UK-based companies developing innovative technologies to support shale oil and gas production could benefit from the industry drive for greater efficiency as energy prices plummet, according to sector specialists at Withers & Rogers.

Recent dramatic falls in the price of oil have made shale oil and gas production less profitable and the industry is urgently looking for ways to improve efficiency and reduce the cost of extraction. According to research by Scotiabank, the breakeven price for a barrel of shale oil is about $60. The price of oil having slipped below this, to around $55 per barrel during March 2015, meant that extraction cost the shale and gas operator money. 

This caused many shale operations to be shut down at short notice across the US. Prices have since recovered slightly and currently hover a little over the $60 break-even point, but are still barely high enough to induce operators to re-initiate shale extraction.

The seemingly inexorable rise in the global oil price since 1999, when a barrel of oil cost just $10, has been directly responsible for the rapid development of the shale oil and gas industry and the technology needed to support it. However, with oil prices having fallen back, some innovators might be tempted to put their R&D plans on hold.  

Russell Edson, senior associate and patent attorney at Withers & Rogers, one of the UK’s intellectual property firms, said: “The lower price of oil means innovators could find that technologies which make the extraction and production of shale oil and gas more efficient could benefit by licensing their innovations to operators. Now, such innovations are needed more than ever.”

“Creating safe fracking technologies and improving the overall efficiency of shale oil and gas extraction are constant industry challenges. In the current cost-conscious environment, operators are turning to nimble innovators to find solutions that could help to deliver a net gain to their bottom line.”

“This mood was reflected at Offshore Technology Conference (OTC) in Houston, where although the challenges of the oil price drop were acknowledged, key industry players were optimistic that the industry would find a way through the dip, which is seen as temporary.  By driving efficiencies and forcing operators to find more cost-effective solutions, it was clear that many felt the price drop could be a good thing for the industry as a whole.

The safety of the extraction process has been a primary focus for UK innovators to date. Developments in this area have focused on improving seismic monitoring so that it provides reliable information on ground movement and helps to ensure extraction takes place where there are known deposits. Another area of interest has been around the prevention of fracking fluids leaking into the water system. The oil price drop adds to this the challenge of finding more cost-effective ways to achieve all of these improvements. Although UK innovation activity is still in its early stages, some of the R&D that has taken place could now be leveraged through license agreements with operators across the wider industry.  Collaboration across the industry, and indeed with other industries, will be important in addressing the challenges now facing the industry.

Instead of taking a step back from R&D activity, UK-based innovators could find their technologies benefit from wider appeal. In particular, there could be an opportunity to collaborate with other players both within and outside the oil & gas industry.

Russell Edson concluded: “Some of the technologies developed in the UK which were intended to address safety concerns, are attracting wider interest from operators who have identified their commercial benefits. In some cases, more efficient monitoring systems could help to make extraction more cost-efficient as well as providing information about how the activity is impacting on the environment.”