Year: 2020. Place: Houston. 5 a.m. The screeching alarm clock ripped John out of a peaceful sleep. It was Monday morning, and he had a big day of work ahead of him at BPChevExxMobPhilShellTex. He slipped on his tuxedo (casual Fridays gave way to a new fashion trend-black-tie Mondays-around 2005) and headed to the office. 8 a.m. John rushed to his desk and switched on his computer. The company was planning a drilling campaign offshore Morocco, and he had to have the drillship ordered before lunch, and have it on location by the end of the week. In the interest of speed, John used his voice-activated software to call up the hot new e-procurement site Oil.kom (every possible dot-com name was used by 2008). There, he opened up the drillship bid request template. "Let's see, water depth rating-20,000 feet," he muttered into the computer's microphone. "Equipped for laser drilling? Of course! I thought that would be standard equipment by now." He continued for about 30 minutes, filling in the requirements for the ship. "Send," he commanded the computer, and the completed bid request instantly arrived on the desktops of the world's two remaining deepwater drilling contractors-GlobNobPride and TransoceanSedForDiaEnsco. In a couple of hours, the responses should start rolling in, John thought. That leaves plenty of time to take in another meeting. 11 a.m. "You'd think someone would be smart enough to invent a virtual reality helmet that doesn't pinch your ears," John said, his voice muffled by the metallic contraption on his head. He was in the company's visualization theater, about to take a tour through that deepwater reservoir offshore Morocco where the deepwater drillship would be working. In an instant, John was inside the earth, maneuvering around salt bodies and studying the porosity of the source rock. The flashy graphics and stereo sound made him forget all about his aching ears "This latest 4-D data looks top-notch," he said, watching the pattern of the fluids flowing through the reservoir. "As soon as WesternGecoCGGVeritas works the bugs out of its proprietary Fifth-D technology, let's integrate that information into the presentation also." 2 p.m. Back in the field development department, John's colleague, Jane, was mulling over some ideas as to how the deepwater Moroccan field could be developed, assuming it's successful. Of course, with an industry success rate of 70% on deepwater wildcats, chances are that development plans will be necessary. The field, in 15,000 feet of water, is just 100 miles away from the closest spar platform, making it the perfect candidate for a subsea tieback scenario, Jane decided. Downhole oil/water separators will ensure that not one drop of water is produced with the hydrocarbons. Electronic sensors will be placed in the development wells to detect any production problems and activate the necessary controls to fix them-all without any human intervention. "It's just your typical deepwater development," Jane thought to herself. 5 p.m. It was almost time to hop onto the Houston Light Rail and head home. But first, John and Jane logged onto the company's satellite conferencing program for a brief meeting with the rest of the deepwater Morocco asset team. They reviewed their progress: the drillship was ordered and already being custom-fitted, the first couple of drill sites were chosen in the visualization theater, and preliminary plans were drawn up for a subsea development scenario. Not bad for a day's work. Technology on the horizon The above tale highlights some of the innovations that are now beginning to affect the industry or may do so in the near future. Laser drilling is being studied by the Gas Technology Institute. E-procurement has changed the way oil companies buy equipment and services. Visualization centers are becoming increasingly popular. Flow assurance research is enabling companies to develop subsea tieback projects in ever-deeper water. Developing technologies are bringing the dream of self-regulated, "smart" wells closer to reality. But that's really just the beginning. Oil and Gas Investor asked several technology experts about innovations that will affect the industry as early as next year and are as far-reaching as the next two decades. Some of these technologies were being tested in the lab and in the field as this magazine went to press. Others have a much longer road to the Patch-if they make it there at all. Dual-gradient drilling For the foreseeable future, the industry's focus will be in the deep water, and drilling in the ocean depths soon may become a lot easier and cheaper thanks to a technology called dual-gradient drilling. An industry group including Texaco , BP , Chevron , Conoco , Diamond Offshore , Global Marine , Schlumberger and Hydril is studying this technology in a five-year project at a cost of almost $45 million. The system basically eliminates the mud from the drilling riser and replaces it with seawater, which significantly reduces the annular pressure in the upper-hole section. This