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SPE DISTINGUISHED LECTURER SERIESis funded principally

through a grant of the

SPE FOUNDATIONThe Society gratefully acknowledges

those companies that support the programby allowing their professionals

to participate as Lecturers.

And special thanks to The American Institute of Mining, Metallurgical,and Petroleum Engineers (AIME) for their contribution to the program.

Prepare for the Future: Innovate

Leo RoodhartShell International E&P

3

A New Way to Innovate

4

Outline

• The need for radical Innovation• A Simple Process to accelerate Innovation

and fill the R&D funnel• Some statistics• Some Examples• How to implement• Discussion

5

Growing Energy Demand

1970’s

Source: 1970 & 2005 � BP Statistical Review of World Energy , 2020 � EIA International Energy Outlook 2006

6

Growing Energy Demand

1970’s

Source: 1970 & 2005 � BP Statistical Review of World Energy , 2020 � EIA International Energy Outlook 2006

2005

7

An Example Future: Energy Diversification

1000

'70 '80 '90 '00 '10 '20 '30 '40 '50 '60

800

600

400

200

0

Ocean/Wave

Solar Thermal

Solar PV

Geothermal

Wind

Biomass Power

Biofuels

Hydro

Nuclear

Gas

Oil

Coal CH 4

Coal Tradn.

Traditional Fuels

Shell Long Term Energy Scenario "Dynamics as Usual"

8Source: IEA

Availability of Oil

80

70

60

50

30

40

20

10

0

0 1000 2000 3000 4000 5000 6000

WEO requiredCumulative

need to 2030Ec

onom

ic P

rice

2004

(US

$)

Available Oil in Billion Barrels

Include CO2 mitigation costs(to make CO2 neutral compared to conventional)

AlreadyProduced OPEC ME

OtherConventional

Oil

Deep Water Arc

tic

Super Deep

EOR

Heavy OilBitumen

Oil Shales

9Adapted from Holditch & Hart’s E&P

Options for the Long Term

Increased Pricing Improved Technology

Stranded Resources

Conventional

Marginal(vol. Rate)

Remote

Tight Gas Low perm.oil

Heavy Oil

Tar &Bitumen

Gas Shales

GasHydrates

Coal-bedMethane

Coal Gasification

Contaminated(H2S, CO2)

Resources Volume

Oil Shales

Incr

ease

d pr

icin

g

Impr

oved

tech

nolo

gy

10

The pace of innovation in E&P has been slow relative to that in other industries

Source: McKinsey

ADSL(broadband telecom)

Consumer products(US average)

E&P industry(15 tech. cases)

Medicine(Merck-average)

Prototype to field testField test to commercialCommercial to 50% penetration

Idea to prototype

0 5 10 15 20 25 30 35

Year

Innovation

Slow Pace of Innovation & Adoption in E&P

11

Being the most sustainable company

Capture a larger part of new energy

markets

Energy rather than molecules

Access to customers rather than access to

reserves

Oil Com

pany Futures

Domains

Link Long Term Scenarios to Mid-term Strategy.

CleanTar

Sulphur

CO2

Uncongas

Ocean Energy

CleanCoal

BOPUrbanEnergy

Differentiated Products &

Services

Energy Efficiency

Up-StreamBio-Energy

NowMonetizing

more difficult hydrocarbons sustainable

Solar

12

Being the most sustainable company

Capture a larger part of new energy

markets

Energy rather than molecules

Access to customers rather than access to

reserves

Oil Com

pany Futures

Domains

Link Long Term Scenarios to Mid-term Strategy.

CleanTar

Sulphur

CO2

Uncongas

Ocean Energy

CleanCoal

BOPUrbanEnergy

Differentiated Products &

Services

Energy Efficiency

Up-StreamBio-Energy

NowMonetizing

more difficult hydrocarbons sustainable

Solar

13

Fill the Domains with projects

• GameChanger • Exploratory research.• Technology development

– In-House– Universities– Research Institutes

• Deployment– In-House– Spin-out– Partnerships

Commercial Feasibility

Technical feasibility

time

mat

urity

14

A new way to Innovate

• Put some money aside: Seed Funding– 10% R&D Budget

• Establish a Company wide process +• Create Cross-Business Innovation platform• Stimulate and nurture radical ideas.

