Development of new technologies comes with many benefits and challenges. In the particular case of the oil and gas sector, companies are searching for new and innovative solutions to increase the overall competitiveness in the industry. However, creating and applying new field testing technologies in offshore facilities may prove to be challenging due to the high costs and risks they imply, especially after the oil and gas industry entered a downcycle in 2014. The Norwegian market experienced a similar situation in 1998 when the oil prices plunged from US $46 to below US $10 per barrel. Thus, the Norwegian Research Council established DEMO2000 to maintain competitiveness in the Norwegian Continental Shelf and motivate companies to keep investing and producing oil in Norway. This program focuses on testing and qualifying technology that is beneficial for the Norwegian oil and gas industry. The goal was to successfully carry out economical operations in a scenario where the oil barrel price was at US $8 per barrel.
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Anders J. Steensen, Special Advisor and Program Coordinator at DEMO2000
The program was approved by the Norwegian government in 1998 which a year later invested NOK 100 million to start the program. The program was designed to have this budget annually; however, funding varies depending on the economic conditions in Norway and the oil price. “When the oil prices were very high and the activity of the sector was very intense, DEMO2000’s resources were limited. On the other hand, because of the oil crisis of 2014, the program received around NOK 200 million extra for 2016-2017,” says Anders J. Steensen, Special Advisor and Program Coordinator at DEMO2000. The main objective of the program is to keep activities in the Norwegian Continental Shelf as competitive as possible and generate income. The basis for the program plan is the OG21 technology strategy which determines the needs of the Norwegian oil and gas industry and defines its technological needs for exploration and development.
A large part of the projects that are supported by DEMO2000 are focused on subsea technologies and equipment. Some examples of research and development programs that have qualified for DEMO2000 include subsea compression, directional drilling, and well completion and they have been tested using finance from the program and other contributors. “It has been proven that the technologies developed through the DEMO2000 program have made it possible to exploit 1.5 billion additional oil barrels,” says A. J. Steensen. “The big players are usually more eager to acquire new technology because they have the resources to do it, while medium and small size players are reluctant to become the first users of new developments,” adds A. J. Steensen. DEMO2000 has been very successful and the Norwegian technology industry within the subsea field has a leading role in the global market.
The DEMO2000 program is based on cooperation between the oil and gas companies, vendors, and the government. The vendor covers roughly 25% of the testing costs, companies have to provide testing facilities and financing for testing, and the government covers around 25% of the total costs of the project. “Statoil has been the biggest participant and supporter of the program, but ConocoPhillips, Norske Shell, Lundin, and ENI Norge have also considerably supported the scheme,” says A. J. Steensen. The projects awarded by the program are largely financed by the oil and gas companies who, in turn, gain the most benefit from the tested technology.
Apart from a review board that evaluates projects, DEMO2000 has a board that consists of people from the Norwegian Petroleum Directorate, oil companies, Petoro, the vendor industry, and the research field. “When we developed the program, we considered the roles of each of the collaboration partners responsible for the development of the oil and gas sector in Norway,” says A. J. Steensen.
It may be challenging to test new equipment in offshore facilities due to the high costs. “Offshore companies are not willing to test new technologies offshore until they reach the development level of TRL5,” says A. J. Steensen. DEMO2000 aims to support technologies to help them evolve from TRL4 to TRL5 or TRL6, estimations which are based on standards established by NASA.
Testing equipment in offshore facilities greatly depends on the license holders; testing activities must be approved by all of the license holders of an oil field. However, the tests are performed according to the DNV GL RP-203A standards, providing freedom to perform such tests onshore. “It is easier to perform tests onshore because the wells are very small compared to the offshore fields,” says A. J. Steensen. “Testing technology in a well stream directly impacts a company’s financial flow, which is not very large in onshore plants. Some wells in the Norwegian Continental Shelf produce around 120,000 barrels per day; stopping their production has no benefits,” he adds.
The costs of testing technology in smaller onshore fields are significantly lower. However, if a project improves safety and competitiveness, it becomes easier to find companies willing to adopt the technology. Furthermore, well technology can be easily tested offshore because the technology is applied directly to the reservoir instead of the production activities. Anders J. Steensen has seen that it is less challenging to get approval for technologies that improve the recovery rate.
As the Norwegian oil and gas sector matures in the North and Norwegian Seas, the industry is on the lookout for opportunities in the Arctic region. However, there are several challenges that must be addressed in order to perform activities successfully. While environmental conditions may be harsher in the Norwegian Sea compared to the Barents Sea, it is completely dark in the Arctic region for half a year and distances are considerable. “With distances of 400 to 500 kilometers, logistics become a challenge,” says A. J. Steensen. “On the other hand, the environmental impact in the Arctic has to be much lower compared to the North and Norwegian Seas, the pollution caused by drilling activities has to be reduced,” adds A. J. Steensen. The challenges include locations, infrastructure, communication, availability of power, reduced human capital, and a lack of skilled people. However, DEMO2000 aims to address these challenges and it looks for possibilities to help move facilities into the far North.
This initiative of the Norwegian Research Council has proven to be a success in terms of promoting the testing of new developments. Once the institution determines which programs will be funded, specialists from the oil and gas companies review applications. By doing so, the large operators become aware of these new technologies, they actively participate in the reviewing process and create new opportunities for the applicants to enter the market. “If a technology is tested and approved by oil companies working on the Norwegian Continental Shelf, it will also prove to be useful for the oil fields in other offshore markets,” states A. J. Steensen.
The goals of DEMO2000 go in line with the government’s goals because the program is publicly funded. “We aim to actively participate in the development of technology that could meet the needs described by the program and the OG21 strategy. We are looking to enhance the possibilities offered by digitization,” says A. J. Steensen. He expects to transform the available large amounts of data into information. In addition, the program expects to reduce the risks and increase competitiveness in oil and gas operations. “The oil and gas sector has to perform more efficiently and we will strive to improve Enhanced Recovery Rate in the reservoirs by testing technologies and equipment in this field,” says A. J. Steensen.
“This collaboration has been the key to success, it is the traditional Norwegian way of doing things,” concludes A. J. Steensen. The bottom line is that DEMO2000 aims to increase the competitiveness in the Norwegian Continental Shelf and bring benefits to the society by increasing revenue from oil activities and providing new business opportunities.
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