to prototype, testing and commercialisation. There is often a “race to be second,” he adds, with operators highly reluctant to be first to experiment with new ideas, because of the high risks and high costs involved in such a tough environment.
In the past, the operators did much more in-house research, but the structure of the industry is changing all the time, and most of the new companies operating in the North Sea now rely more on the smaller players in the supply chain to deliver innovation – and that is exactly where the opportunity lies for the OGIC and its industry partners in Scotland.
For the oil and gas sector in the UK, the timing of the OGIC is perfect, says de Leeuw. The technical challenges are greater than ever because exploration is heading for more difficult waters, and new technologies are starting to emerge, which promise to deliver innovation in the areas most needed, with universities leading the way in research. Meanwhile, the new Technology Leadership Board is developing industry themes and a culture of collaboration is becoming the norm.
The need to invest more in innovation is also gaining more support from government. “The OGIC will work closely with other funding organisations such as the ITF (Industry Technology Facilitator), Interface, the TSB (Technology Strategy Board) and the UK Research Council to leverage innovation spend,” says de Leeuw.
According to de Leeuw, the OGIC will initially focus on the following themes:
1 Improving exploration outcomes;
2 Well construction, drilling and completions;
3 Enhanced recovery;
4 Asset integrity and life expansion;
5 Shale gas exploitation;
7 Production optimisation;
Over the next year, these themes may be further developed by the new Technology Leadership Board, but de Leeuw and his new team are keen to get started, and the first project kicked off in June this year.
The OGIC plans to get 100 projects up and running over the next five years, with half of them involving early-stage assistance, providing funds for new research of up to £20,000, which businesses will match. The other projects will be closer to commercialisation and receive OGIC funds of up to £250,000. Running 20 projects a year may seem ambitious, but de Leeuw points out that this would mean an average of less than two projects per university.
Apart from coming up with new solutions for practical industry problems, these projects should also create about 500 new jobs by 2018. And to underline the practical nature of the OGIC, de Leeuw explains that its location in a business park in Aberdeen is to make sure the OGIC team (8–10 people by the end of this year) is close to “where the action is,” rubbing shoulders with potential industry partners, including SMEs and micro-businesses.
Shale oil and gas extraction is another major issue, which is likely to grow in importance over the next few years. To make it work in the UK, the industry needs an efficient supply chain and innovation could have a huge role to play, from planning and site preparation to extraction and eventual decommissioning. There is no question that the UK has significant resources, but there are different challenges ahead in terms of the geology as well as the political issues, so the role of the OGIC will be to monitor the industry and analyse potential future needs, before it initiates any new projects. “All our activities must be demand-led,” says de Leeuw. “If there is no demand from industry, then we won't provide any funding for projects.”
Decommissioning of oil and gas facilities will also demand increasing attention in years to come, as the offshore platforms reach the end of their economic life. The chief aim is to make the decommissioning process as efficient as possible, not just in terms of time and money, but also in terms of environmental impact. Projects could cost tens of millions of pounds, so any savings will be critical, and innovative ideas could transform the whole approach – maybe from an unrelated industry. Carbon capture and storage may also come into the picture in the future, providing further areas for the application of new technology.
The OGIC is creating a new “ecosystem” of industry partners, and de Leeuw anticipates that collaboration may lead to a lot of cross-fertilisation between different sectors, including partnerships with companies which have never had contact with the energy sector before. For example, Scotland has an active software development industry, which may be able to develop new solutions for visualisation and simulation – not just for training but also to rehearse operations in the kind of difficult and hostile environments often encountered offshore in the UK. If companies in Scotland can produce best-selling games such as Grand Theft Auto, why not become world leaders in visualisation for other industries, including oil and gas? Another sphere where future applications may have a big impact is real-time information displays, combining data processing with other solutions such as Augmented Reality (AR), so engineers see layers of 'live' information to diagnose and repair problems.
De Leeuw and his colleagues are already in regular contact with the other innovation centres recently set up in Scotland, including the Industrial Biotechnology Innovation Centre (IBioIC) and the Innovation Centre for Sensors and Imaging Systems (CENSIS). IBioIC could collaborate in numerous projects, because of its strong emphasis on industrial processes, including petrochemical production, whilst CENSIS has a member of staff based in OGIC's Aberdeen office, to explore the possibilities for future joint projects. According to de Leeuw, another key objective is for Innovation Centres to learn from each other; “Cross innovation will be key to success,” says de Leeuw, “and that means working closer together and sharing our experience and knowledge.”
Since the OGIC was set up this year, de Leeuw has been impressed by the “very positive feedback” from everyone in the industry when he explains its strategic objectives and how it will work. One concern, however, is the way it handles intellectual property (IP) – who will own it and profit from sales? Oil and gas is a highly competitive business where IP is jealously guarded, but de Leeuw's job is to persuade operators and other companies in the supply chain that they can protect their own interests as the same time as promoting innovation in general, using new solutions to improve how they work and earning income from industry-wide global sales.
Another question raised by service companies is “will the innovations be used?” And the simple answer is “yes”, because industry says that it needs the solutions to start with – the innovations have a ready market.
Big game, big numbers
Maximising the potential of the North Sea reserves will take the oil and gas industry into a different dimension – deeper waters, greater exposure to more extreme weather and harder-to-locate, more inaccessible wells, plus the problem of getting the products to shore, via pipelines and tankers. No one can be sure how much oil and gas is really out there or predict future prices – which makes it much harder to work out any possible return on investment.
The oil and gas industry is key to Scotland's future economic success, so any progress in developing solutions will make a huge difference – no matter how much oil and gas is produced. Looking at the numbers in more detail, de Leeuw explains that there are plans in place already for the first eight billion barrels. To produce the next few billion barrels will be a more difficult technical challenge, he says, but to reach a target of 16–24 billion BOE will require innovation like never before, and that is where the OGIC fits into the picture.
“The stakes are high,” de Leeuw says. “We need to maximise recovery and minimise costs, while addressing production decline. But there's also a fantastic prize to go after, and to get there we need innovation and transformational change. The challenge for the OGIC is to be the delivery mechanism for innovation, getting operators, the supply chain and researchers to collaborate, so everyone wins. We know there must be better ways of working and we need innovation to thrive. Our job is to drive the agenda and accelerate the innovation process.”
The OGIC: How it works
The OGIC will be “a delivery mechanism for the industry, linking industry needs to university resources and know-how.” It will focus on three major functions:
1 Sharing the industry's technology needs;
2 Early-stage assistance and funding;
3 Project funding.
The OGIC will interact with more than 2,300 operators and service providers, translating what they need into practical projects, then connecting companies in the supply chain with the right academic researchers, to develop solutions. For early-stage assistance, it will offer match funding for companies of up to £20,000 to fund initial research. In this way, academic researchers will ‘double their money’ thanks to business involvement, and the companies will – in effect – gain access to world-class researchers at about half the cost. Bigger projects to deliver market-ready commercial solutions will receive up to £250,000 from the OGIC, enabling companies to grow and creating new jobs in the process.
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