5 trends in oil & gas technology

5 trends in oil & gas technology, and why you should care

(by  Mac Elatab, published on www.venturebeat.com) Oil is in the news again. Last week, oil prices touched all-time highs due to Iranian export declines; the chief economist of the International Energy Agency said that high oil prices could cause an international recession. And whereas it looked like the State Department had put the breaks on the Keystone pipeline in November, President Obama announced last week that he was going to fast-track the construction of the southernmost portion of the project.

5 trends in oil & gas technology, and why you should care

However, developments in oil and gas (O&G) are often overlooked in tech publications. It’s easy to see how technology is reinventing retail, entertainment, telecommunications, and healthcare, but there’s little discussion of tech’s impact on the universe of companies focused on natural resources extraction, such as petroleum, natural gas, and mining companies, aka “extractive industries.” The reality is, O&G is adopting a lot of new technologies, and a lot of funding is going into innovative companies that can help oil and gas companies work smarter.

(Chart based on the following patent classes: Solid Anti-Friction Devices, Materials Therefor, Lubricant or Separant Compositions for Moving Solid Surfaces, and Miscellaneous Mineral Oil Compositions; Mining or In Situ Disintegration of Hard Material; Mineral Oils: Processes and Products; Mineral Oils: Apparatus;Fuel and Related Compositions; Earth Boring, Well Treating, and Oil Field Chemistry; Chemistry of Hydrocarbon Compounds; Boring or Penetrating the Earth/)

Evidence of the increasing importance of oil and gas innovation is seen in patents, for example. The number of patents related to extractive industries more than doubled from 2005 to 2010.

Strategic investors in O&G technology include Chevron, BP, Energy Technology Ventures, a joint venture between GE, NRG, and ConocoPhillips, Statoil Ventures, and KPC Ventures. Statoil Ventures and KPC are especially noteworthy, because they are divisions of national oil companies (NOCs) — Statoil, Norway’s national oil company, and the Kuwait Petroleum Corporation, respectively.

A Bain report highlighted the role that national oil companies play in spurring a country’s technological development – “the Petrobras Effect”:

“Many of the NOCs seek to nurture entrepreneurship and foster globally competitive businesses in energy-related sectors—and that creates an opportunity to promote new areas of competitive advantage and strengthen existing ones for their home countries. In principle, they can become powerful engines of socio-economic change—not just earning wealth but also spreading the economic benefits of a competitive oil sector.”

Strategics are involved in not only funding companies, but in funding VC firms. According to its website, Chevron invests in firms such as Ampersand Ventures, Element Partners, EnerTech Capital, Nth Power, and RockPort Capital Partners. KPC Ventures backs Braemar Energy Ventures, Chrysalix, Emerald Technology Ventures, Conduit Ventures, Nth Power, and EnerTech Capital. Baker Hughes, Nalco, and Weatherford sponsor the Oil & Gas Innovation Center, and the Surge Accelerator was recently started to serve as a Houston-based incubator for energy startups.

Whether we like it or not, hydrocarbon fuels are not going away anytime soon, and innovations in O&G tech have the potential to impact everyone. If technology makes oil and gas easier, safer, cleaner, and cheaper to extract, energy prices and quality of life could improve for everybody. And if that doesn’t appeal to the better angels of your nature, it presents a huge business opportunity.

Here’s a look at the five key innovation areas the extraction industry is focused on — and where the biggest opportunities lie for O&G technologists:

1: Software “Eats” Oil and Gas: The Digital Oilfield and Beyond
As Marc Andreessen has written, software is “eating the world,” and O&G is no exception. “The Digital Oil Field” is something of a buzzword in the oil and gas industry – tossed around like “the cloud” or “big data” are in IT. The basic premise is a web-based visualization platform from which companies can manage, measure, and track all of the data coming from all over the oilfield.

