Oil and gas technology financiers who gathered at the recent Offshore Technology Conference deliberated over who will pay for expensive new industry innovations, and left without answers. Ricardo Rodriguez, director of investments for Shell Technology Ventures Inc., said that in 2002, BP Plc, ExxonMobil Corp. and Royal Dutch/Shell spent a total of $450 million on research and development, and Baker Hughes Inc., Halliburton, Schlumberger and Weatherford International spent a total of $1.135 billion. However, most of this money goes toward engineering solutions, Rodriguez said. It's a much different strategy to fix problems than to develop new technology. Shell Technology Ventures has made 13 investments so far, and it wants at least a 20% return from the new technologies in which it invests, he said. Satish Pai, vice president of Schlumberger Oilfield Technology, said an increasing percentage of R&D spending is by service companies. Today, the top five service firms account for about 35% of the industry's R&D spending, he said. Collaborations would be welcome, but they don't really work in energy, because of ownership and commercialization issues. "We need to find a model for collaboration," he said. While a lot of money is devoted to "energy" research, a small part goes to exploration and production, he said. A larger amount is spent on renewable energy technology, and even some on coal. The trend away from E&P definitely could be seen in Elena Melchert's presentation. The program manager for the office of natural gas and petroleum technology at the Department of Energy, showed what the DOE is requesting for its 2004 budget. The natural gas technology project budget was $44.1 million in 2002, $47.3 million in 2003, but only $26.6 million is being requested for next year. For the E&P portion, $20 million was budgeted in 2002, $23.5 million in 2003 and $14 million is requested for 2004. The oil technology program budget was $56.2 million in 2002, $42.3 million in 2003, but only $15 million is being requested in 2004. For the E&P portion, $33.2 million was budgeted in 2002, $23.4 million in 2003, and a mere $2 million is being requested for 2004. Matt Simmons, chairman and chief executive officer of energy investment-banking firm Simmons & Co. International, said that the 1990s saw an explosion in oilfield technology development as the industry emerged from depression. However, most of the decade's "miracles" were being tested 30 years ago. They were developed with no roadmap in mind, and many were invented solely to survive the depression. Today, the "work in progress" blackboard is not very large, he said. It is not apparent what the breakthrough technologies will be in this decade or the next. To jump-start technology innovation, the oil industry needs a Sputnik-type scare, followed by an Apollo project-type response, he said. "Waiting another half decade is probably too late." In Simmons' opinion, the biggest technology gap today can be found in the industry's techniques for determining remaining reserves, which are hazy. The industry must be able to perform a "full physical exam" on giant oil and gas fields, find out what is still there, and learn to understand the steep decline curves, he said. Again, what's going to pay for the needed R&D explosion? Energy prices need to be higher, Simmons said, to foot the bill. -Jodi Wetuski