– Technical and business ideas

• Rejuvenate R&D• Create new Options



time

mat

urity

15

The Process

• Ideas can be submitted at any time

• A panel of peers decides in a week

• If needed some budget is given to mature the idea

• Decision to continue is made by extended panel

• The first tollgate is a value proposition

• and followed by technical feasibility

• Another innovation

GameChanger Process

16

Go Forward PlanLeadership TeamImplementation PlanResources Being Requested

Why us?Core competenciesStrategic Fit

Size of the PieTotal Value CreatedValue Captured by company

How Much Does it Change the Game?

Unique CVPIs it really revolutionary?Other Players

Strategic ControlProtecting the Business Opportunity

SustainabilityRobustness in Changing WorldEnvironmental ImpactFit to Society’s expectations

The Criteria

17

“Essential Elements for Success”

• Speed and focus on implementation• Grass roots approach• Simple, effective, recognised process• Relevant, business-oriented metrics• Accept failure as part of the process • Full time GameChanger team only accountable to

themselves• Senior Management commitment and support• Group of “Peers” holding the budget

18

0

200

400

600

800

1000

1200

1400

Submitted Phase I Phase II Phase III(graduated)

killed

# id

eas

138

311

501

12921154

Statistics over 6 years

19

Where do ideas come from? The Web

20

Re-brand Gas

•Exploit the clean nature of gas vs. heavier polluting fuels (coal, petrol)

•O2: gas rich/liquids poor; facing $2 x 109 import by 2015 unless greater use of gas with Triple Bottom Line benefits

Where do the ideas come from?

Innovation Website

Ad-hoc submission of ideas from anywhere in the company and external

Themed Workshops

External ContactsUniversitiesInventors, start-ups

21

Woodside, W. Australia

Petroleum Development OmanSultanate of Oman

Where do ideas come from? Workshops

22







time

mat

urity

23

StanfordSQU

St Petersburg

NorwayImperialCollege

DelftColorado

Major relationships

Univ. Texas

MIT

Tsinghua

Alberta

New Science: Discovering with Academia

24

Stranded Resources

Conventional

Marginal(vol. Rate)

Remote

Tight Gas Low perm.oil

Heavy Oil

Tar &Bitumen

Gas Shales

GasHydrates

Coal-bedMethane

Coal Gasification

Contaminated(H2S, CO2)

Oil Shales

Incr

ease

d pr

icin

g

Impr

oved

tech

nolo

gy

29

3859

63

1-11 52

3

4

56

7

8 210

11

17 16

15

13

37

363534

33

32

31

3028

27

2625

24

23

2221

18

40

39

2019

47

48

49

50

51

58

6162

53

9094

12-22

25-36

68

71

90

23

91

41-45

57

67

7481

92

9596

98100

72

67

65

66

83

67

75

75

64

66

90

85

45

78

79

87

89

75

81

69

101

54

Options for the Long term

Adapted from Holditch & Hart’s E&P

25

GameChanger Examples

Drill Smart• A new concept combining

Through-bit Logging and rotarysteerable drilling technology (RST)

• Aimed at an ability to drill and evaluate designer deviated wells for substantially reduced costs over today’s technology..

Offers in single trip: • Through Bore Rotary Steering, • Through Bore Mud Motors, • Retrievable MWD, • Through Bore Bits, • Through Bore logging tools• and more…

26


Greening the Desert• In a desert environment,

scarcity of water provides an opportunity to look at re-using produced water for agriculturepurposes.

• A cost-effective alternative to the current practice of deep water re-injection

• Reed bed technology is the most promising clean-up technology

• A pilot test at the Rahab farm in Oman is being executed

27


Bubble breaker• Simple wireline-run device• Counter-intuitive : place a

restriction in the well to reduce pressure loss !

