Accelerating technology uptake, patents and vanity

Oil IT Journal Editor Neil McNaughton reports from the SPE special session on the ‘slow rate of technology take-up’ in the oil and gas industry while his colleague Sally Gould attended a press launch of the International Energy Agency’s study on oil and gas technologies of the future.

I attended a the SPE session on ‘accelerating technology take-up’ this month. Apparently, the industry suffers from slow technology take up according to Ali Daneshy of the University of Houston. Daneshy reminded us of Geoffrey Moore’s oeuvre ‘Crossing the Chasm.’ The ‘chasm’ is the temporal gap between early adopters and broad take-up of a new technology. Moore (reference to whose work I have heard many times, but so far spared you) presents an intriguing graph—a bell curve, whose horizontal axis is time (with no scale) and whose vertical axis is ‘take up’ (again, no scale). Some way in from the left hand, leading edge of the curve, is the ‘chasm,’ an arbitrary chunk excised from the smooth curve.

The wheel

OK let’s give Moore a spin. Unfortunately, the wheel’s invention is too far back in time for us to have a great insight to its early adoption. One can speculate as to what early mule cart travelers thought of the technology as they were pitched into the occasional chasm! But since, the wheel has been pretty good business. A glance from my office window confirms my intuition that ‘take up’ continues apace. In fact if I was an inventor of curves, I submit that exponential growth would be a better fit than a standard distribution. I’m not convinced that Moore has all the answers.

Houston Technology Center

Getting back to the SPE session, a study from McKinsey for the Houston Technology Center purported to show that the ‘chasm’ is reached earlier and lasts longer in oil and gas than in other industries. Slow adoption means that everyone ‘leaves money on the table,’ this is ‘bad business’. Vik Rao (Halliburton) showed a graph of patent applications since 1990. At that time, oils and service companies were granted an equal number of patents. By the late 1990s, oil company patents declined as service industry patents rose spectacularly.

Information asymmetry

This shift in technology spend has caused a shift in expertise and increased ‘IP sensitivity’. Today we have ‘information asymmetry,’ a lack of transparency between buyer an seller which ‘destroys economic value’. Three suggestions have been put forward to rectify this situation: 1) that an organization (the ‘ministry of truth’) be established to validate the utility of an R&D project, 2) an insurance company underwrites R&D downside and 3) there be established an ‘industry uptake award.’


Tom Bates (Lime Rock Partners) reported that R&D spending by US majors is 30-40% down over past decade in real terms and industry fares poorly compared with other sectors—GE spends 18% of net income on R&D; Microsoft, 95%; and Exxon a meager 2.6%. The service companies ‘outsource’ R&D by acquiring new technologies. US government spend is ‘insignificant.’ Bates opined that global procurement programs are viewed by entrepreneurs as an significant obstacle to the introduction of new technologies.

Shell Technology Ventures

Bill Dirks (Tecton Energy) described how Shell felt it was not receiving proper reward for its new technologies in the marketplace. A lot was spent on ‘things that no one asked for’ and there was a lack of discipline to kill off non-viable projects. Dirks recommends sharing risks and rewards and that operations should provide assessment and funding. But it is hard to counter the perception that while the bulk of risk is for the service industry, the bulk of the reward accrues to oils. Dirks suggests the SPE could have a role in developing and publishing E&P technical standards, promoting joint industry projects and perhaps even by setting up a technology ‘clearing house’.


A different slant on the impact of technology on E&P is to be found in a new publication from the International Energy Agency*. The report notes that, although picking technology winners is fraught with uncertainty, the oil and gas industry is ‘very active in pushing the technology envelope’. The IEA report, authored by Schlumberger’s Christian Besson, describes the industry as ‘relatively risk averse’ and suggested that this might be a reason for the fact that ‘changes take time.’ Besson writes that while the R&D departments of key industry players are already working on technologies that will bring major changes to the industry, picking the winners ‘offers plenty of scope for error’. In the past 25 years, 3D seismic has proved a real winner, while the considerable investment in chemical recovery and oil shale technology has yet to show a commercial return.

Gung ho!

Having worked for twenty years in exploration, I would have described the industry as gung ho rather than risk averse. What can be less ‘averse’ than going sole risk on a wildcat? Perhaps it is because the industry is so used to risk that is inured to the ‘sure fire’ new play whether in R&D or a new basin.


One obstacle to technology take-up that was not fully investigated by either the SPE or the IEA report is the effect of patent law. This has not been designed to accelerate take-up for some greater good, but to ensure that the inventor of a new technology gets a return on investment. But as we have seen in these columns (OITJ Vol. 10 N° 3), patents can be more marketing than science. Even when they are science, they are not necessarily innovations. Without wanting to embarrass anyone, I am thinking of some of the ‘vanity’ patents that oil companies have been granted for technologies that are common knowledge, or in some cases, already in the textbooks. Maybe there is a role here for the SPE, doing the job that Patent Office seems incapable of, judging the intrinsic merits of new patents and putting gentle pressure on abusers or pointing out obvious ‘prior art’ to naïve applicants.

* ‘Resources to Reserves, Oil and Gas Technologies for the Energy Markets of the Future.’ International Energy Agency/OECD, 2005.

This article originally appeared in Oil IT Journal 2005 Issue # 10.

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