FindingPetroleum has described the digital oilfield as an oilfield where “all the components integrate and communicate as well as your body does.” A McKinsey report describes a “digital oil field” where “instruments constantly read data on wellhead conditions, pipelines, and mechanical systems. That information is analyzed by clusters of computers, which feed their results to real-time operations centers that adjust oil flows to optimize production and minimize downtimes.”

This represents a big opportunity for oil and gas companies. According to Oil and Gas Investor, total upstream energy IT support spending is about 25 cents per barrel of oil. Booz & Co mentioned that some analysts believe digital oilfield technologies could increase the net present value of oil and gas assets by 25%.

A digital oilfield can also minimize the impact of the lack of qualified skilled labor; Booz & Co predicts that the labor gap could reach 1 million by 2015. The McKinsey report describes how “one major oil company” was able “to cut operating and staffing costs by 10 to 25 percent while increasing production by 5 percent.”

Major software companies have jumped on this trend. EMC announced a development center in Rio de Janeiro to focus on big data analytics for oil and gas. In fact, EMC boasts that more than 95% of Forbes Global 2000 oil and gas companies use its technology. Other large IT and software companies with solutions designed for oil and gas companies are IBM, Microsoft, Progress Software, Cisco, Wipro, and SAS. Schlumberger and Baker-Hughes, two major oilfield services companies, have significant digital oilfield practices. A smaller company in this space is Chevron Technology Ventures-backed Mobilize, which enables energy firms to aggregate data in real time from multiple vendors.

A handful of other venture-backed software companies are tackling O&G. Some small companies in the space include Transform Software and Services, a developer of visualization and interpretation software designed for geophysical, geological, and engineering workflows. FiveCubits provides tracking software and plant control systems for bulk material companies, including petroleum, coal, and minerals companies. Rock Flow Dynamics provides software tools for reservoir engineering, specifically a reservoir simulator.

2: Accessing the Previously Inaccessible
When Marco Polo visited Azerbaijan, he found oil gushing out of the ground. Today, oil is considerably harder to find, but new technologies are making the once-inaccessible accessible. For example, BP originally estimated it would only be able to recover 40% of the oil at Prudhoe Bay in Alaska but has since revised this upward to 60%. Some of the new techniques BP has used include fracturing the rocks (applying pressure to the rocks to create fine cracks that can stimulate the flow of trapped natural gas), injecting low salt water into a reservoir to push out oil trapped in rock pores, injecting carbon dioxide into wells, and feeding in certain micro-organisms to help oil flow.

VC-backed companies, including Oxane and Glori Energy, have sought to facilitate these types of operations. Oxane has commercialized technology from Rice University to create new ceramic proppant to increase the rate of production and the total amount recovered, and to reduce the environmental impact of fracturing. (Proppants are particles added to fracturing fluid in order to hold fractures open.) Glori Energy improves the sustainability and efficiency of recovering oil trapped in reservoirs by stimulating naturally occurring microbes. For more challenging jobs, Foro Energy has developed long-distance laser technology to destroy ultra-hard (high compressive strength) rocks.

Turning from oil to coal: Some coal is too deep to mine. Laurus Energy, a developer of underground coal gasification projects, is able to convert this goal into gas streams, which can be used as feedstocks or to produce low energy carbon.

3: Working in Remote Environments
Oil and gas exploration today is based in some of the most remote places in the world. It is hard to imagine places more inaccessible than Prudhoe Bay (on the North coast of Alaska), Russkoe Field (above the Arctic Circle in Russia), the Campos Basin (offshore, Brazil) or the Tengiz in Kazakhstan. North Sea oil is the reason Aberdeen has the busiest heliport in the world. Oil and gas companies have looked to technology solutions to manage these distances. For example, RigNet is a venture-backed company focused on IT networks for drilling rigs and offshore vessels. NuPhysica, a telemedicine company, solves a major need within the oil and gas industry of handling employee injuries when they’re out in the middle-of-nowhere. The company uses advanced videoconferencing solutions to allow doctors to diagnose and potentially treat patients remotely. In one case, it saved an oil company $30,000 by enabling an injured worker to be diagnosed on an oil rig rather than emergency transported to shore. Even mundane things, such as remote collaboration software, are crucial. VSEE Labs, a Salesforce.com-backed startup, provides video conference and collaboration software used by Shell Oil and Saudi Aramco.

