Collaboration: Not A Dirty Word In Oil & Gas

Tim Haïdar
Posted: 10/06/2014

Since the beginning of oil and gas extraction in the 1820s, companies have been unlocking value and revenue through a constant evolution of process and technology.

A business definition of the word innovation could be "the process of translating an idea or invention into a good or service that creates value or for which customers will pay." And innovation has always been a concept with a singular goal: profit for the innovator, and the innovator alone.

In the recent report Gateway to growth: innovation in the oil and gas industry, multinational professional services network, PwC, found that the most innovative 20 per cent of companies grew at a rate 16 per cent higher than the least innovative. Yet in an arena where joint ventures abound, collaboration seems to stall at the point of intellectual property development. But will this all need to change?

Open innovation

A concept that has been kicking around since the 1960s, open innovation was coined by organisational theorist, Henry Chesbrough, and can be defined as: "innovating with partners by sharing risk and sharing reward." In the oil and gas space, it could be referred to as "one of a number of models by which industry members seek to create a technical solution in furtherance of one or more industry objectives."

Although the principle of this innovation through open collaboration is laudable, the practice, with proprietary technologies and sensitive information at stake, proves to have its its pros and cons:

Advantages

Disadvantages

Reduced cost of conducting research and development

Possibility of revealing information not intended for sharing

Potential for improvement in development productivity

Potential for the hosting organization to lose their competitive advantage as a consequence of revealing intellectual property

Increase in accuracy for market research and customer targeting

Realigning innovation strategies to extend beyond the firm in order to maximize the return from external innovation

Synergism between internal and external innovations

In the aforementioned PwC study, close to a third of oil and gas professionals surveyed said they believed that open innovation was "the approach with the most potential to drive revenues" in the coming decades. But how can this be taken successfully from drawing board to boardroom? So far, there are several examples of enterprising organisations that are taking up the gauntlet.


IP Alliance

In the often-inhospitable hydrocarbons arena of Alberta, Canada, the Canada Oil Sands Innovation Alliance (COSIA) is one of the most developed collaborative networks in the industry.

Formed in 2012 to tackle some of the environmental challenges and impacts of extracting heavy oil from the bituminous sands of Athabasca, COSIA now encompasses 13 operating companies that represent almost 90 per cent of the oil sands production in Canada.

Concentrating primarily on the areas of tailings, water, land usage and greenhouse gas emission, each of these organisations has signed on to the COSIA charter, pledging to: "Collaborate and innovate to accelerate improvement in environmental performance."

In the past 24 months, COSIA members have worked in concert to share and develop 560 distinct technologies and innovations that have cost close to $900 million to develop, and the organisation is becoming a research and planning hub with a compliment of dedicated scientists and engineers.

The alliance's recently-launched Environmental Technology Assessment Portal (E-TAP) also allows submissions from external parties "to identify and assess potential solutions to our current and future technology gaps and opportunities."

GameChanger and Innovate

A different kind of collaborative innovation has been in existence and flourishing at supermajor, Shell, for more than a decade. Predating the COSIA initiative by some 16 years, Shell Global's GameChanger programme was founded in 1996 with the remit to identify and nurture "unproven ideas that have the potential to drastically impact the future of energy."

Combining elements of open innovation, business incubators for early-stage and startup companies as well as corporate venturing to engage with bleeding-edge technology firms, the programme is designed to foster the "interesting ideas may seem too risky for large energy companies to invest in." Since its foundation, GameChanger has worked with over 1,500 innovators and taken 100 of its seed projects through to commercial maturity.

Norwegian multinational oil and gas company, Statoil, has approached the collaborative innovation topos from yet another perspective, through its Innovate initiative. Under the banner of "challenge-driven open innovation", Statoil poses a number of problems they are seeking to solve through technological innovation - anything from noise reduction on rigs to streamlining offshore wind installation.

The company then asks for contributions from external sources - both individuals and companies of all sizes - to put forward their proposed solutions. The funding adjunct of this programme is Statoil Technology Invest, a fund established for the support of SMEs and start ups in the first critical years of their existence.

The future?

With a number of models and approaches already in play for collaboration on the intellectual property front, the right conversations, grounded in facts as opposed to emotion and agendas, are being had to drive towards a "one for all and all for one" future. But there is a long way to go.

Maybe it is only the pressing macro issues such as environmental wellbeing and the increasing strain on energy supply from sky-rocketing global population that will see this companies holding hands and not up in arms.

Tim Haïdar
Posted: 10/06/2014

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