DELIVERING ENERGY FASTER, BETTER, SMARTER Mr. Chairman, distinguished guests, ladies and gentlemen, good afternoon, thank you for inviting me to be a part of this executive plenary session. It s a pleasure to be here once again at MEOS, particularly in the 50 th anniversary year of the SPE. This meeting comes at an extraordinary time in our industry s history. Demand for both oil and gas remain robust propelled by energy needs in both the developed and the developing world. Spare production capacity has become much thinner, and is proving elusive to replace. Hydrocarbon sources are becoming more and more diverse. Activity and investment in exploration and production remain strong as we respond to the challenges of adding new production capacity while maintaining that from existing fields. In selecting my remarks this afternoon I thought I would try and show how the combination of faster communications, better technology and smarter knowledge can combine to improve performance in delivering oil and gas. Page 1 of 11
Seventy years ago, oilfield crews communicated with parent organizations by telegram. Answers to questions, suggestions for development and requests for support took months to arrive. Technology research was conducted centrally often far away from the fields in which the resulting products were to be deployed with consequent delays while communications were exchanged. Today, air travel and electronic communications present new opportunities for moving technology and knowledge. The communications revolution has moved science and technology closer to the field. Back in the 1930s, the majority of Schlumberger engineers were French, and their equipment was designed and manufactured in France. But today our engineers represent more than 140 nationalities and their equipment is based on research and engineering fundamentals developed in any of two dozen centers located in almost as many countries. And while some technologies used are specific to the exploration and production industry, others are increasingly transplanted from other technologically intensive industries, such as those in the fields of automotive, aerospace and medical engineering. Faster communications make all of this possible. Page 2 of 11
Efficient and effective E&P technology deployment has become global in collaboration. Communication has enabled almost seamless contact between the fields where the problems arise, and the scientists and engineers who develop the solutions. The speed of technology deployment has increased dramatically as has the ability to adapt existing technology to specific customer problems. The days of remote research laboratories are almost over as today s scientists and engineers work in close collaboration at the project level. The web companies are the ultimate examples of this change as their business models put them in immediate contact with their customers. Our own technology world is quite similar. More than 7,000 people work in 5 research, 15 development and 12 manufacturing centers in 10 different countries. Globalization on this scale enables local centers of excellence to be harnessed for their particular characteristics. Innovation for example is a key facet of engineering in France, Russia is renowned for its mathematical strength, China is one of the largest investors in nanotechnology and Singapore is developing expertise in project conception following its success as a manufacturing base while the USA remains the single biggest investor in science and technology by far. Last year we expanded our research activities in Russia giving them a well-defined charter based on the country s fundamental skill sets. We opened a new center for stimulation engineering near Novosibirsk and a center for artificial lift systems engineering in Tyumen, both close to producing oilfields in West Siberia. And in Canada we developed a new center for innovative fluid property products and services an activity that will surely increase as unconventional hydrocarbon production increases. We also inaugurated a new purpose-built research center in Saudi Arabia. Page 3 of 11
The Dhahran research center is destined to become a focal point for the study of carbonate reservoirs which hold about 60% of the world s proven conventional oil reserves and nearly 40% of the world s gas reserves. Seventy percent of the oil reserves in the Middle East lie in carbonate reservoirs yet they remain less well understood than their sandstone equivalents, due partly to a lack of specifically dedicated research. Locating the center in this region therefore made perfect sense but two other factors governed this choice. Not only being close to the headquarters of a major oil company it is also close to one of the world s leading universities in the education of petroleum engineers and scientists. In our view, this is a modern model for oilfield research and development activity harnessing as it does research facilities, access to academia and proximity to the end user with producing oilfields nearby. Think of it as being able to test one morning s lab experiments in a live well that afternoon. Communication technologies allow the center to remain constantly in contact with its peers in the rest of the world. Page 4 of 11