4: Minimizing the Harm of Hydrocarbons
Cleantech investing may not be dead, but alternative energy is arguably in the “trough of disillusionment” in the hype cycle following recent scandals and the disappointing financial performance of public cleantech companies. The WilderHill Clean Energy Index is down 55% since it was launched in 2004. This has increased interest in making production and consumption of hydrocarbon fuel less harmful, rather than making alternative fuels commercial. For example, companies such as PWAbsorbents and GeoPure HydroTechnologies have tackled the problem of treating water produced in the extraction of natural resources.

Other companies focus on decreasing demand rather than trying to increase supply. Cerion Energy produces a nanotechnology-based diesel fuel that decreases consumption by a minimum of 8%, while reducing emissions.

5: Turning Lemons into Lemonade and Fuel Metamorphoses
There is another suite of companies that try to take one resource and turn it into other, more valuable or convenient resources. Fractal Systems is a VC-backed technology that upgrades heavy oil and bitumen. Heavy oil and bitumen have greater densities than light crude oil; they are more expensive to refine and produce more pollution; however, there is much more heavy oil and bitumen in the world than light crude.

Siluria Technologies is a company that replaces oil with natural gas for manufacturing processes. The advantage of doing this is that natural gas is cheap and abundant in the U.S. (and has become cheaper and more abundant because of fracking technology) and pollutes less than oil (0.23 kgCO2/kWh for natural gas vs. 0.27 kgCO2/kWh for gasoline). In a similar vein, Ciris Energy converts coal to natural gas. This is valuable, because coal is the most abundant fossil fuel in the U.S. and China, but converting it to natural gas makes it more environmentally friendly (0.23 kgCO2/kWh for natural gas vs. 0.37 kgCO2/kWh for coal).

Even more audacious are companies turning waste into energy. Enerkem is pioneering technology to use garbage to replace petroleum. SunCoal Industries turns organic waste, such as garden compost, straw, and chicken manure, into carbon-neutral coal. Agilyx developed technology to convert plastics into synthetic crude and other petrochemicals. Plastic is heated until it turns into a gas, the gas is condensed into a liquid, and then the hydrocarbons are separated.

Three Opportunities for Innovators in Extractive Industries

Three additional areas have been relatively untouched by innovators but could be huge market opportunities:

1. Mineral extraction innovation.  Only a fraction of venture investment goes into energy technology, and only a small portion of that goes into hydrocarbon related technologies.  Even fewer dollars go into supporting the mining and minerals industry. The sole venture-backed mineral company that comes to mind is Simbol Materials, which produces Lithium; the sole strategic minerals VC I have heard of is BBIG Ventures (part of BHP Billiton), which closed shop in 2002.  As the recent high-profile WTO trade case suggests, minerals, especially rare earth minerals, are going to have an important impact on the economy. The Economist recently cited an article in Environmental Science and Technology that concluded that if wind turbines and electrical vehicles were to become as mainstream and widespread as they could be, the requirements for certain rare metals would need to increase by 700-2,600% over the next 25 years, whereas these supplies are only increasing by 6% a year.

2. Financial innovation to manage commodity volatility. Oil and energy prices are extremely volatile (see chart below). One of the most innovative companies I have seen is PriceLock, which helps consumers lock in prices for gasoline. Energy price volatility is a huge problem for consumers and corporations and presents a huge opportunity for entrepreneurs.

