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									Introduction of New Technology- Barriers to Implementation                                                                                                                                                                                                                               PP/06/02

Type           Technology Examples                             Perceived Operator Issue                                                                                                       UKCS Successes                    Other Country/Norway Approach/Insights                   Norway Successes
Engineering    No specific examples                            New technology by definition exposes the operator to unknowns and uncertainties in how the technology may prove out in the
                                                               field. Any extension to the known envelope of operation does this.
                                                               Where Norway has proved more tolerant, is not so much in the encouragement of adoption, but in firstly reducing the risks of
                                                               first implementation and in cushioning the operators from poor results.
                                                               To do this, the Norwegian Govt has created a strategy aimed at development of specifically Norwegian technologies for export
                                                               purposes, as a means of employing petroleum taxes for long term gain and to provide against a future of low petroleum exports.
                                                               The result is the SDF and the significant Norwegian govt share in all fields.
                                                                The SDF funds have been used to fund initiatives, particularly in the areas of subsea production technology, to get products
                                                               defined and developed to the point of first commercial implementations. These initiatives have often been very forward-looking
                                                               and have generated some good solutions, many of which are now being tested or have been implemented. The testing
                                                               programmes are essential to reducing the risk of failure.
                                                               But the Norwegian govt has also used its influence to bail out contractors who have run into trouble implementing the new
                                                               technologies (as well as some good old ones). This has usually been done by using their share to arrange a contract
                                                               settlement that met the contractors needs, at the expense of the operator. Assume that there has been a quid-pro-quo in terms
                                                               of access to SDF funds or relief from contributions. (SDF : State Development Fund)

Field       Some of the new technology being rejected is    There is also a view amongst most of the larger operators that if some of this new technology is effective and enhances the                                         Norwegian operators also see the pioneering attitude
Development being made on the basis that the fields to be   economics of a field, then they would still be paying over the odds for a service. ( either on operating charges or by way of                                       of introducing New Technology as a way of getting
            developed are now so marginal that any major incentives ) It would appear that the operators have a drive to commoditise technology.                                                                                the relatively new and less experienced operators
            failures can sometime have a huge impact on                                                                                                                                                                         some credibility and recognition when they bid for
            the economics of the whole project. In Norway,                                                                                                                                                                      new licenses both home and abroad.
            the fields are still large enough to withstand
            such hits. This is demonstrated by the lifting
            costs in Norway being lower per boe than in the
            UK even though the operating costs ( especially
            personnel costs ) are so much higher.

 Flexibles /   Flexibles, Composites                           There seems to be a reluctance on the part of the major operators, dominant in the UKCS, to utilise new technology as they are                                   Norwegian operators have been/are influenced by
  flowlines                                                    concerned with reliability and will sacrifice initial potential CAPEX savings to ensure these, upfront savings not as attractive as                              their government stake holders - ie a lot of the new
                                                               track record/reliability. Development concepts for marginal fields in the UKCS are now often fast tracked to realise revenues                                    technology introduced in the Norwegian sector is
                                                               while margins are positive - this will deter operators from introducing new technology as what is familiar is low risk - almost                                  Norwegian developed and benefits Norwegian
                                                               development by shopping list. This model may change as there is an increasing number of independents in the region more                                          industry. They are also more open to running trials
                                                               concerned with low CAPEX and fields are becoming increasingly marginal, ie innovative technology may be the only way to                                          within a development concept, perhaps less
                                                               develop some of these fields, it could be "take the risk" or "lose the prize". LOGIC/Satellite Accelerator is a step toward this.                                answerable to share holders than others. This has
                                                                                                                                                                                                                                possibly been influenced by the size of field
                                                                                                                                                                                                                                developments in the Norwegian sector and the speed
                                                                                                                                                                                                                                with which they are developed (large fields, long
                                                                                                                                                                                                                                development programs, time to identify and evaluate
                                                                                                                                                                                                                                new technology requirements).

Subsea Well Composite / Smart risers                           No support for development.Issue is cost of speculative development and opportunity for trial and implementation. With subsea                                     Industry wide,government and industry sponsored   Recent successes: subsea pumping,multiphase
intervention.                                                  well intervention support available from Norway but no interest from UK majors. Interest from few Independents.                                                  programme, OG 21 "Nasjonal Teknologistrategi" that metering,active flowline heating and competing
                                                                                                                                                                                                                                is technology gap led.                             well intervention techniques.

