Innovation crucial in the time of an oil downturn
Whilst the current technological environment is creating opportunities for innovation in the oil and gas sectors, a survey has found that almost half of oil and gas executives feel they have fallen short of their innovation goals.
Lloyds Register Energy recently launched a study that revealed the need for greater collaboration, data analysis and cultural change to address innovation challenges.
Alarmingly the number of respondents who said they have fallen short of their goals has almost doubled as the oil price has gone down – with only 26% saying they had fallen short in Spring 2014.
Findings form the study, which form part of the Technology Radar 2015 report Innovating in a New Environment, combines Lloyd’s Register Energy’s expert knowledge with third party insights, to provide data-driven findings on the role of innovation in the current and future upstream oil and gas industry.
Senior industry practitioners were interviewed and oil and gas professionals were surveyed to provide a compelling case for increased technological innovation.
“The oil and gas industry is undergoing a period of significant uncertainty”, said John Wishart, Group Energy Director, Lloyd’s Register.
“The oil price slowdown is clearly impacting investment in innovation initiatives. However, our report finds that contrary to perceived wisdom, innovation has a crucial role to play in the current environment, where it creates operational efficiencies and is cost-effective.
“To innovate properly and achieve business goals companies must address a number of common challenges, including collaborating more openly, using data more effectively and changing traditional mind-sets,” continued Wishart. “Encouragingly, our findings show that overall the industry understands the need for innovation and has begun reaching out to other sectors to gain technological insight.”
The Technology Radar 2015 report considers the role for innovation in the changing innovation landscape. Its conclusions are that the cyclical downturn should be a driver of innovation, not a barrier.
Unfortunately, the majority of oil and gas executives believe the oil price will sit between $50-$70 in the next year; the highest percentage (27%) believe it will hover around $70, which in many cases will hinder investment in innovation.
The report outlines three scenarios for how different oil prices may affect innovation, examining the types of innovation that will be prioritised in each scenario. The full Technology Radar 2015 report can be found here: www.lr.org/technologyradar.
The report also examines how executives are placing increasing emphasis on collaboration, both internally and outside of the industry, as they adapt technology from other sectors. Two-thirds of respondents say they are under pressure to collaborate with other organisations within the sector. When they do collaborate, upstream companies focus on the early stages of a project, and often around safety. The report reveals an overarching cultural shift is still required to fully integrate genuine collaboration in innovation.
The role for data collection and analytics in driving innovation has also been assessed, finding that more advanced data collection and analytics are a must have in the current low oil price environment.
Lack of data and systems integration across different parts of the business are huge barriers to successful data collection and analytics, with silos the biggest cause of the issue.
There is pessimism surrounding the current oil and gas environment, but what Technology Radar 2015 has shown is that the downturn in the oil price is strengthening the need for innovation, not weakening it.
S3 Consortium Pty Ltd (CAR No.433913) is a corporate authorised representative of Longhou Capital Markets Pty Ltd (AFSL No. 292464). The information contained in this article is general information only. Any advice is general advice only. Neither your personal objectives, financial situation nor needs have been taken into consideration. Accordingly you should consider how appropriate the advice (if any) is to those objectives, financial situation and needs, before acting on the advice.
Conflict of Interest Notice
S3 Consortium Pty Ltd does and seeks to do business with companies featured in its articles. As a result, investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this article. Investors should consider this article as only a single factor in making any investment decision. The publishers of this article also wish to disclose that they may hold this stock in their portfolios and that any decision to purchase this stock should be done so after the purchaser has made their own inquires as to the validity of any information in this article.
The information contained in this article is current at the finalised date. The information contained in this article is based on sources reasonably considered to be reliable by S3 Consortium Pty Ltd, and available in the public domain. No “insider information” is ever sourced, disclosed or used by S3 Consortium.