change has several benefits, but perhaps the most important is the elimination of several strings of casing from the well. With fewer casing strings, the target zone would be reached with a larger-diameter liner, which increases flow rates and introduces the possibility of using horizontal and multilateral completions. Taken a step further, this could lead to fewer wells needed to develop a field, smaller surface facilities and faster production. And all that can save an operator big bucks-between $5 million and $10 million per well, says Pete Sigwardt, a manager in Texaco's upstream technology department. The next big step in this multiyear project will arrive in March 2001, when a prototype of the technology is scheduled to be tested in 1,000 feet of water in the Gulf of Mexico. Encapsulated acid Another near-term technology that Sigwardt is excited about is called encapsulated acid. The idea-conceived by Texaco-could greatly increase the amount of oil and gas recovered from carbonate reservoirs, he says. Many carbonate reservoirs require frac jobs to release hydrocarbons from the source rock, and hydrochloric acid is one common substance used to stimulate the reservoir. However, when the acid is pumped down the well, it can only react with reservoir rock nearest the wellbore before it loses its effectiveness-it cannot penetrate deep into the reservoir. "There is a lot of oil and gas tied up in carbonate reservoirs," Sigwardt says. Encapsulated acid would work almost like a Tylenol capsule. The acid is covered in a microgel, about the size of a grain of sand, and pumped into a reservoir. The gel dissolves over time, allowing the acid to penetrate deep into the reservoir before it begins its work. "Also in this vein, we're trying to change the acid into a more environmentally friendly one," Sigwardt adds. "We're looking at food-grade acids." Texaco is working with Halliburton on these projects, and some of these concepts could be field-tested as early as next year. Rotary closed-loop drilling At Baker Hughes, Technology Director Peter Aronstam believes rotary closed-loop drilling technology will vastly improve drilling accuracy. It's an idea being pursued by multiple companies; the Baker Hughes product is called AutoTrak. Wellbores are never perfectly straight, of course, and the traditional way of dealing with that involves having a person study the bit rotation and the trajectory and then alter the course of the well. Because of the lag time between the identification of any downhole trajectory problems and the adjustment process, getting within several meters of the target is considered a good result, Aronstam says. But rotary closed-loop drilling puts the control of the drillbit in an active subassembly that is a few feet behind the bit. "It's like a robot at the end of the drill string," Aronstam says. "It gives you real-time information, and you tell the bit where to go." Baker Hughes drilled a 14,500-foot well for Agip with the AutoTrak system and came within 10 centimeters of the target, he says. The advantages to this are numerous. "In the Austin Chalk, conventional methods will drill a horizontal section in eight days. With AutoTrak, it can be drilled in 25 to 26 hours," he says. "It makes the corrections downhole and drills more like a rifle bore. Plus, with a crooked well, there's more friction on the drillpipe. With a rifle bore, there's less friction." Also, better well placement can help companies produce less water. Currently in the United States, oil wells produce 10 times more water than oil, Aronstam says. Today, about 5% of wells are drilled with the rotary closed-loop method, but in 10 years, that could increase to 40% to 50%, he says. Though it's cheaper in the long run to drill this way, the tool has a dayrate of about $40,000. "There is some sticker shock," Aronstam says. Logging while drilling Of course, hitting the drilling target dead-on isn't going to do a company much good if the seismic data used to design that target is off base. Logging while drilling, or geosteering, is an emerging technology that measures the formation continuously throughout the drilling process, allowing a company to readjust its model as needed. "Today, the industry has about a 40% success rate in rank exploration wells," Aronstam says. "But this has the potential to drive that percentage up." Smart wells Also in the vein of real-time information, smart wells will help the industry with reservoir monitoring and control. Executives at Baker Hughes , Halliburton and Schlumberger all mentioned the need for this technology. Smart wells give oil companies real-time information about their performance, and they have a control downhole that allows performance to be altered. "You know about changes and problems in the well months before you would have known, in the past," Aronstam says. "By catching issues early, you probably can get a 5% to 10% increase in recovery efficiency." With average recovery rates hovering around 35%, that's a significant improvement. Adds Gary