What Big Business Will Pay for in a Downturn

Faced with falling oil prices, energy companies are turning to startups to make their rigs more efficient

Written by Murad Hemmadi
DarkVision CEO Stephen Robinson (centre) with colleagues in Vancouver. Photo: Ben Nelms

It was 2013, the height of the oil boom in Alberta. Stephen Robinson was looking for a new challenge. Around the same time as his graduation from engineering at the University of British Columbia, he sold the company—a system that uses high-speed imaging to scan for defects in packaging—he’d founded as a student. He could have followed the career trajectory of other young tech entrepreneurs and moved to Silicon Valley. Instead, the oilfields beckoned.

Robinson’s new company, DarkVision, is developing HD cameras that can be used in oil wells, reducing risk and shrinking drilling costs. It’s among a host of new startups developing technology for the oil and gas industry, which finds itself desperate for innovation in this era of low commodity prices.

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Many companies still use antiquated technologies to understand what’s happening in the layers of rock below the surface. They rely on sensors, which print off a report that looks like a seismograph reading, to gauge the viability and soundness of an oil well. When you’re drilling 2,500 metres underground, data can be slow to come to the surface and inaccurate once it arrives. Cold Bore Technology and Xact Downhole Telemetry—two companies based in Calgary—aim to improve the drilling process by increasing the speed of the data.

“These specific technologies can reduce the risk of drilling problems, so they could easily save $100,000 to $200,000 per drilling project by increasing the knowledge of the geological formations,” says Colleen Kennedy, an analyst at Lux Research, a technology market research firm. “It’s really important to have as much information as you can, because the risk is just so great. The more you know, the more you’re able to make sure your system can run smoothly.”

Cost has become a big concern, as the price of a barrel of oil dipped below $50. In September, the Canadian Association of Petroleum Producers estimated that almost 35,000 oilfield workers had been laid off in 2015. Yet Robinson says companies are still keen to invest in new technologies, even though they’re being forced to cut down on production.

“Now they’re even more interested in reducing their costs. Not that they weren’t interested in preventing well failures before, but now you can get the attention of people a little bit easier,” Robinson says. “We liked the fact that well failures are a big fundamental issue that just wasn’t going away—regardless of the price of oil, regardless of the details, it just was going to be there for a long time.”

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You might expect big oil operators to keep their innovation in-house. But the reality is corporations—including Cenovus Energy, Suncor Energy and Enbridge—have been using their capital funds to invest in oil and gas startups in Canada for years. Oil and gas operators, entrepreneurs say, are good at incrementally improving their own processes. But game-changing technology is more likely to come from outside.

Most of the technology currently under development in Canada is focused on the drilling process. However, automation—which is already being adopted in other areas of business—is emerging as the next trend in the industry. New technologies could drastically cut down on the number of people needed to run a complex drilling operation. Earlier this year, Suncor Energy Inc. purchased 175 driver-less trucks from aJapanese manufacturer, with the goal of replacing its entire fleet within a decade. In 2014, a Statoil platform in the Norwegian North Sea received a $33-million upgrade to its automated systems, with the intent of improving safety and efficiency. Automation could soon reach the broader oil and gas industry, says Kennedy. New regulations in the United States, requiring offshore rigs to live-stream data, will only increase the need.

For full-scale automation to become a reality, data gathering and transmission need to improve first. One company aiming to address this problem is Xact, which uses acoustics to get a picture of a well, explains president and CEO Jason Roe. “We’re not taking people off the rig yet but we are increasing data,” he says.

This article is from the December 2015 issue of Canadian Business.Subscribe now!


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