   Drilling                                                    The drilling engineers/ Petrophysicists seem to be risk averse to new technology because it is adding an element of risk to the         Rotary Steerable
                                                               equation. Some of the operators are open about a shift in their policy from leading edge to trailing edge technology. They              tools is an example
                                                               now want something that is tried and tested before they want to try it. The reserves are smaller, the pockets are smaller, the          of new technology
                                                               wells have to be more economical. Even though there is some benefit people are afraid to take that step as it seems pressure            the UK operators
                                                               is still high. The Economic Value Calculations for applying the new technology need to be done. It is also a matter of trust with       accepted but once
                                                               Contractors technologies being seen as part of the solution.                                                                            again it was only
                                                                                                                                                                                                       after Norway

               Coiled Tubing Drilling Systems(CTDS)            The view is that Norway openly embraces new technology and easy to obtain funding. CTDS could not have been developed                                            Nowegian culture more open and willing to discuss
                                                               without Norwegian operator support. The UK is much slower, requiring much more evaluation and planning, feasibility studies                                      openly the mutual benefits of new technology.
                                                               etc. Reasons thought to be cultural, since the same Oilco personnel in the GOM or West Africa just "go do it".                                                   In USA Clients prepared to trial without same level of
                                                                                                                                                                                                                                assurances and detailed cost justification.

                                                               .                                                                                                                                       One customer
                                                                                                                                                                                                       supported it and
                                                                                                                                                                                                       although it has not
                                                                                                                                                                                                       worked with 100%
                                                                                                                                                                                                       reliability they still
               HPHT Coiled Tubing collar locator                                                                                                                                                       think is the best
                                                                                                                                                                                                       value and
                                                                                                                                                                                                       continuously support
                                                                                                                                                                                                       the improvements
                                                                                                                                                                                                       made to the tool.

Pumping        Foam cement .                                   In most cases operators in the UK are not supportive because of risk-adversity, conservatism, suspicion, compartmentalisation                                    New technology is supported in Norway.
               Conformance control Products have been in the   of processes,( Well construction vs production), “if nor broken, don’t fix it” attitude, quick employee turnaround, or in cases, cost
               market for long time but only recently have     related issues. In some circumstances they don’t feel that locally there is the right support & knowledge for the new product.
               some majors tried it with success.              Only if there is an obvious need with little alternatives customers will accept new technology.
Completions   Smart wells   Now there is some history, available UK operators are becoming more receptive to this technology, however there is an                  Good success            It is certainly true that the Norwegian sector   Smart Wells is a prime example - of the North
                            aversion to being first - and taking significant technology risk. The relative maturity of the UK sector is probably another factor.   implementing new        embraces technology more readily than the UK     Sea wells completed with true Smart Well
                            The UK sector is further down the curve than the Norwegian sector and there has been heavy focus on NPT reduction to                   intervention products   sector. There are tax incentives available to    systems there are probably 4-5 times as many
                            maximise returns. Implementation of new technology does carry some risks and in particular is likely to adversely impact NPT.          in existing producing   Norwegian operators who elect to adopt new       systems installed in the Norwegian sector
                            In this environment I believe there is a reluctance to jeopardise the gains even though the longer term benefits may be                wells in the UK         technology.                                      compared with the British sector.
                            substantial.                                                                                                                     In    sector. New
                            some marginal UK fields the loss of production from a single well may affect the project viability (some have only 2-3 producing       technologies with a
                            wells).                                                                                                                                proven track record
                                                                                                                                                                   have been
                                                                                                                                                                   implemented to
                                                                                                                                                                   resolve problem
                                                                                                                                                                   wells and improve

                            New technology can impact the customer in a number of ways - higher capital cost to drill/complete the well - higher operating
                            cost to install/deploy the equipment - loss of production if things go wrong. Unless a low risk is presented to support the use of
                            the new technology, it is hard for the operator to justify the technology. As an industry we have not historically been good a
                            sharing information (lack of trust between operator and supplier) - as a result it can be hard to demonstrate the true value that a
                            new technology can bring. If we communicate openly we are more likely to be successful in this area.
                            Contractual terms can sometimes present a dis-incentive to the application of new technology. Better (true win-win) contracting
                            practices will assit the implementation of new technology.
                                           COMPANY X Data
New Technologies
                                           Number of Jobs/Deployments
Subsurface                        UK        Norway     GOM       Asia     Americas Perceived Reasons for Non-Acceptance
Foam cementing                     2          11       600+       10        900+    Too risky, expensive, benefits evident in the long term

Water control & Gas                                                                 Expensive, outcome not guaranteed, intensive planning
Management                        2           4         4         20         30     required.
Wireless coiled tubing collar     14          7         7         4          35     For UK, high numbers reflect one customer's
locator                                                                             experience. Other customer’s may not accept it as
                                                                                    easily, preferring to use the less risky and established
                                                                                    wireline CCL method
                                                                                    UK Culture of reticence, caution. Have 22 projects that
Coiled Tubing Drilling System   No data     No data   No data   No data   No data   are being actively pursued worldwide.
Company X deployed MLT             0          10         -                          Company X figures

MLT Total market                   6          22         -        15        261     Global Market Total =354
Integrated reservoir
management and downhole
data acquisition system            0          7
Cost of New Chemical                                                                Cost to make chemicals UK compliant far exceeds $25-
registration, No History        $25-$30k                                            $30k
Cost of New Chemical
registration, With History       $12k

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