Meeting energy challenges requires the wide-ranging technological capabilities to:
· provide comprehensive solutions,
· find synergies,
· integrate systems, and
· recognise new possibilities.
I cannot explore the spectrum of energy technologies. So let me give you a flavour of what we are doing in the Shell businesses for which I am responsible - Exploration & Production and Gas & Power.
It is vital to keep pushing forward seismic .
We now apply pre-stack imaging and pre-stack depth migration routinely to entire 3D data sets, providing much clearer definition. Old surveys are being re-acquired with new techniques - such as this high resolution survey in Brunei.
These developments enable us to exploit other advances - such as precisely targeting multilateral horizontal wells. This 'fishhook' well from Brunei is a production, appraisal and exploration well all in one - and at a fraction of the planned cost.
Such advances have enabled us to halve unit operating costs in Brunei. And production from the Seria field - which has been producing for 70 years - will double over the next few years as they enable us to identify and target unswept oil.
Using time-lapse - or 4D - seismic to track reservoir changes enabled us to locate a well in Norway's Draugen field which delivered 77,000 barrels a day. We see 4D as a key technology for maximising production from mature reservoirs.
Seismic visualisation and interpretation have developed rapidly. Large scale visualisation CAVES improve shared understanding. We are working to extend visualisation - on workstations and desktops - to allow us to work together in world-wide 'virtual' teams.
We are even experimenting with a device called a haptic mouse to 'feel' the subsurface. Unlike some others, we continue to focus on developing proprietary modelling and simulation tools.
Integration is being extended from the subsurface. In the southern North Sea, integrated subsurface and surface modelling helps optimise gas field development.
There have been huge advances in drilling - long-reach, horizontal, slim, multilateral, coiled tubing.
Now wells are getting smart. Combining multilateral extensions, real-time measurement of reservoir conditions, automated control and downhole processing will allow us to manage reservoir performance much more effectively - and with less environmental impact.
Novel well design, fraccing and stimulation techniques enhance gas flows from tight reservoirs. We are working on downhole monitoring of the dimensions and performance of fractures.
We have been developing Shell intelligent well technology. But the real rewards will come from integrated systems. Our WellDynamics joint-venture with Halliburton combines a range of technologies and complementary experience.
Such wells will have particular value in deep water - because of the high cost of well support.
Shell is one of the two main deep-water players, with world-wide operations. We are developing other solutions to deep-water problems.
One is how to prevent the weight of the fluid column damaging unstable formations. The Shell subsea pumping system will pump drilling fluids from the seabed.
Another is how to extend drilling reach while retaining the well bore for the high productivity deep-water economics demand. Shell expandable tubular technology - expanding pipe diameter in situ - offers a solution.
Increasing recovery also means exploiting non-conventional resources - if that distinction still means anything. Shell Canada's Athabasca oil sands scheme - to supply high-quality, low-sulphur gasoline - is very competitive.
With more potential projects than buyers, the issue for LNG is competitiveness.
We continue to drive down capital and operating costs. There is no magic bullet - rather a toolkit of technologies and knowledge of the whole gas chain, from retail to reservoir.
It requires the technological judgement to push limits. Installing the largest ever processing trains in the new Oman LNG plant helped make it the cheapest greenfield development.
We are very excited about the prospects for our gas-to-liquids technology - which is already proven in the only commercial scale plant in Malaysia. A breakthrough in catalyst technology in our Amsterdam laboratory has further cut costs.
Gas-to-liquids now offers a competitive alternative to LNG for commercialising gas reserves - delivering ultra-clean, high-quality products increasingly required for rising fuel standards. We are pursuing further schemes in such countries as Indonesia, Iran, Egypt and Trinidad & Tobago.
I referred to Shell coal gasification technology. This is more efficient than conventional coal combustion and the resulting syngas burns as cleanly as natural gas. All the by-products are saleable and there is the potential for sequestering the carbon dioxide. It opens the door for coal in a hydrogen economy.
We think it could play an important role in enabling China to use its coal cleanly and competitively. Plans for the coal gasification first plant - making chemical feedstock at Dongting in Hunan - are well advanced.
