An industry going high-tech

A few decades ago the capture of hydrocarbons was a fairly straightforward process: you drilled into some Texan scrub and if your luck was in, you struck black gold. The Beverly Hillbillies television show springs to mind. Nowadays, the search for oil and gas has become a precise science with millions of dollars ploughed into technologies to discover, develop and recover oil and gas from new and existing wells. The oil and gas giants are working smarter, as well as investigating alternative forms of energy in these carbon-conscious times that we live. Although fossil fuels will remain the cornerstone of the business for the foreseeable future, companies like ConocoPhillips, the third-largest integrated energy company the US, is looking to diversify in order to meet soaring demand. This couldn’t be achieved without technology.

To illustrate its importance in the energy arena, ConocoPhillips has earmarked around US$400 million for technology alone in 2008. The Houston-based company plans to spend approximately $150 million of this budget for research on the development of alternative energy, including non-conventional oil and gas resources.

Stephen Brand, SVP of Technology, who began his career more than 30 years ago as a geologist in exploration and production (E&P) with Phillips Petroleum Company, feels the industry is light years ahead today. “ Significant advancements in drilling, well completion, and seismic technologies have been made during my career and these advancements must continue in order to meet our growing energy demand and to maximize our energy resources.” He says feats accomplished in the seventies pale into comparison to exploration efforts we see now. “In 1976 [when Brand started out in the industry] we thought 600 feet of water was deep – now we’re exploring and producing in water that is 8000 feet deep.”

Fresh focus
Although Brand’s career has been mostly in the E&P arm of the business, his new job is still intertwined with his old one. “My previous roles in E&P and my current role as SVP of Technology really have similar issues; both areas are all about portfolio management, risk assessment and finding long-term solutions to address the future of energy supplies while, in today’s world, also reducing the environmental footprint of energy development and usage.”

Brand’s remit encompasses pretty much most areas of this major’s operations. His technology organization within ConocoPhillips covers E&P technology such as seismic and drilling, downstream coking technology, research into second generation renewable forms of energy, carbon capture technologies, transforming non-conventional fossil sources such as heavy oil into clean fuels and converting coal into clean-burning natural gas. It also works with other alternative forms of energy such as wind, solar, geothermal and lithium-ion batteries. It is little wonder then that Brand says the oil and gas industry “relies heavily on technology” in order to function in a highly-competitive environment.

A major project in the pipeline is the state-of-the-art Global Technology Center that ConocoPhillips is planning to build in Louisville, Colorado. The 432-acre plot of land, halfway between Denver and Boulder, is being established to support the R&D growth areas, says Brand. It will become a leading facility in the research of innovative technologies, including biofuels, environmental technologies, non-conventional and other alternative technologies. The goal is open the center by 2011, although 2012 looks more likely. Colorado appeals to the energy firm, being home to the U.S. Department of Energy’s National Renewable Energy Laboratory as well some of the finest learning institutions investigating renewable energy. “Colorado is becoming a hub of alternative energy development, and we are planning to build our technology center in a location that will capitalize on our relationships with and proximity to excellent research universities, government laboratories and think tanks,” Brand explains.

“The technology center will focus on a wide variety of energy research activities across the upstream, downstream and alternative energy spectrum.” Brand also states that the facility will also become a dedicated training facility to offer employees worldwide technical training in core disciplines, as well as personal development and leadership skills. Currently, there isn’t a fit-for-purpose training center available within the corporation. In addition, as this facility is being designed and developed, there will be a number of additional factors taken into consideration. “Anything we build in this center will be green, state-of-the-art, and set in an open, natural environment that reflects the beauty of the surroundings,” Brand says. (COP cannot confirm your number of employees in Colorado and we’d prefer this reference be deleted).

New frontiers
Outside of the US, ConocoPhillips has a strong portfolio of investments that are delivering healthy returns thanks to the sharing of technology. An example would be the firm’s 20 percent share in Russian giant OAO LUKOIL. First-quarter results showed that profit soared to US$710 from US$256 million. It’s a deal that has flourished, says Brand. “We have found our co-operation with LUKOIL to be very productive in terms of knowledge and technology transfers. Our Naryanmarneftegaz joint venture is currently developing the YK Field with first production scheduled for summer 2008. This is a mainly LUKOIL-style development which ConocoPhillips has supplemented with our experience from Alaska and Canada. We have learned better how to implement projects in Russia while LUKOIL has gained practical experience with some different technologies.”

Both ConocoPhillips and LUKOIL have a management exchange program, with company officials making the trip from Houston to Moscow and vice versa. This has boosted knowledge and efficiencies. “Through this program we have come to better understand each other and have shared best practices and knowledge,” Brand enthuses. “We see significant value from the program today and see increased benefits from having worked together as we expand our cooperation into other opportunities.”

But with a company as large as ConocoPhillips, identifying which technologies to pursue and develop can create some tough decisions. So how does Brand make these choices? “ We consider how new technologies complement our current asset portfolio in determining where and how we make new investments. We also consider the future, long-term strategy of our company and how new technologies can support this strategy.” He also notes how problems [he prefers challenges] are thrown up everyday in this industry.

