A 21st century industry

An Ask the Expert feature with Kenda Capital BV

How technology is driving the oil and gas sector to new frontiers.

The oil and gas industry is experiencing significant long-term changes. Global demand for energy continues to increase and extracting oil and gas reserves continues to get more difficult, and more expensive. There is an urgent need to use available new technologies and expertise to improve the efficiency of supply. Higher fuel prices are required to justify the required investment in supply, and also to encourage a step change in efficient energy consumption. Prices must be balanced against the need to control inflation, eradicate poverty, and protect the environment.

New available technology can be used to increase recovery, improve production efficiency, and to increase supply more quickly and cheaply than by conventional methods. This requires decisive leadership, organisational change, and the transfer of technical expertise on a large scale where it is needed most – to the major resource holders such as Russia and Eastern Europe. There is no immediate shortage of reserves, but developing these reserves is more technically challenging, infrastructure is in need of repair or upgrade, and the right people are scarce. whilst the supply chain for equipment, services and people is at capacity, operators generally continue to explore and develop reserves in the same way today as 40 years ago.

Proven technologies exist which can alleviate these constraints but many operators remain largely unaware of the potential benefits. Suppliers of new technology are often met by operators reluctant to properly assess a new technical solution. Assessment requires people, time and management support. suppliers are faced with lengthy trial periods, slow decision making and uncertain commercial terms on successful demonstration.

Most new technology companies fail; not because of the technology, but because operators are too slow to assess the benefits and deploy the technology. With numerous barriers to entry, the industry as a whole is unconsciously discouraging investment in new technology at a time when it needs it most. Reliable studies have shown that the average time of technology adoption in the oil industry from idea to market acceptance between 1960 and 2000 is over 20 years.the most successful operators embrace new technology in a structured manner. These operators allow cross discipline technical teams to work closely together, they welcome new ideas, screen them quickly, plan and execute trials within months, assess the overall results, and if successful, the technology is deployed on a large scale as quickly as possible. the initial cost of the technology may be higher than the conventional equivalent but prices are quickly balanced by volume discounts or by encouraging competition. recent data shows that the operators that deploy technology most effectively are the larger national oil companies in the Middle East and South America, some smaller independent oil companies, and some leading international oil companies.

Kenda Capital is the largest global investment organisation that focuses on funding, introducing and accelerating new technology across the oil and gas industry. We deal with operators, entrepreneurs, and investors to try and meet the needs of the industry as a whole, from novel exploration and drilling techniques to pipeline construction and repair. Of the many companies that we have supported, almost none of them have yet managed to penetrate Russia or Eastern Europe. However, we remain optimistic and excited about the region and it’s potential.

To summarise:

• There is an urgent need to improve supply efficiency by using new technology on a large scale, but this will require decisive leadership, and organisational change.
• Proven technologies exist but many operators remain largely unaware of the potential benefits.
• Small companies with new technology often fail – not because of the technology, but because operators are too slow to assess the benefits and deploy the technology.
• The industry as a whole is unconsciously discouraging investment in new technology at a time when it needs it most.
• Russia and Eastern Europe are among the most challenging regions to deploy new technology but stand to be one of the largest beneficiaries.

Rob Mayfield has more than 12 years’ technical and commercial experience in the oil and gas industry, working in Africa, the Middle East and Europe. He is now focused on funding and accelerating new step change technologies into the industry. Mayfield is a director of more than 14 emerging technology companies and is actively involved with major operators to understand their concerns and introduce new solutions. He has an engineering degree from Edinburgh University and an MBA from INSEAD.