The degree of communication required is perhaps best illustrated by an example. Within Schlumberger, acoustic research expertise lies at the Schlumberger-Doll Research lab in Cambridge, Massachusetts while the knowledge to design and build sonic logging tools resides at the technology center in Fuchinobe in Japan. The research and development team assigned to the recently introduced Sonic Scanner wireline service included more than 50 engineers and scientists that were required to collaborate and communicate across a 13-hour time difference. They represented almost 20 different nationalities and a variety of technical disciplines. They faced questions of tool performance, cost and reliability, which they resolved through today s communications made possible by videoconferencing, Net-based meetings, Internet consultation and email. When travel became necessary, face-to-face meetings and short exchange assignments were rendered more productive by the contacts that had already been built through electronic exchanges. But even with this technical vision, it was readily apparent that field interpretation specialists would be vital in turning potential applications of the new measurements into practical realities. Their efforts led to early success in improved geomechanical modeling and deeper reservoir imaging. Faster communications played a critical role as knowledge sharing among interpretation specialists harnessed the expertise of the research community and the engineering know-how of the tool designers. But while faster communications are clear enablers of technology development, local hubs of knowledge are critical to its deployment. Here in the Middle East we have a flourishing Regional Technology Hub in Abu Dhabi. The facility provides a working environment where customer experts work hand-in-hand with our own geoscientists and petroleum engineers on the specific challenges to be addressed by the new technology. The Hub is also a two-way street. It s very important for field needs to move upwards in a technical organization fast enough for engineering efforts to respond in time. The Hub Page 5 of 11
therefore acts as a focal point for the Schlumberger technical voice in the Middle East by communicating regional customer needs to the worldwide R&D organization. Technology Hubs are just one example of bringing expertise to a problem much faster as they move regional problems to global experts. In the operational world, a growing number of Operations Support Centers fill similar roles in supporting field operations. Schlumberger operates almost 50 such centers today with more than half dedicated to bringing expert knowledge and better technology to the drilling of the progressively more complex trajectories that many wells are now demanding. Better drilling technology has of course made remarkable advances with what was unthinkable just 10 years ago becoming everyday occurrence today. Better technology has extended the reach of multilaterals and horizontal wells to 10 miles or more, while enabling their placement in the reservoir with a precision approaching 3 feet or so. But accuracy like this is still not enough. Once in the reservoir, the well must remain as much as possible in the most productive zone for the economics of the project to be viable. The driller must be able to see far enough ahead of the bit to be able to follow variations in the formation properties as closely as possible. This can mean vertical displacements of a few feet while staying within a formation thickness of much the same order and it was here in the Middle East that we were able to develop key technology that is now rapidly entering commercial service in many locations around the world. We had already begun design of a new-generation deep electromagnetic imaging-whiledrilling system known as PeriScope when we learned that one of our customers in Oman was experiencing difficulty in drilling wells through a series of delicate carbonate formations. In attempting to stay close beneath the shale cap to limit attic oil and avoid water encroachment the operator wasted much time and effort through repeated well trajectory excursions. Each time the bit exited the carbonate and entered the shale, the Page 6 of 11
drillers were forced to backup and sidetrack the well back down into the reservoir. Not only did these maneuvers cost time and money, but the multiple exits led to subsequent collapse of the unstable shale into the wells leading to subsequent production problems. Better technology often demands better ways of working and we were fortunate enough to enjoy a good working relationship with the operator and dialog began with the operator explaining its problems while we described the new system for improved steering that we had under development. While it wasn t easy to convince the customer who was naturally apprehensive to use an untested tool, he was finally encouraged by our willingness to bear the cost of development. Six months then elapsed while our engineering teams put the finishing touches to the new PeriScope technology. During the subsequent drilling operations, Schlumberger and the customer monitored the job in real time from both Muscat and Houston watching as the new technology steered the entire length of the horizontal well, staying 3 to 6 feet below the shale cap. The results were highly satisfactory. There was no backtracking or sidetracking while drilling, no lost time, and no shale fragments to cause later production problems. PeriScope technology has now been used on projects as varied as coal-bed methane wells in Canada, arctic operations in Alaska, offshore wells in Nigeria, heavy oil projects in Latin America as well as on a growing number of horizontal wells here in the Middle East. We believe better technology means better measurements leading to better reservoir understanding. High on the list of new technologies now making a difference is the new seismic technology known as Q. This is based on digital single-sensor recording leading to higher fidelity, better clarity and finer resolution. Q technology removes noise digitally, including the noise present in land data from surface production facility noise. The technology has already been used in the Middle East. Page 7 of 11
