3. The Business Context for RTD Investment

In managing technology, E&P companies look to achieve the following:

• affordable technological capability both to acquire new assets of value and realise/improve the value of current assets;
• operational capability to conduct their business processes in an efficient way (improving the productivity/cost ratio) and thereby increasing profit margins;
• reduced elapse times from investment outlay to financial return.

Business criteria plays a key role in industry's new technology acquisition and RTD investment decisions in the 1990's. In the best run companies there is concern both for immediate needs (present asset challenges) as well as strategic requirements over the longer term (10 year forward-look) for enabling technology to facilitate renewal/growth of asset portfolios in an affordable, timely fashion.

In more detail, the business needs driving RTD investment policy typically include:

• improving exploration efficiency and effectiveness;
• reducing capital costs of new developments;
• reducing operating costs;
• more rapid exploitation of economically marginal and/or technically difficult fields;
• improving field performance and individual well productivity;
• maintaining safety and environmental standards, and participating in the development of new regulations;
• reducing both the need for intervention by drilling in the reservoir and the need for direct human intervention in the operation, maintenance and repair of production equipment;
• ensuring that low cost and effective means of intervention are "designed in" where intervention down-hole or subsea is required.

In addition to reducing technical and economic uncertainty in exploration and development projects by affordable measures, there is a strong emphasis on improved quantification and integration of data and technical disciplines to manage any remaining uncertainty in business decision-making and project planning processes.

Investment in new research is not always the appropriate response to a technology challenge. Knowledge of the options offered by best available technology (or indeed "sleeping" technology), including that in other industry sectors, is a prerequisite for sensible RTD investment decisions. This is also the case for best operational practices. Using what is available better or linking with the technology application leaders may be the appropriate tactic in a given circumstance. For those companies not seeking to be at the leading edge of technology, "follow-the-leader" becomes a business strategy.

The UK offshore industry's cost reduction initiative (Cost Reduction Initiative for the New Era or CRINE; UKOOA, 1994) raised a number of issues which will impact on RTD investments and technology management. These include:

• the need for increased standardisation in production technology, i.e. a reduction in unnecessary bespoke engineering;
• a focus on fit-for-purpose technology - not "high tech" for its own sake;
• the importance of addressing full life-cycle costs in the development of new fields.

Cost consciousness and a renewed focus on business impact have led a number of E&P companies to re-assess fundamentally their commissioning of RTD both internally and externally. The "requirement identification" process targeting a range of timeframes, is now given much greater importance. Also, the working of the delivery chain from research to application, together with management's ability to integrate efficiently new knowledge and innovative technology into the company's internal processes, are now recognised as critical factors in gaining a proper return on investments.

Last Update 28/5/96