Innovative Technologies Give Energy Operators Staying Power
Posted March 31, 2020
Despite challenging public health, geopolitical and economic circumstances, the U.S. energy industry remains positioned at the leading edge of technology and innovation. Historically, America’s natural gas and oil companies have overcome unexpected and uncertain events with safe, reliable and resilient operations – and gone on to play an important role in rebuilding the domestic economy and strengthening national security.
And there’s evidence this will happen again. That’s why we’ve said, don’t bet against this industry.
Mark Mills, a senior fellow at the Manhattan Institute, wrote recently that today’s industrial digital technologies could help us weather this market downturn and eventually access more of our abundant energy resources. He explained:
“The kinds of software automation and artificial intelligence that have yielded revolutions in other less physically challenging businesses—from retail to music and news—are now focused on the industrial sectors. Hundreds of startups are developing oil-field software.”
A Barclays research report from January 2020 – “Frac to the Future; Oil’s Digital Rebirth” – concluded that, over the next five years, digital technologies could reduce the cost of natural gas and oil production by almost 10% globally, while increasing the rate of recovery by the same amount. Of course, these projections were released prior to the current economic decline, which could slow the onset of digitization, but Mills still affirmed:
“The shale industry’s structure is uniquely suited to digital proliferation. Rather than a handful of oil giants engaging in huge projects that take years to plan and fund, the shale industry is dominated by thousands of smaller businesses drilling thousands of smaller, cheaper wells that can come online in weeks and months, rather than years.”
As much as any other sector, energy markets have felt the impact of the coronavirus (COVID-19), with decreasing demand compounded by the crude oil “price war” initiated by Saudi Arabia and Russia. This picture is troubling, but if history is any indicator, then the American shale industry could emerge from this more productive – as it did after the mid-2010s downturn – with newer technologies, better operating techniques and stronger business models.
When the markets rebalance, natural gas and oil producers will likely develop technologies to meet the renewed growth in energy demand. While the competitive landscape may change, rising commodity prices combined with digital efficiencies will unlock opportunities for American energy companies and their investors, and according to Mills, this could “ignite another shale super-cycle in U.S. production.”
Even as the U.S. has experienced enormous production growth during the past decade, hydraulic fracturing techniques only extract 5-15% of the natural gas available in deep shale formations – and digital technologies will be key to maximizing these domestic shale resources.
America’s natural gas and oil operators are a high-tech industry of solution seekers and problem solvers. With state-of-the-art technologies, energy companies will overcome these immediate market challenges and continue to deliver affordable, reliable and cleaner energy well into the future.
About The Author
Sam Winstel is a writer for the American Petroleum Institute. He comes to API from Edelman, where he supported communications marketing strategies for clients across the firm’s energy and federal government practices. Originally from Dallas, Texas, Sam graduated from Davidson College in North Carolina, and he currently resides in Washington, D.C.
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