“ We face unique challenges in every region in which we operate, including the Lower-48 and Alaska, and the Russia and Caspian region is no exception. The biggest challenges facing us, and the industry, are access to material opportunities, increasing cost pressures, and timely availability of goods and services for new developments.”

The outlook
In the meantime, the focus for the oil and gas industry is on bringing oil and gas to market. However, increasing effort will go into exploiting new technologies in order to diversify US energy production. Increasingly, we are going to see investment in renewables like wind and solar, alternatives such as clean coal and nuclear, and biofuels. After all, oil and gas isn’t going to be around forever. However, all of these alternative options come with unique issues: biofuels, for example, will only meet a tiny fraction of the soaring energy demand we are witnessing globally – largely generated by the rapidly developing economies like China, India, and parts of the Middle East. Also, fuel from food pushes up the price of many staple food types. Indeed, the food versus fuel debate looks set to run and run.

Brand says ConocoPhillips believes that fossil fuels powering today’s economy are needed to serve as bridging fuels until the energy sources of tomorrow are developed in sufficient scale. He adds: “Concurrently, we are working to bring non-conventional fossil fuels to market in cleaner forms while developing biofuels and other renewable energy sources. We are expanding our ethanol and biodiesel blending capabilities. We are also funding research into second generation renewables using non-food cellulosic materials that will not compete with the world’s food supply.”

Last year, the oil giant announced that it plans to establish an eight-year, US$22.5 million research programme at Iowa State University dedicated to developing technologies that produce biorenewable fuels. It has also entered into agreements with Archer Daniels Midland Company to work together on the development of renewable transportation fuels from biomass. Another agreement has also been struck with Tyson Foods, Inc. to produce and market the next generation of renewable diesel fuel. ConocoPhillips says the alliance, which uses beef, pork and poultry by-product fat to create a transportation fuel, contributes to America’s energy security and helps to address climate change concerns. The energy major also produces renewable diesel fuel from vegetable oil in Ireland. Impressive stuff indeed.

Although Brand has occupied this key post for little more than six months, it’s clear from speaking to him that he is relishing the challenge ahead. And his role is going to grow in stature and importance in the coming years with technology now engrained in the oil and gas industry’s psyche. So what’s next for ConocoPhillips? “Our investment in technology will be spread out among the topics I mentioned before, but we will also focus our efforts on innovative technologies that we believe will actually be successfully deployed in the future,” Brand responds. “We’ve increased our research and development activities in technologies that complement our existing businesses and provide strong growth opportunities in energy alternatives. The future will potentially see further expansion of technology innovation undertakings and investment.”

Stephen Brand , who assumed his current role in October 2007, was previously, VP of exploration and business development, Exploration and Development. Prior to that, he was President of Australasia following the ConocoPhillips merger in 2002. He had previously been general manager, Australia division. Brand graduated from the University of Minnesota in 1971 with a bachelor of science degree in geology. He received a master of science degree in geology in 1973 and a doctorate in 1976, both from Purdue University.

Extras…

Technology and innovation initiatives  

Fuels technology
ConocoPhillips is investigating greater use of ethanol in gasoline, removal of unwanted byproducts from fuel, identification of more effective refinery catalysts, potential molecular-level enhancements to fuel blends, and thermo-chemically converting cellulosic biomass – wood, corn stover and switch grass – into bio-oil. The company is also looking to use beef and pork by-product fat for a transportation fuel.

Heavy oil
In partnership with EnCana, ConocoPhillips operates a heavy oil business. Its heavy oil capabilities are also aiding in evaluating the feasibility of producing shale oil in the US Rocky Mountains. A similar approach is being used to analyze the producibility of natural gas hydrates – methane trapped in ice in arctic regions and beneath seabeds.

E-Gas™
This technology offers the potential for coal industry customers to burn it more cleanly while generating purer streams of carbon dioxide that can be used in industrial processes or injected to recover more oil from aging reservoirs and potentially more methane from coal beads.

Carbon sequestration
Research continues on capturing waste carbon dioxide and injecting it deep underground into depleted reservoirs, thus reducing atmospheric emissions. ConocoPhillips has developed technologies that reduce both energy use and emissions at the source.

Water sustainability
In mid-2007, the company announced plans to establish a global water sustainability center that will examine ways of treating and using by-product water from oil production and refining operations. The Center, jointly owned by GE and based in Qatar, will see US$25 million of investment in the first five to seven years.

Next generation biofuels
Last year, ConocoPhillips and Archer Daniels Midland Company announced an agreement to collaborate on the development of renewable transportation fuels from biomass. ConocoPhillips also announced a strategic alliance with Tyson Foods, Inc., to produce and market the next generation of renewable diesel fuel. This is in addition to a US$22.5 million research program at Iowa State University into biorenewable fuels.

Source: ConocoPhillips

Fact file

• ConocoPhillips is the third-largest integrated oil company in the United States
• The fourth-largest refiner in the world
• The sixth-largest worldwide reserves holder of non government-controlled companies
• It currently has exploration efforts in 23 countries, producing 2.3 million barrels of oil equivalent (boe) a day (includes LUKOIL and Syncrude)
• Has earmarked US$12 billion for E&P in 2008