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Technology Uptake in the UKCS Planning and Implementation Challenges John Barwis Well Engineering Manager, Shell U.K. Exploration and Production Chairman, Industry Technology Facilitator.

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slide1

Technology Uptake in the UKCSPlanning and Implementation Challenges

John Barwis

Well Engineering Manager,Shell U.K. Exploration and Production

Chairman,Industry Technology Facilitator

slide2
The “KNOW HOW” to apply science and engineering to a business problem to enhance our capabilities and performance.

TECHNOLOGY means:

slide3

INNOVATION means:

  • Introducing new tools, or
  • Using old tools in new ways, or
  • Working differently
  • Through innovation we seek to:
  • accomplish the previously difficult or “impossible”
  • reduce cost, time, risk, or uncertainty
  • Innovation often involves technology
  • Innovation need not imply invention or R&D
slide4

The Technology “S Curve”

Embryonic: proof of concept

Growth: developing prototype

Mature: improving reliability

Ageing: commoditisation

Maturity

(design-change frequency, reliability)

Embryonic

Growth

Mature

Ageing

Effort

(ideas, work, time, money)

slide5

Generations of Technology Management

1st 2nd 3rd Beyond

R&D driven

Project driven

Partnership

between R&D

supplier and user.

Co-creation by R&D supplier and user.

(traditional)

(supplier - buyer)

after Roussel, Saad & Erickson, 1991

slide6

Technology Development – Strategic Choices

Plans and Targets

3rd Generation

R&D

Business Input - Value and Problem Statements

Identify Technology Needs

Create R&D programme to fit budget and execute

Classify Technology Needs

Decide on best procurement option for each technology

Generate Acquisition and Development Options

slide7

Technology Procurement Options

HIGH

Develop In-House

Manage In-House,Farm OutNon-StrategicElements

NEED FOR COMPETITIVE ADVANTAGE

Ignore, or

Obtain from Market

Collaborate via JIPs

COST OF DEVELOPMENT

LOW

HIGH

slide8

Idea to Business: Attrition Rate

Shell

ITF

400

(339)

120

(85)

35

(40)

3

New

Business

Incubate

Funding Panel

Screening Panel

Guide

Ideas

Test

Mature

32

Existing

Business

Develop

  • < 10% of ideas become usable products
  • < 50% of products will be taken up by a single user
  • 80% of value will come from 20% of the implementations
slide9

Directing Innovation: R&D Planning

  • Better direction and screening low on the “S-curve” will increase the uptake of “proven” products later on.
  • avoids “nice-to-haves” with low added value
  • previews product NPV before it’s built
  • generates customer “pull” for implementation
  • improves transparency of implementation risks
  • ensures early provision of an implementation plan
slide10

Guiding Innovation: Mentorship

  • No shortage of proposals; solid ITF evaluation process
  • ITF brokered 40 projects worth £10.1 mln
  • Poor take-up by Universities
  • Most SMEs have poor business plans
  • Most operators see no clear path to commercialisation
  • Service companies could play a key development role
  • Government focus should be on incubation, not handouts
slide11

The Road to “Proven” Technology The Developers Perspective

Proof of concept

Implementation

‘Not Invented Here’

Maintenance

time

Skills

Failures

Fever Team

Development

Old work

practices

stick

slide13

Crossing The Chasm The Marketing Perspective

Chasm

Early Failure Pit

EarlyMajority34%

Late

Majority

34%

Laggards

16%

Innovators

2%

Early Buyers

15%

Technical

Sales

Commercialization and Crusaders

BD managed account teams and sales group focus on economic buyers and influencers

Early Market

Bowling

Alley

Mainstream Market

End of Life

after G.A. Moore, 1991

slide14

Value of “Proven” Technology

  • EMV = Ps(PVPs) – Pf(PVCf)
  • Ps : probability of success
  • PVPs : present-value profit given success
  • Pf : probability of failure
  • PVCf : present-value cost, given failure
    • includes cost of rework
    • includes value of deferred production
slide15

Framing the Cost of Failure

  • Low
  • lost opportunity but no collateral damage
  • usually involves “learning the limits”
  • example: inappropriate 4D reservoir characterisation
  • Medium
  • delay and extra expense, but project not jeopardised
  • may be justified by later pay offs
  • example: expandable casing failure
  • High
  • project delivery jeopardised or entire NPV destroyed
  • profoundly impacts future missions and relationships
  • example: loss of a well in a one-producer field
slide16

The Technology “S Curve”

Embryonic: proof of concept

Growth: developing prototype

Mature: improving reliability

Ageing: commoditisation

Maturity

(design-change frequency, reliability)

Embryonic

Growth

Mature

Ageing

Effort

(ideas, work, time, money)

slide17

Barriers to “Proven” Technology

  • Oil and gas E&P may be the least risk-averse endeavour in the industrial world. Operators are not averse to risk – but they will and should avoid risk they don’t know about.
  • Operator skills shortage: under-recognition of opportunity
  • Service provider skills shortage: implementation failures
  • “Good oilfield practice” includes risked decisions
  • All operators have different screening criteria
  • Lack of data on the probability of failure hinders uptake
  • Cost of failure is higher in high-cost basins
slide18

Encouraging Innovation & Implementation: Tax

  • Tax-code recognition of the full R&D life-cycle
    • include commercialisation of technology
    • include novel applications and improvements
    • include field trials
  • Tax credits (e.g. US, Canada, France)
  • Payroll tax relief for R&D (e.g. Netherlands)
  • Tax relief for University funding (e.g. US)
  • Tax payers should not directly assume operator’s risks
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