These data come from the Minagish Oolite reservoir in Kuwait. Conventional seismic can only differentiate three events, which led to the interpretation that fluids being injected to improve oil recovery should flow freely between the injector and the producer wells. This is shown in the top display. Yet the results from the producer were below expectations. From well log data, a total of seven distinct zones were known to exist in the reservoir at the injection well and the lower display shows the lateral development of these zones between the wells. The red circle provides a clearer picture of the pinch outs between the wells, as well as a tar mat barrier that was inhibiting fluid movement between the injector and the producer. Large-scale imaging like this is a clear indicator of potential hurdles to field production but cannot track fluid movement between wells. For that we need better measurements that permit monitoring saturation changes during production. Such timely information is necessary to intervene in a controlled and predictable manner so that hydrocarbon flow is maintained over an extended time. Crosswell electromagnetic imaging is an emerging technology that provides reservoirscale measurements well suited to fluid monitoring behavior. Like other electromagnetic methods the technique highlights the natural contrast in the electrical properties of oil and water. This example comes from China from a field produced under waterflood. The fence diagrams show the fluid distributions between three wells an injector, and two producers. The warmer colors indicate the higher resistivities and show the remaining pockets of oil in each of three zones. We believe that better technologies such as this will be instrumental in helping increase recovery in the Middle East where many operators face the challenge of producing reservoirs with super-permeable zones, which, if perforated, can lead to large volumes of produced water. Better technology such as this Page 8 of 11
can play a critical role in identifying such zones and help reservoir engineers monitor water control efficiency and ultimately optimize recovery. Another aspect of technology that can help us deliver energy better lies in workflow process. With every reservoir model comes uncertainty. We can make better measurements, but measurements still have errors. Errors of observation, errors of processing and of interpretation, errors due to false assumptions, and errors due to lack of understanding and communication between geologists, geophysicists, drillers and reservoir engineers. One of the newer tools available to the industry is Petrel workflow software. This technology goes a long way to meeting the goal of integration between the major geoscience disciplines. The seamless coupling of geophysics, geology and reservoir engineering allows the right wells to be drilled in the right places, while gaining better control of the uncertainties associated with any particular reservoir model. Petrel is based around a shared-earth model that addresses these issues. It enables smarter working through dramatic productivity gains and increased collaboration practices. Page 9 of 11
Which brings me to my final point smarter knowledge. While this is linked to faster communications and better technology, it is also strongly connected to recruiting and training practices particularly at a time when access to skilled people is limited. In the last two years, in answer to the extraordinary industry growth, we have recruited 6,000 engineers in 80 countries from 122 universities. These figures not only show that the scientific educational machine can meet demand but also that recruiting must occur on a global level and this will have implications for us all in managing employee career paths. Part of our approach has leveraged links with 45 world-class universities to which we have appointed Schlumberger ambassadors who are often alumni of those very universities. But the real challenge will come in managing the transfer of knowledge and the development of autonomous decision making among a young industry generation. This will not be easy. They will have to assimilate much more technology, much more rapidly than any previous population and they will have to do so in a new area of greater reservoir challenges. We must therefore look at how to make our human resources more productive much earlier. Competency development, knowledge management, new oilfield technology, workflow process improvement, technical career development and better management of retiring senior employees are all part of the solution. Let me just give you two examples of what can be done. A few minutes ago I mentioned how Operations Support Centers enable the drilling of today s complex well trajectories through faster communications and better technology. The same approach can bring expert coaching and counsel to less-experienced crews on remote operations. The Center in Aberdeen does this by monitoring operations on up to 28 rigs simultaneously in real time. But this already assumes an initial level of knowledge. Hiring 6,000 people in 12 months is one thing, training them is another. At Schlumberger, we see more and more benefit in a uniform operating structure in which the various technologies needed in the oilfield can leverage each other. It no longer makes sense to train a wireline field engineer in a wireline-only environment. Consequently three years ago we opened the first of a series of new-generation training facilities that cater to a number of different technology needs. Since then we have begun construction of two more, one in Russia and one here in the Middle East in Abu Dhabi, which we open tomorrow. The new centers feature state-ofthe-art classrooms, workshops, laboratories and field technical equipment to provide new field engineers, field technicians and maintenance engineers basic and advanced training in well logging, cementing, stimulation, directional drilling, completions and artificial lift technologies. The training challenge is enormous and will continue over the employee s career lifetime. In 2005 we counted more than 250,000 training days at Schlumberger. We expect to need almost double that number this year. Page 10 of 11
Ladies and gentlemen, I believe that our industry has already moved to implement the global change that will be essential to our ability to deliver energy in the future. In 25 years time, oil and gas will still be supplying 80% of the world s energy needs. Faster communications, better technology and smarter knowledge are essential for us to meet that challenge and fulfill our role as reliable suppliers of energy at reasonable cost. Thank you very much for your attention. Page 11 of 11