Flaharty, Baker Hughes head of investor relations, "If you have a technology that can improve recovery 5%, you've got the Holy Grail." At Schlumberger , Pascal Panetta, head of product development, cited Schlumberger 's work on Norsk Hydro 's Oseberg Field in the Norwegian North Sea as a step toward the greater implementation of reservoir monitoring and control equipment. Schlumberger will provide Norsk Hydro with a system to allow real-time monitoring and remote control of individual production zones within a well. "When we use this technology, we will be able to see patterns in the reservoir and act on the information in real time to improve the sweep of hydrocarbons," he says. "Today, we are passive. Tomorrow, we will be proactive." Seismic technology Panetta also places great importance on the evolution of seismic technology. Currently, when conventional seismic surveys are shot, multiple sensor arrays are used to record the data. The signals from the sensors are combined, and the resulting data may be distorted by outside noises. But a technology called Q Land that Schlumberger recently introduced provides the ability to digitally combine signals from a single sensor or small group of sensors. This removes noise and distortion from seismic data and allows explorationists to image targets in complex geological areas that were invisible in the past, he says. This enhanced imaging and resolution, in addition to improving target selection, will be fundamental in assisting production and reservoir management in the future, Panetta says. Also, because of the purity of the data, single-sensor response and digital-group-forming give good results when repeated. This repeatability makes the data more useful to 4-D, or time-lapse, seismic projects, he says. 4-D surveys incorporate the fourth dimension of time to trace the flow of fluids through the reservoir and to study saturation and pressure changes. Bob Heinemann, Halliburton's chief technology officer, believes that the industry will see an explosion of activity in 4-D seismic. With projects becoming more expensive, as they are in deep water, operators want more direct measurements around which to base their decisions. 4-D seismic can help them place wells where they will be the most productive. Fluids differentiation There is one potential problem, Heinemann says: it's quite difficult to distinguish from seismic data which fluids are oil and which are water. "In the next three to five years, we will see big advances in detecting different fluids from seismic," he says. "We can now tell gas from oil, usually, but we can't do much today with oil and water because they have the same density and the same reflection on seismic. The reason for 4-D is to see how fluids are moving. It would be great to know what that fluid is." Composites Another coming innovation is the increased use of composites, which are lighter, safer, more compact and easier to install than alternative systems, Heinemann says. Halliburton is using composites in its Anaconda Advanced Well Construction System, which underwent initial trials in 2000. Anaconda includes real-time data transmission technology that is embedded into carbon-fiber composite umbilical tubing. The ability to transmit electrical power and commands through the pipe adds tremendous versatility and control to the drilling process, so well control is improved and many hazardous conditions can be avoided. Plus, because of the composites, the pipe is nearly buoyant under most drilling conditions, a big advantage in extended-reach drilling. Looking beyond drilling applications, composites may be used instead of steel to build structures in about 10 to 15 years, Heinemann says. A further look These technologies are well on their way to becoming common items in the oil patch, but the research and development executives had plenty to say about more futuristic ideas also. Edward Reynolds is the manager of emerging technologies for the Exploration Production Technology group at Conoco Inc. In other words, he combs other industries and looks for technologies that could affect the Patch long-term. Microdrilling He's found a lot of potential. Because of weight and volume constraints in space exploration, NASA is looking for novel ways to drill meaningful holes on Mars in 2004. One technology it is considering appears to be an ultrahigh-frequency hollow tube no thicker than a pencil, Reynolds says. It can slowly penetrate earth materials with very little bit-weight and no rotary action. "Perhaps, a version of this technology could be used in our oil fields for side-wall coring, sensor-emplacement drilling, or possibly even limited multilateral drilling," he says. Systems on a chip Some of the most unusual technologies Reynolds has come across are based on tiny machines called microelectro-mechanical (MEMS) devices. These devices were born out of the necessity to equip space vehicles with the smallest, lightest gadgets possible. Many laboratories are developing "systems on a chip," which are