As recently as ten years ago, China’s total energy consumption was half that of the US. How quickly times change: data published by the International Energy Agency back in August revealed that the burgeoning super power has stormed past its American rival, consuming 2.252 billion tons of oil equivalent in the last year alone, a staggeringly fast progression that shows little sign of abating. China’s double figure annual growth rates may be an extreme example, but the trend is indicative of a much wider shift that has major implications for energy security worldwide.
The combination of a global population rise of some quarter million per day, increasingly energy-intensive lifestyles within developing economies and the emergence of new industrial behemoths means that the requirement for discovering new energy sources and maximising existing ones has never looked starker. At the same time, debate over our need for ‘cleaner’ power continues apace, with governments making concrete commitments to cut fossil fuel use and reduce carbon emissions. Within this discourse, campaigners can sometimes portray the oil and gas sector as the villain of the piece; a conservative relic of an earlier age ill-equipped to meet the short and long-term energy challenges facing the global community.
This is not a picture recognised by Kjell Ursin-Smith. The ONS president and CEO, recently named Oilman of the Year by the Stavanger branch of the Society of Petroleum Engineers, is adamant that the industry is not only aware of the need for action but is actively looking towards ways of leading the charge towards finding sustainable answers.
“I was at the CERA conference in Houston just a few months ago,” he tells me. “There were 1,500 industry representatives there and nobody could have left in any doubt that everyone present was extremely concerned about the gap between supply and demand. The commitment is unquestionable.”
This commitment is reflected by the theme at ONS 2010, ‘Energy for more people’, proposed by an international committee chaired by ConocoPhillips Norge managing director Steinar Våge. Ursin-Smith is clearly enthused by the potential of August’s event to prompt an industry-wide debate around the need for increased access to resources, better resource exploitation and increasingly energy efficient production.
“I am convinced there needs to be a dialogue across all regions and sectors,” he explains. “We must demonstrate to the world that the industry is aware of its responsibilities and is active in encouraging the exchange of skills and ideas from all interest groups. With participants from over 100 countries, this seems like the right place to do that.”
Such ambition marks a significant departure from the original focus of ONS, now in its 35th year, when the North Sea tended to be the sole topic of conversation. Nevertheless, it is to Norwegian waters where Ursin-Smith turns for an example of just what a difference maximising existing assets could make.
“If we get every well on the Norwegian Continental Shelf producing 1% more that will equate to an extra income for Norway of 100bn-Nkr150bn,” he reveals. “The motivation has to be financial as well as practical, but both are great drivers for finding new ways of increasing yields.”
As the industry approaches 40 years of production along the shelf, however, that 1% is becoming increasingly difficult to tap. The CEO acknowledges that ageing infrastructure could be an issue, but is a firm believer that the evolution of operations has been managed impeccably thus far. “I look at the Ekofisk field and the fact it has been onstream since 1971,” he counters. “We estimated that it would produce until the end of the 90s, but that has been revised up to at least 2050. Technology is a great enabler and we have seen innovations introduced very intelligently over time. BP’s Valhall field is another great example of operators adopting an approach led by innovation. New technologies can change the game very quickly.”
This begs the question as to where oil and gas companies are currently focusing their technology spend. The R&D required for better resource exploitation is quite different to that for increased access, but are large operators focusing on one area at the expense of the other? “From where I stand, it seems that companies are aware that you have to be investing in both ends,” is the measured reply. “While making the most of existing assets is fundamental, developments such as the move into increasingly hazardous areas demands a quite different approach and the technologies to match. That is recognised across the industry.”
This argument is supported by the level of entrants participating in this year’s innovation awards at ONS. First presented in 1982, and supplemented by an addition SME award since 2004, a record number of companies – over 140 and counting – are vying for recognition in 2010. “This can only be a good sign,” Ursin-Smith agrees. “We must all be constantly evolving, moving forward, and that is only made possible by innovation.”
For the first time, ONS has been seeking nominations for a ‘Special Innovation Award’, to be presented to an individual or organisation that has played a significant role in the wider energy sector. One wonders whether progress may also lie in diversification as the industry seeks out answers about how to meet an increase in energy demand.
“That is true and we’re seeing the tendency already,” Ursin-Smith says. “For example, you only have to look at Statoil’s work with renewables, such as the Hywind project off the coast of Norway, to see that companies are expanding their thinking.” Hywind is a prime example of innovation on the part of an offshore oil and gas giant. The world’s first full-scale floating wind turbine is being tested over a two-year period at an investment of some Nkr450m. It can be placed at ocean depths of between 120 and 700 metres and opens up the possibility for capturing wind energy in deepwater environments. These are early days, however, and not even the most enthusiastic exponents of wind power will pretend that it can tackle the energy gap alone.
“Oil and gas have a major role to play because, as we stand today, there are simply no alternatives that are economically viable,” says Ursin-Smith. “But the mobile telephone was not invented by a telephone company and, in the same way, it is not necessarily those exclusively focused on finding new energy sources who will come up with the answers.
“It will be an extremely capital-intensive mission and it is the large oil and gas players who have the capabilities to hand. They possess the infrastructure, the R&D, and, more importantly, it is where you’ll find the people. The oil and gas sector has always attracted some of the brightest minds; extremely clever men and women with the right skills to take on a challenge of this size.”
A requirement to think outside the box is further accentuated by the Space and Energy Park at this year’s ONS. This will explore some of the technology challenges shared by technicians searching out new energy resources and those pursuing more celestial endeavours.
Common interests include automation, harsh environments, new materials, energy solutions, remote operations, integrated operations, communications and surveillance; and the hope is that collaboration will generate new businesses, jobs and technologies. “There are certainly some technologies that could be potentially transferred from space to subsea,” says Ursin-Smith. “It is so important that we look beyond the conventional contributors to this debate and incorporate those who might be ignored otherwise. This is a great example.”
That dialogue is only just beginning and, in the meantime, the quest for new frontiers continues. While the energy gap is framed as a global issue, debate between nations about access to such territories suggests that the bigger picture does not always take prominence. The Arctic is a case in point, with some of the industry’s more outré commentators even suggesting that the dispute over ownership could lead to a third world war.
“Such squabbles are an issue,” says Ursin-Smith, “and that is why politicians need to take into account the world’s future rather than focusing on their immediate interests. What happens in the Arctic matters to everyone and there are promising signs. April’s agreement between Norway and Russia about borders in the Barents Sea and Arctic Ocean sets a great precedent for the future, both of oil and gas and the energy challenge in general.”