With $45/bbl, Alberta's energy sector is under tremendous cost and environmental pressures, getting more, spending less and increasing efficiencies across the board are the current realities.
Enter the technology developers. From leak detection to down-hole optimization, Alberta has an impressive resume of energy technology developers poised to bring solutions to those very problems being faced by the energy sector.
In response, Calgary Economic Development, Kinetica Ventures, the Government of Alberta and Bennett Jones have just launched Innovate Straight Talk: a conversation about getting energy tech innovations to market.
The de-risking energy technology series continued November 16 with a deep dive into the energy value chain from the perspective of the series of financial transactions that occur from reservoir to end-user, and understanding the structural aspects that contribute to driving costs up ie where can technology play a value added role.
Samantha Stuart, Energy/Financial Consultant, McKinsey & Co.
Duke Du Plessis, Senior Advisor, Energy, Alberta Innovates Energy and Environment Solutions
Innovation is imperative for improving our position on the cost curve; most of the Canadian asset classes are high on the global cost curve and we need to drive down costs to compete in the global marketplace. We need innovation to access different asset classes and stabilize the supply. There is a current focus on making structural cost reductions (i.e., cancelling capital projects and reducing jobs), but the focus will soon need to shift to implementing innovation that yields lower production costs. The oilfield service companies are currently better positioned than the producers to capture the value generated by innovative technologies and methods. They are spending much more than the producers and seeing the benefits.
Production companies need to figure out ways to better access innovation or they run the risk of providing less attractive returns to investors. However, Samantha (McKinsey & Co.)[KF1] explained that the oil and gas industry lags behind other industries in the adoption of new technology. In fact, it can take up to 31 years to take a technology from prototype stage to 75 per cent market penetration!
There are several biases at play with the deployment of new technology including:
Goldcorp, an Americas gold producer, held a global competition open to any participants who wanted to help Goldcorp identify where they should dig for gold.
The result? Goldcorp struck gold using an identified prospect from the competition, in a much shorter time than their usual exploration cycles which opened new and fertile business development opportunities.
Another great example that was discussed was the Enerkem facility in Edmonton that converts municipal solid waste (MSW) to biofuels and chemicals. This first of its kind technology will take 100,000 tonnes of Edmonton MSW and convert it into 38 million litres of biofuels.
It took 15 years to bring this technology form the screening and evaluation stage to full scale commercial production.
Understandably, there were several ‘pinch’ points along the path to commercialization:
Read more about this global game changer here.
Q: Can you outsource innovation?
A: Often, the government can have a longer term vision since they are not as closely tied to immediate shareholder ROI
A: IOC’s and NOC’s often outsource innovation but keep it at an arm’s length, for example, their venture capital arms
A: To innovate faster, you need to find who in the world is already where you want to be and partner with them
Q: What advice do you have for policy makers around innovation incentives?
A: Yes, you can financially incentivize innovation, but what you don’t want to do is incentivize businesses that shouldn’t be there in the first place. Alternatively, you need to think about the role of Boards and other key decision makers – they can be structured so that they always look through the innovation lens and play the role of champion in this space. This is a differentiator for companies.
If you have a topic idea you’d like to see, please e-mail Megan Zimmerman at email@example.com.
The next Innovate Straight Talk event will take place in early 2016.