Technology Breakthroughs: Creating Fertile Ground for Innovation in the Oil and Gas Sector

aileen_nowlan_31394David Hone, Chief Climate Change Advisor at Shell, recently stated that it takes 25 years for a new technology to reach one percent of the energy system. At the multinational companies I have worked with as clients and partners, I have seen how much time it can take to launch a new idea or product.  But, I believe we can and must accelerate the pace of technology development and adoption. This is especially crucial in the area of methane detection. Methane is the main component of natural gas and methane emissions are the cause of 25% of today’s global warming.

For the past three years, the Methane Detectors Challenge (MDC), a groundbreaking partnership between Environmental Defense Fund, oil and gas companies, technology developers, and other experts, has focused on designing and testing promising methane detection technologies. Two of the most promising technologies, both of which provide low-cost continuous methane emissions monitoring, will soon be pilot-tested by major oil and gas companies. Moving from concept to pilots in just a few years teaches us that it is possible to accelerate the adoption of new technology in the oil and gas sector.

Lesson One: Bring all stakeholders to the table around a realistic shared goal

During tMDC_teamhe initial phase of the Methane Detectors Challenge, we facilitated a series of meetings between environmentalists, scientists and oil and gas companies, including Shell, Noble Energy and Southwestern Energy.  This collaborative approach set MDC up for success.  We gained insights on how methane detectors would need to work in the field—simple, self-powered, able to send automated alarms—and this helped the technology entrepreneurs target key functionality.

Our environmental goal for MDC struck a balance of ambitious and pragmatic; detecting big emissions that account for the vast majority of total methane emissions.  By understanding which features would deliver the most impact, we focused on key—but not all—technology gaps.  This dramatically sped up the development and testing time.

Lesson Two: Cast the net widely

At the start of the Methane Detectors Challenge, we cast the net widely for initial applications. If existing providers aren’t already solving the problem, there is no reason to stick with the familiar.  MDC invited applications from all over the world and from different industries.  The result was technologies adapted from outer space, coal mine safety, and personal breathalyzers, to name a few: fresh ideas and new approaches brought together by entrepreneurs who are committed to slowing the tide of climate change.

Lesson Three: Small, flexible investments can pay off

Small investments in emerging technologies can yield great results, and while not all will pay off, those with promise will improve rapidly. This is a portfolio approach to innovation—much like successful Silicon Valley enterprises. This requires leadership commitment and clear communication of project goals to all stakeholders, then being flexible and creative.

Taking some early-stage risk is necessary to create opportunity for big payoffs. Oil and gas companies are familiar with this at the exploration stage; the same is true for technology innovation.  MDC focused on new hardware solutions. Many entrepreneurs (as with entrepreneurs in other sectors) were often advancing personal funds to contract manufacturers or suppliers. This is a dangerous stage that many startups do not survive.

Oil and gas companies should consider offering working capital, rapid payment terms, and in-kind support for early-stage ventures.  The payoff could be significant—a more efficient, more effective strategy that works with a company’s exact specifications. With the right assistance, hardware startups are still not going to turn a profit on the first units, but they might make it through their first year.

MDC headerCatalyzing innovation requires flexibility and compromise on all sides.  Just as entrepreneurs aim to learn about the culture, quality and safety standards and business priorities of oil and gas customers, oil and gas companies will learn and improve faster if they ask themselves what they do and do not need from an early-stage entrepreneur as compared to their expectations of an established provider.  Their requirements for fast iteration of a developing technology may be different from adoption of a tested and proven technology. A lower risk, rapid improvement orientation can be reflected in product or service agreements, warranties, and the feedback offered to innovators.  Similarly, for oil and gas companies, the business case for adopting a new technology may not initially outweigh their current approach.  But with a portfolio of small bets, and the patience to help new ideas progress down the cost curve, these companies increase the odds that a new technology dramatically improves on the status quo.

During the Methane Developers Challenge, I have witnessed first-hand how environmentalists and oil and gas companies can learn from the portfolio approach and rapid iteration lessons of Silicon Valley innovation. In the next few months, MDC entrepreneurs will learn from deploying their technologies at major oil and gas companies. This is a powerful example of ambitious and pragmatic collaboration. This corporate leadership, with oil and gas companies taking a risk and putting their unique resources and insights to work catalyzing innovation, will enable business and the planet to thrive.


Follow Aileen Nowlan on Twitter, @aileennow


Additional information on EDF Methane Detectors Challenge