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Over the past decade, the largest research and development spenders in the Canadian oilpatch have been companies with oilsands operations, a trend that continued in the latest list of
Canada’s Top 100 Corporate R&D Spenders provided by Re$earch Infosource.
But a number of service companies also made the list:
As large producers divested themselves of much of the oilfield technology development, it enabled the rise of a multitude of entrepreneurial start-up service companies that could compete and deliver innovative solutions. These include innovations in such areas as directional drilling, downhole steering and hydraulic fracturing, according to Mark Salkeld, president and chief executive officer of the Petroleum Services Association of Canada (PSAC).
“There are all aspects to (the trend) and we have member companies who come up with ideas for downhole solutions and they work with their customers to experiment,” Salkeld says. He noted there are also different levels of collaboration, for example, when service and production companies use wellbores as laboratories for the benefit of both.
For Canadian producers, it’s vitally important publicly and privately funded research programs innovate and test new processes to drive down costs and keep the country’s resources economically relevant, says an icon of the Canadian oilpatch. Jim Gray, a co-founder of Canadian Hunter Exploration which discovered the third-largest natural gas field in North America in the mid-1900s, says the rate of disruptive technical change is higher now than ever before. For example, 10 years ago no one would have predicted the overwhelming majority of wells drilled today would employ horizontal drilling along with multi-stage fracturing with up to 180 fracs. Canadian companies must continue to innovate, Gray notes.
“And this new disruptive technology, rooted in North America and a big chunk of it right here in Alberta, is opening up vast production opportunities in unconventional reservoirs in North America and elsewhere around the globe — in China, Argentina, Saudi Arabia and elsewhere. ” he says. “This new light crude oil is changing the basic structure of our industry worldwide.”
Funding Options Needed
Moving from concept to commercial acceptance of a new product or technology takes capital and companies — big and small — currently pursue both direct funding and indirect funding to help move their inventions to market. The Canadian Scientific Research & Experimental Development (SR&ED) program is an example of the latter.
SR&ED is a federal tax incentive program designed to encourage Canadian businesses of all sizes and in all sectors to conduct research and development. One of the most common misperceptions about the SR&ED program is that it’s only available for large companies that perform “white-labcoat” scientific research. While large businesses may apply, small and medium-size companies have equal access. “SR&ED is indirect funding of a company,” says Jeff Henderson, senior manager of Scientific Research &
Experimental Development at MNP. “You’ve already spent money on an operation and you’re recovering a percentage of that money back as a credit. It’s either going to be a cash-back or a tax credit, which you can apply towards taxes.”
One of the challenges with the SR&ED program is navigating its complex claims requirements.
“You don’t always need a specialist, but for certain projects it’s beneficial to have a specialist involved to maximize the claim, and to make sure you’re following the policies and you’re able to answer any questions that the Canada Revenue Agency may have,” Henderson notes.
Direct funding opportunities also exist under SR&ED, for example, in situations where clients submit an application for a loan program.
“A lot of people don’t even know what [funding] opportunities are out there,” Henderson says. “There are programs to hire highly qualified people — to pay a portion of their salary — and other programs to assist in the commercialization of a technology, such as patent costs, business plan costs and market development.
“They’re all part and parcel of the same goal: to drive innovation and strengthen the economy within Canada.”
Case Study: Innovation helps Encana cut its drill and complete costs in the Duvernay
A focus on innovation is helping Encana Corporation achieve substantial cost reductions in its condensate-rich Duvernay play, where the company has grown net production in the Simonette area to about 20,000 barrels of oil equivalent (boe) per day. “Longer laterals, faster penetration rates, increased reliability and more efficient water handling, along with reducing non-productive time, have all contributed to drilling and completing our wells faster and cheaper,” Jim Roberts, vice-president and general manager for Encana’s northern area operations, told the company’s Investor Day audience in late 2016.
The company’s most recent step-change is its approach to multi-well pads, where the use of dual rig / dual frac crews per pad has the compound benefit of lowering Encana’s fixed costs per well. Encana says this technique also leads to significantly higher efficiencies for its drilling and pumping times, which translates into less days on lease for both drilling and completions operations.
The company estimates this approach saves more than half a million dollars per well in the Duvernay.
The company's third quarter drilling and completion costs averaged $7.4 million in Simonette North, reflecting a 40 per cent reduction from its 2015 average. During the quarter, Encana also delivered a new lowest-cost, “pacesetter” well at $6.6 million, which the company says demonstrates it can expect to continue to see its costs drop in the Duvernay.
In order to drive even more cost reductions, Encana’s Duvernay team is focused on sustainable efficiencies. The company’s overall goal is to maximize the number of hours the frac equipment is pumping in a 24-hour period and to place as many fracs as possible. Encana’s completions team has also been working on ways to minimize the maintenance time between fracs by using a pit-stop maintenance scheme.
The completions team examines everything a frac company does between fracs, and they challenge service providers on their processes. As a result, Encana has extended the cycle time for some of those pit-stop maintenance items from every few fracs to once a day, resulting in an overall 65 per cent reduction to maintenance time.
Encana’s mindset is that the pursuit of cost reductions never ends, Robert said, noting the company is focused in the near-term on more efficient methods of proppant delivery, as well as continuing to find ways to reduce its maintenance periods.
Contact MNP’s Oilfield Services Team
For more information on MNP’s OFS services, contact a member of our team:
Jeff Henderson, Ph.D., Senior Manager, Scientific Research & Experimental Development (SR&ED), at 587.702.5959 or [email protected]
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