Making the most of technology:
Having advanced technology is just the start. It is essential to make the most of it everywhere. This requires systematically …and I stress systematically:
· earning lessons,
· sharing knowledge, and
· pursuing improvement.
We have been able to cut LNG costs because of our particular experience in designing, constructing and operating such schemes. But only because we have taken care to develop a cadre of LNG specialists embodying that experience.
The same goes for deep water. Learning from experience has enabled us to drive down unit development costs by 60 percent, and cut project times by half. Shell Deepwater Services applies this learning around the world.
We put increasing effort into sharing knowledge - using a range of new communications techniques from web forums to world-wide business television.
But I think the most productive way of sharing is still to enable people to move around - applying, developing and exchanging their experience in new conditions. Our worldwide operating responsibilities give us unique scope for this.
The vital thing is to keep driving forward improvement - constantly challenging how we do things, the assumptions we make, the limits we accept, the possibilities we see.
Shell E&P has developed a powerful approach called Realising the Limit - to speed drilling, maximise the value of subsurface knowledge, make the best use of capital and increase production. Global teams envisage the perfect performance for each element of a task - to the limit of today's technology - and apply our collective experience to realising this.
Shell companies using Drilling the Limit™ have been able to cut drilling costs by more than 20 percent on average. In the United Kingdom they were halved.
To extend those technology limits we need a constant flow of innovations.
One response has been to harness the creativity of all our people, through an internal venture capitalist approach called Gamechanger. This is simple, rapid and rigorous. It has delivered new business value in key areas - cheaper exploration, intelligent wells, non-conventional energy, energy conversion and environmental improvement.
We seek to leverage our internal capabilities by working with others.
This includes research alliances with key technology institutions - from Delft Technical Institute to the Colorado School of Mines, NTNU in Trondheim to the Russian Academy of Sciences.
We work with others to commercialise technology - gaining industry-wide scale and delivery and encouraging continued development, while delivering a healthy return and keeping ahead of the learning curve. For example, expandable tubulars are being marketed through joint ventures with Halliburton and Baker Hughes.
We have formed a joint-venture with the Beacon Group to develop new energy technology businesses. Beacon is a leading New York based venture capitalist specialising in the energy sector. It's a very good reality check to see if a successful technology entrepreneur is willing to invest its own money in a proposed commercialisation.
The first venture of the partnership involves our Twister supersonic gas separator - which has no moving parts, produces no emissions, is much smaller and saves lots of money. We expect it to sell well.
Integrating to add value:
Over the past 20 years this industry has been strikingly successful in reducing its costs and expanding its capabilities. More than anything else this has been due to integration.
This means integrating:
· subsurface disciplines to achieve comprehensive understanding,
· appraisal and development into a continuous, flexible process,
· staff and contractors into cohesive teams with shared incentives,
· operational and commercial drivers, and
· the whole value chain from retail to reservoir.
Integration is particularly necessary for gas - with its developing markets, long-distance supplies, connected infrastructure and fluctuating demand.
Developing West European gas supplies after the discovery of Groningen in the early 1950s was a similar challenge to that now facing China.
Groningen remains a supreme example of the importance of integration - providing the capacity to meet huge demand swings. State-of-the-art underground facilities store summer production for winter use.
Integrating subsurface, engineering, operational and commercial considerations will be essential in preparing redevelopment plans to fit Groningen for its swing role for a further quarter of a century - in uncertain liberalised markets.
Integration is equally important in providing cost-effective and reliable LNG supplies. In developing markets, the link with power is vital - which is why we put such stress on our InterGen joint-venture, which has been so successful as an independent power developer.
People not things
Talks about technology often seem to focus on things - pixels, pipes, platforms and processes.
In reality it is about people - attracting the best, developing their skills, extending their experience, organising them to work together, encouraging and harnessing their creativity, valuing them and what they do.
That is how we will meet those pressing energy challenges.
Phil Watts, Managing Director of The Shell Petroleum Company (The "Shell" Transport and Trading Company, plc) and Group Managing Director of the Royal Dutch/Shell Group of Companies at the SPE International Oil & Gas Conference, Beijing, PR China.
© 2000 Mena Report (www.menareport.com)