• Breaking-up large bubbles improves flow regime in the tubing : less gas slippage

• Applications in :– Naturally producing wells

with associated gas– Gas-lifted wells– Deep-water risers

28


Light Touch• A mobile hydrocarbon ‘sniffer’

using probably the world’s most sensitive ethane gas sensor

• measure tiny amounts of ethane naturally seeping from hydrocarbon reservoirs

• Correlate emission locations to the subsurface hydrocarbon accumulations

• screens large areas for oil and gas – at less than a few percent of the cost per square kilometre of seismic surveys

Now taken up by medical scienceFor early detection of lung cancer

29


Reactive Liner Perforating• New perforating technology

developed in conjunction with QinetiQ

• Next generation in shaped charge systems using a reactive liner

• Perforation liner creates secondary explosion within the perforation tunnel by using a bimetallic liner material

• The reactive properties of the charge creates a self-cleaning action that results in open, debris-free hole.

• Radically new charge design, based on military technology

• Selected as finalist for world oil 2007 awards in “best completion technology” category– Winner to be announced oct 17

30


EZIP• Reduced water and increased oil

inflow in mature fields• Polymers that swell when

contacted by water - well heals it’s own leaks!

• Idea stimulated by child’s bath toy• First trial Jan 2005 reduced water

cut from 90% to 20% and increased net oil production by >500%

• Over 200 already run in PDO• STV Company SwellFix

established and growing rapidly

31

Lighter than air technology�Use large zeppelins to transport

pipelines, heavy equipment etc. into hostile environments

�Thereby avoid the costs of building roads, bridges etc...

Status of the project

�State of the art in zeppelins mapped

�Retrofit study on the Sachalinproject on hindsight

�Commercialization with third party being investigated


32

Adhesive bonding of pipelines• Glue pipes together instead of weld or

flange or screw• Thereby avoid the harm that welds do

to corrosion resistant materials, • Allow internally coated pipe to be used

Status of the project

• Principle proven

• New joint designed and calculated through

• Patents granted on connection

• Looking for funds for final full scale testing


33


Bio-Consolidation • A method aimed at consolidating

dikes, dunes, foundations etc. by means of microbiological calcium carbonate deposition at sand grain interfaces.

• develop the downhole sand consolidation technology simultaneously with the civil engineering application.

• This represents a radically new method of sand management.

• If successful in competing with gravel packing, cost reductions and productivity improvements could be tremendous.

34


Biological desalination• Select and cultivate or

genetically engineer micro-organisms

• to absorb and store sodium chloride in a salty environment

If successful, this would be atotally new approach to waterdesalination

35







time

mat

urity

36Source: McKinsey





Prototype to field test

Field test to commercial

Commercial to 50% penetration

Idea to prototype

0 5 10 15 20 25 30 35

Year

Venturing

Can we speed-up more?

Slow pace of innovation & adoption in E&P

37

Venturing: accelerate deployment

• In-House development takes too long• Spin-out innovation Projects

• Set-up Global Venture Capital Investment Fund– Invested US$ ~270mln since 2001– 25 Investments with ~800 staff

38

Many Projects Become Companies

Spin-in

Idea Prototype 1st Field Test Commercial Intro Market Rollout

RFID Technology

EMBaffleTM Technology

Spin-out

Gamechanger

WelldogAGLI3TubelS-Fix

39

Many Projects Become Companies

Spin-in

Idea Prototype 1st Field Test Commercial Intro Market Rollout

RFID Technology

EMBaffleTM Technology

Spin-out

Gamechanger

WelldogAGLI3TubelS-Fix

GC

GC

GC

GCGC

GC

GC

GC

40





Prototype to field testField test to commercialCommercial to 50% penetration

Idea to prototype

0

Source: McKinsey Survey

5 10 15 20 25 30 35Year

0

120,000

140,000

160,000

1999 2000 2001 2002 2003

time

SlottedSlotted

SolidsSolids

20,000

40,000

60,000

80,000

100,000

Foot

age

[ft]

Industry Footage of SET and ESS

Expandable casing

It can be done faster!!

41

In Summary

• Identify potential New “Play Grounds” • Stimulate and connect entrepreneurial people within

your company: Collect ideas• Sponsor disruptive technology ideas with small bets,• Take away the risk of “crazy ideas’: Proof the Concept

• Fills the R&D Funnel with new technology one can keep in-house

• Spin-out projects as new business for fast implementation

Or

42

40% of the core EP Research program based on former

GameChanger projects

30% of STV companies include one or more graduated GameChanger projects

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