the result of the integration of mechanical elements, sensors, actuators, and electronics on a common microchip through the utilization of microfabrication technology. The medical, biomedical, aerospace, automotive, and many other industries are finding numerous uses for this technology. And the oil industry could, too. "As we strive to access more and more data from our reservoirs, this technology will become ever more important to our industry as well," Reynolds says. "Smart completions, in situ permanent sensors, and various drilling sensors are taking advantage of this technology." Smart water Like the idea of smart wells? Then how about smart water? Sigwardt of Texaco says one innovation in the conceptual stage is to program water molecules that are used in waterfloods to find the oil that is trapped in the reservoir, which could greatly enhance ultimate recovery. "Smart water would know how to find the oil. It would go out and seek the oil zone and sweep out that area as opposed to sweeping a water zone," he says. "It would have built-in triggers to delay the water sweep until it hits a rich, saturated oil zone." Lignin Another idea is to replace the water in waterfloods altogether. The Texaco staff has researched different waste products that could find new life in the oil patch, and it has found one potential winner in the paper industry-lignin. Lignin is a black substance that is left over in the papermaking process, and it has no real use currently. Tests are planned to see if it could be used as a surfactant to recover oil. "In Indonesia, we will test this in the near future," Sigwardt says. "Indonesia is the perfect place because it has a paper pulping industry." Nano- and biotechnology Aronstam at Baker Hughes believes there may be huge strides made in the next decade or so in the areas of nanotechnology and biotechnology. Bacteria can be engineered to do a number of things to hydrocarbons. Already the industry has seen it consume the sulfur in oil. The future may bring bacteria that can partially process heavy oils to reduce their viscosity or reduce the quantity of produced water that comes with oil or gas operations. "We could engineer critters to do our work for us," he says. Aronstam says there are several laboratories currently studying bioremediation that use ponds full of plants. Scientists take the produced water that comes with gas, put it in into these ponds, and the plants purify the water until it is of reinjectable quality. "You could modify that plant to do a better job," Aronstam says. "We can expect this will happen in the next 10 years, maybe less." Better economics The driver for all of these technologies, of course, is economics. As major oil companies trim their research and development budgets, they focus on their core competencies. Service companies, which have stockholders of their own to please, don't want to develop technologies that won't give them an acceptable rate of return. And the end users of this technology don't want new products unless they can demonstrably affect their bottom line. "Even if I had the inventions today, when they get taken up by the industry is problematic," Aronstam says. "There's invention, and all these wonderful things, and then there's economics...When you come up with something new to replace a current technology, people won't accept it unless it's 10 times cheaper or 10 times better. There's a huge reluctance to put new gizmos in the oil field." Expect more innovative relationships to develop in the coming years that will help make the economics of technology development attractive to everyone. Oil companies can spin off separate companies to market their proprietary technologies to the rest of the industry and profit from them. Texaco did this with Magic Earth LLC, which was created to specialize in leading-edge visualization technology. "It's better to let the cat out of the bag and get the technology applied than to let technology sit," Sigwardt says. "However, it's still important to have premium Texaco technologies to enrich business deals. We make that technology available to industry through spin-offs, but we get significant internal value having it in-house first." Heinemann of Halliburton even predicts that the fiercely competitive service companies may collaborate with each other in the future as employment issues put pressure on the available pool of technical talent in the industry. "The oil industry is facing such investor pressure and competitiveness with other industries for investment dollars. Managers will say they want to fund only the very best projects in their portfolio," he says. "That's easier said than done. If we knew which technologies would perform the best, wouldn't we do that already?" R&D today will be oil service companies' lifeblood in the future. Flaharty of Baker Hughes says, "We didn't cut our research notably during the downturn. In absolute numbers, it's the only area we didn't cut. I don't think you'd want to own this company in five years if we cut R&D."