3. Improve pipeline tech. The world needs cheaper, easier, and more environmentally-friendly pipelines. Pipelines are incredibly expensive to install – so much so, that outside of the United States, it is rare for them to be financed without government sponsorship (either direct or indirect). By making them more environmentally friendly, pipeline building could also avoid political risk: Environmental issues were big factors in the State Department’s decision to initially deny the permit for the Keystone Pipeline and Bulgaria’s decision to cancel the Burgas-Alexandroupolis pipeline.

Note: All views expressed in this article are my own and do not necessarily reflect the views or opinions of TrueBridge Capital Partners.

Mac Elatab (@Rollscritique) is a member of the investment team at TrueBridge Capital Partners, where he evaluates venture capital fund investments and direct investments in software and internet companies.

[Top image credit: huyangshu/Shutterstock]

Article Credit: VB News – www.http://venturebeat.com/2012/03/28/5-trends-in-oil-gas-technology-and-why-you-should-care

Coal-to-Liquid Fuels possibly competitive again?

Coal-to-liquid fuels poised for a comeback

With rising energy prices, could coal-to-liquid conversion become an economical fuel option?

Converting coal into liquid fuels is known to be more costly than current energy technologies, both in terms of production costs and the amount of greenhouse gases the process emits. Production of coal-to-liquid fuel, or CTL, has a large carbon footprint, releasing more than twice the lifecycle greenhouse gases of conventional petroleum fuels. However, with the rise in energy prices that began in 2008 and concerns over energy security, there is renewed interest in the conversion technology.

Coal-to-Liquid Gas
Credits – WSJ Research (SASOL)

Researchers from the MIT Joint Program on the Science and Policy of Global Change (JPSPGC) recently released an assessment of the economic viability of CTL conversion. The researchers looked at how different climate policies and the availability of other fuel alternatives, such as biofuels, would influence the prospects of CTL in the future.

Coal-to-liquid technology has been in existence since the 1920s and was used extensively in Germany in 1944, producing around 90 percent of the national fuel needs at that time. Since then, the technology has been largely abandoned for the relatively cheaper crude oil of the Middle East. A notable exception is South Africa, where CTL conversion still provides about 30 percent of national transportation fuel.

But will there be a resurgence of CTL technology? To determine the role that CTL conversion would play in the future global fuel mix, researchers examined several crucial factors affecting CTL prospects. Different scenarios were modeled, varying the stringency of future carbon policies, the availability of biofuels and the ability to trade carbon allowances on an international market. Researchers also examined whether CTL-conversion plants would use carbon capture and storage technology, which would lower greenhouse gas emissions but create an added cost.

The study found that, without climate policy, CTL might become economical as early as 2015 in coal-abundant countries like the United States and China. In other regions, CTL could become economical by 2020 or 2025. Carbon capture and storage technologies would not be used, as they would raise costs. In this scenario, CTL has the potential to account for about a third of the global liquid-fuel supply by 2050.

However, the viability of CTL would be highly limited in regions that adopt climate policies, especially if low-carbon biofuels are available. Under scenarios that include stringent future climate policies, the high costs associated with a large carbon footprint would diminish CTL prospects, even with carbon capture and storage technologies. CTL conversion may only be viable in countries with less stringent climate policies or where low-carbon fuel alternatives are not available.

“In short, various climate proposals have very different impacts on the allowances of regional CO2 emissions, which in turn have quite distinct implications on the prospects for CTL conversion,” says John Reilly, co-director of the JPSPGC and one of the study’s authors. “If climate policies are enforced, world demand for petroleum products would decrease, the price of crude oil would fall, and coal-to-liquid fuels would be much less competitive.”

