How high-tech can lower costs

Companies are cutting budgets left, right and center. Here’s why they should leave their research and development ones alone

March 25, 2015

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There was a time, not that long ago, when the oil sands were simply too costly to be globally competitive with other sources of supply. But thanks to the work of researchers, scientists and other big thinkers, we found a way to dramatically reduce those costs and make the oil sands economically viable. Now, amid what Premier Jim Prentice calls the most serious fiscal circumstance the province has faced in a generation, Alberta is spending some of the little money it has left betting on another technologically driven great leap forward.

Despite the crude crash and the estimated $7-billion hole it will leave in the government’s finances in 2015, Alberta still found enough cash between the couch cushions to promise Kinetica Ventures a million dollars in funding over the next two years. The newly launched energy technology accelerator is focused on closing “key gaps” in Canadian oil and gas research and development. “The Alberta government is facing serious fiscal challenges with the falling price of oil and it is important that we continue to support innovation in Alberta,” said Alberta cabinet minister Don Scott after announcing the new investment.

It’s not much in the grand scheme of things, but in times like these that million dollars could do more than just help – it might even pull a few businesses back from the brink of bankruptcy. “The Kinetica opportunity is a ray of hope in an industry right now that is going through a lot of challenges because of the commodity price situation,” said Stace Wills, the vice president of company creation at Innovate Calgary, which runs Kinetica. “Ultimately, after all the cuts in spending are made to get the industry down to some level of budget certainty going forward, what is left? It boils down to innovation – it really is the only solution after the cuts have been made that will help with the ongoing cost issue.”

Kinetica isn’t on its own in trying to use innovation and technology to drive down costs. According to a February 2015 report from PriceWaterhouseCoopers (PwC) that analyzes the state of R&D within Canada’s oilfield services, “Collaboration within industry and with government and academia is dramatically shortening development time by tearing down research silos, intensifying conceptual exchange and minimizing research duplication.” The report noted that R&D spending remains at all-time highs despite the struggles of most companies in the space. And those spending commitments could start yielding some very interesting results. “We are now witnessing the emergence of a host of breakthrough technologies … that may make much of Canada’s oil sands industry virtually unrecognizable in 20 years’ time.”

And while innovation can help the industry lower its operating costs, it will also help meet the ongoing challenge of social license. Take the new generation of water treatment facilities, which are eliminating the need for fresh water during in situ production. Suncor’s trademarked TRO technology can reclaim tailings ponds in a fraction of what is currently considered typical time and is said to be capable of “significantly” reducing the existing tailings pond inventory, which has long been a focal point of environmental criticism.

The innovations that will save Canada’s energy sector from undue suffering need not be the industry-spawning inventions on the scale of Karl Clarke’s hot water bitumen extraction process or Roger Butler’s steam-assisted gravity drainage (SAGD). In fact, according to Chi-Tak Yee, MEG Energy’s senior VP of reservoir and geosciences, “many future leaps in oil sands innovation are likely to owe much to the re-combination of current knowledge and technologies in new applications … that is the trend you should watch.” We’ll all be watching more closely than ever. After all, while it’s tempting to hope for a rebound in energy prices, there is a very real chance it won’t materialize in the short or even medium terms. Given that many companies in the energy sector can’t afford to wait that long, it has no choice but to turn to technology and innovation in order to save the day – again.

Jameson Berkow is BNN’s Western Correspondent. This article also appears on Watch BNN in Edmonton on Shaw: channel 70 and in Calgary on Shaw: channel 89, as well as on Bell ExpressVu: channel 504, and Bell Fibe TV: channel 1504 across the country.

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