Today’s meltdown in the price of energy commodities has led to devastating cuts to capital projects and staff and still left many companies on the brink of solvency. With little else left to cut, technology innovation is one of the few avenues still open for producers to find ways to trim costs.
As one of the world’s highest-cost producing regions, there remains scope to bring costs down in western Canada, but matching the right technology to the right challenge and de-risking uptake of new technologies remain barriers. A new Calgary-based technology accelerator is taking a unique approach to eliminating those barriers.
Established last year, Kinetica Ventures takes a market-pull approach. Rather than taking a nifty new technology and trying to find a fit for it in the oilpatch, Kinetica went to the oilpatch first to determine what technology gaps exist. Now it is actively seeking out technologies to fill those gaps.
Kinetica sat down with oil and gas companies for detailed discussions about their most pressing technology needs and emerged with a list of more than 400 such items. It doesn’t only use that list as its prime criterion for taking on technology providers, it also actively seeks out technologies that may exist elsewhere or may still be under development—and thus under oil companies’ radar—that could solve those identified technology gaps.
“Companies have gone through the rationalizations they can—they have cancelled capital projects and gone through one or more rounds of layoffs—and there is still pressure to reduce costs. So, really, the only reliable thing left is to reduce costs through innovation,” says Kevin Frankowski, Kinetica executive director. “What we do, along with our partners that we have in what we call the innovation ecosystem, is work to help de-risk technology offerings to the point where it now fits within the risk profile that energy companies are able to accept.
“We are a bridge between the technology end users [i.e., the energy companies] and the technology developers, which may be start-ups or may be small- and medium-sized enterprises or larger companies that are looking to enter a new market.”
The time it takes to commercialize a new technology can vary significantly in an industry with a notoriously long technology adoption period. According to McKinsey, it can take up to 31 years to take a technology from prototype stage to 75 per cent market penetration in the upstream oil and gas sector. That compares to 16 years in the telecom industry, 12 years in medicine and eight years in consumer products (U.S. averages).
The time to market for the technologies Kinetica takes on may also vary widely, Frankowski says. “For the light-intensity technologies [such as software, information and communications technologies], it might only take 18 months from when they come in to when they reach significant pilot or maybe even first customer, whereas on the heavy end [such as a new way to refine bitumen], it can take five years to get to pilot, another two or three years of piloting, and then it could be up to or potentially more than 10 years for some of these more intensive technologies to break into the marketplace and be sufficiently de-risked.”
Cutting costs often means cutting energy use, and together with the province’s new focus on reducing carbon emissions, many of the new opportunities may come from new emission-reducing technologies. “I think that there are some interesting synergistic plays that we may see more of in between renewables and traditional oil and gas,” Frankowski says. “For instance, if we put this renewable on this particular facility, it could increase our overall energy efficiency and allow us to do what we were doing before, but better.”
If the current downturn does prompt increased innovation, that could provide a silver lining in terms of strengthening the industry and maintaining its competitiveness when the market picks up, says Frankowski.
“I am hoping that, as with previous downturns, the energy sector will emerge out of this stronger because we have the opportunity to really sharpen our pencils and look for those ways that we can improve how we do things,” he says.Like this? Read more in the latest edition of Oilweek.