Technology Uptake in the UKCSPlanning and Implementation Challenges
John Barwis
Well Engineering Manager,Shell U.K. Exploration and Production
Chairman,Industry Technology Facilitator
TECHNOLOGY means:
The “KNOW HOW” to apply science and engineering to a business problem to enhance our capabilities and performance.
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
Effort(ideas, work, time, money)
The Technology “S Curve”M
atu
rity
(desig
n-c
han
ge f
req
uen
cy,
reliab
ilit
y)
Embryonic Growth Mature Ageing
Embryonic: proof of concept
Growth: developing prototype
Mature: improving reliability
Ageing: commoditisation
Generations of Technology Management
1st 2nd 3rd Beyond
R&D driven Project driven
Partnershipbetween R&D supplier and user.(traditional) (supplier - buyer)
Co-creation by R&D supplier and user.
after Roussel, Saad & Erickson, 1991
Decide on best procurement
option for each technology
Decide on best procurement
option for each technology
Technology Development – Strategic Choices
Business Input - Value and Problem
Statements
Business Input - Value and Problem
Statements
Classify Technology Needs
Classify Technology Needs
Create R&D programme to fit
budget and execute
Create R&D programme to fit
budget and execute
3rd GenerationR&D
3rd GenerationR&D
Identify Technology Needs
Identify Technology Needs
Generate Acquisition and Development
Options
Generate Acquisition and Development
Options
Plans and Targets
Technology Procurement Options
Develop In-House
Manage In-House,Farm Out
Non-StrategicElements
Ignore, orObtain from Market
Collaborate via JIPs
NEED FOR COMPETITIVE ADVANTAGE
COST OF DEVELOPMENTLOW
HIGH
HIGH
Idea to Business: Attrition Rate
Ideas MatureTest
NewBusiness
IncubateS
cre
en
ing
Pan
el
Fu
nd
ing
P
an
el
Gu
ide
400(339)
120(85)
35(40) 3
32ExistingBusiness
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
ShellITF
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
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
The Road to “Proven” Technology
The Developers Perspective
DevelopmentDevelopment
‘‘Not Invented Here’Not Invented Here’
Proof of conceptProof of concept
Fever TeamFever Team
ImplementationImplementation
MaintenanceMaintenance timetime
Old Old workwork
practicpracticeses
stickstick
Skills
Failures
Expandable Casing Failure
End of LifeBowling Alley
Crossing The ChasmThe Marketing Perspective
Early Market
EarlyMajority
34%
LateMajority
34%Innovators
2%
Chasm
Mainstream Market
TechnicalSales
BD managed account teams and sales group focus on economic buyers and influencers
Commercialization and Crusaders
Laggards16%
Early Buyers
15%
Early Failure Pit
after G.A. Moore, 1991
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
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
Effort(ideas, work, time, money)
The Technology “S Curve”M
atu
rity
(desig
n-c
han
ge f
req
uen
cy,
reliab
ilit
y)
Embryonic Growth Mature Ageing
Embryonic: proof of concept
Growth: developing prototype
Mature: improving reliability
Ageing: commoditisation
Barriers to “Proven” TechnologyOil 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
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