By Allison Crimmins | Joint Program on the Science and Policy of Global Change
June 9, 2011 as written on MIT Edu News

As a company experienced in the coal-to-liquid engineering field, Engenya has supplied services to SASOL, a leading South African Coal-to-Liquid fuel producer. Engenya is the perfect partner fort companies wishing to embark into projects in this field. Contact Engenya now: Contact

Meshless Computational Methods

Although a number of computational approaches exist for solving engineering problems, the meshless modeling method is gaining traction among scientists and engineers. Other techniques such as finite difference/volume, finite element, and boundary element have been typically used to tackle complex engineering problems that often require extensive meshing; however, meshless methods can be just as accurate and are faster, simpler, and require far less data storage.

“It hasn’t been too long ago that the idea of numerically solving complex partial differential equations (PDEs) without the need of a mesh was essentially deemed impossible, except where analytical methods could be used on simplified problems,” says Darrell W. Pepper, professor of mechanical engineering and director of the Nevada Center for Advanced Computational Methods at the University of Nevada-Las Vegas. “However, over the past decade, meshless methods—being able to solve PDEs using node points within a problem domain without the need for nodal connectivity—began to show up in the area of solid mechanics. These quickly grew into applications involving heat transfer and more recently into fluid dynamics and related transport areas.”

Ease of Use

Meshless methods are uniquely simple, yet provide solution accuracies for certain classes of equations that rival those of finite elements and boundary elements, without requiring

Meshless Computational Model
A Petrov-Galerkin finite element model that employs local mesh adaptation is being developed to determine potential wind energy sites within the state of Nevada. Image: Ncacm.unlv.edu

the need for mesh connectivity. Meshless also requires no domain or surface discretization or numerical integration.

A Petrov-Galerkin finite element model that employs local mesh adaptation is being developed to determine potential wind energy sites within the state of Nevada. Image: Ncacm.unlv.edu

“The popularity of the meshless approach results from the ease with which a problem geometry can be established, without the burden of constructing complex grids, and the simplistic solution technique utilizing basic geometric concepts, such as radial basis functions,” says Pepper.

Pepper recounts a project where he and several colleagues spent nearly six months creating an acceptable mesh to solve thermal-hydraulic flow within a nuclear reactor that contained 600 assemblies—over 150 million nodes were required to complete the project. Such large problems generally result in extremely demanding computational resources, typically requiring supercomputers.

“Alternatively, a meshless method is not restricted to dimensional limitations,” Pepper continues. “An infinite domain can be modeled (depending on the number of nodes) and run on a PC. The accuracy achieved, with even a limited number of nodes in a meshless method, compares closely to solutions obtained using massively refined grids. Having the versatility of the ubiquitous finite element method and its use of unstructured meshes (elements), the meshless method is becoming a quick, accurate, and viable alternative to these more popular, conventional numerical approaches.”

Advantages Abound

Meshless methods include kernel methods, moving least square method, partition of unity methods, and radial basis functions. Meshless methods utilizing RBFs create mesh-free algorithms that are significantly simpler to employ than more standard approaches. Other advantages of meshless methods include:

Significantly reduced costs compared to current, expensive commercial codes for doing complex analysis
Computer platform independence—apps will eventually be written that will enable the method to run on a table or even smart phone
Problem class flexibility—almost any problem that can be described with a set of PDEs can be solved using the method
Familiarity of the method and use within undergraduate curriculum and advanced extrapolation to graduate level work—simple models have been written using MATLAB, MAPLE, MATHEMATICA, and FORTRAN, including C++ and JAVA

Efforts are now underway to develop localized meshless techniques that are exceptionally fast, easy to employ, and can be used in multiphysics applications.

“Recent work has included modeling indoor air pollution, including terrorist threats, subsequently resulting in a real-time response system that can automatically activate preventive measures,” says Pepper. “Another application is in bioengineering, especially in modeling aortic blood flow, distribution of air and particulates within the lungs, effects of heat transfer, and structural prosthetics. The method is also now being used to model wind fields for wind turbine siting—compared to the previous method of utilizing hp-adaptive finite element techniques to resolve irregular terrain based on sparse meteorological data.”

Mark Crawford is an independent writer. This article is brought to you by ASME: www.asme.org