Removing the Risk Barrier to Technological Innovation

 

Ian Phillips, Chief Executive Officer, Oil and Gas Innovation Centre

 

The risks and uncertainties associated with bringing a new technology to market are inherently high.  There is significant financial investment required to research, develop, test, and commercialise a concept, and there is the ever-present concern that the concept or idea might not work. Consciously or unconsciously companies always focus on the “regret cost” – what money have I spent and “wasted” if the concept cannot be turned into a commercially viable product.

 

With returns on investment on research and development (R&D) spend often only being realised in the longer-term, R&D budgets are often the first to be reduced or eliminated in times of economic adversity – especially in the higher risk areas of new technologies. With the continuing market downturn, the pressure to reduce costs and spending remains top of the agenda for many, if not all companies within the oil and gas sector.

 

A significant concern is now that reducing R&D investment in the North Sea creates a significant risk of falling behind global competitors, or not achieving the goals of MER UK.  By cutting back on the development of products, processes and software to continue to support the oil and gas sector with solving complex business challenges we run the risk of accelerating the end of field life and decommissioning, which is also a fertile opportunity for new technology and thinking. Whilst R&D budgets have undoubtedly suffered because of intense cost cutting across the supply chain, new technologies are showing great potential to provide much needed cost efficiencies. As a result, there is now a renewed appetite for early stage application of research.  However, the risk element – that “regret cost” if the concept is not proven – is still a barrier to innovation.

 

The way in which the Oil and Gas Innovation Centre (OGIC) works to help companies find appropriate research expertise in the university system in Scotland and to access funding for R&D presents a real opportunity to de-risk R&D. OGIC recognises the importance of continued investment in research and development expertise for the future of the oil and gas industry. With a commitment to solve current innovation challenges and drive the UK oil and gas sector forward, OGIC is addressing this challenge by providing significant grant funding, and by connecting companies with appropriate academic research expertise in Scottish universities.

 

This collaborative role in the sector is helping companies to maximise opportunities for early stage research, often on unproven technologies, when there is a higher risk of the concept not working. By utilising the available research and development capabilities in Scottish universities, companies can benefit from technical de-risking of a project in the early stages, and from test the concept before over-investing. Practically, a company’s “regret cost” is significantly reduced if the innovation does not work out. Universities in Scotland also benefit from this collaboration, with increased opportunities to understand the needs of companies in the oil and gas sector and to work on real projects. This, in turn, is helping to ensure that necessary skills and expertise continue to be developed within the universities in the region, supporting the North Sea’s position as an innovation leader.

 

With this encouragement to explore and de-risk a project in the early phases, OGIC has seen an increase in the number of innovation-led projects being proposed within the North Sea – from technologies with immediate solutions for the sector to longer term projects focused on solving the decommissioning challenge. Recent examples of OGIC projects include the deployment of the novel material (graphene) to an oil and gas application, and exploring the potential to use advanced materials, including composites, to reduce weight in products. As a specific example, new technology company Cavitas Energy recently engaged with OGIC and the University of Strathclyde to develop a downhole deployable device that can enhance oil recovery in heavy oil environments.

 

Whilst developing more technological innovations will help to maintain and attract investment in the North Sea for the foreseeable future, companies within the sector will, more often than not, be the catalyst for this innovation. Said another way, our ability to remain truly innovative and drive the sector forward will be greatly dependent on the sectors appetite to continue to invest in new technologies, and utilise the tools and resources currently available to further de-risk projects and accelerate the process of bringing a project from idea to market.  OGIC and other technology support organisations have grant funding available to reduce the regret cost and help companies to develop these critical new technologies.

 

Ian Phillips, Chief Executive Officer, Oil and Gas Innovation Centre

 

 

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