1999 06
How Bright Ideas Make it to the Marketplace
Dennis Fergusson

Reprinted from the Oil & Gas Inquirer, June 1999, Vol. 11, No. 6 with permission from the author and the publisher, June Warren Publishing Ltd.

What do you think of when you hear the word, "inventor ?" Do you think of grey-haired men with funny accents?

If you do, click delete and re-think. Most innovators today, particularly in the oil patch, create with one side of their brain and calculate market share with the other.

If they have any doubts about market share or other business aspects of developing a new process or instrument, then there are people out there more than willing to help.

"The people who are more successful at it are those who put more weight on the business aspect of an innovation than the pure technical aspect of it," says Dean Wallace, Alberta Research Council’s (ARC) manager of Strategic Planning and Development. "Increasingly, we’re looking as much at their marketing plan as at their innovation."

Sheer numbers of ideas drive some of the business decisions, Wallace says, calculating that out of 10 projects proposed, only one will draw ARC approval. "This is a riskier business than being a batter in baseball," Wallace says.

Even with the current uneasiness in the oil patch, innovation plays a key role – possibly the key role in production and distribution, and Alberta is a hotbed for it.

"The easy fixes are now gone," observes Don Towson, Industrial Technology Adviser with the Industrial Research Assistance Program (IRAP). "The only way the service industry is going to survive is through technology and innovation. The companies that don’t innovate will just disappear." 

Towson, who works with the Petroleum Services Association of Canada (PSAC), feels current conditions have challenged innovators.

"There’s lots of innovation out there; there’s lots of ideas; the constraint today is funding," Towson adds.

In 1998, he saw 30 companies, with 25 potential innovations and advised on two small projects. "They (companies) were just too busy. Now, they’ve got the time and no money. With the drop in oil prices, money is just drying up."

Don Vernon, industry officer with Industry Canada, mirrors Towson’s concern.

"It’s really a tough sell," he comments on getting large companies to help fund research. The federal government, however, is raising the minimum limits for assistance from $200,000 to $500,000.

"It’s very likely we’ll have more money available for other areas, including oil and gas," Vernon predicts.

For Vernon, innovation drives productivity, and productivity sets the standard of living for the nation. "Clearly, there is more we can do," he says.

On average, Canada falls 20 to 30 per cent below the U.S. in productivity. Canada, however, remains competitive partly due to a low dollar. "If the trend continues, even the low dollar will not be saving us," Vernon says.

Innovation seems to start with a perceived need, then a possible solution. What happens after that can be a tortuous road for the innovator – be it individual or company.

According to Wallace, a significant amount of innovation never makes it to the patent office. It becomes a smart solution to a field-based problem and common practice through word of mouth.

"I think there’s a lot of routine research and development done by companies doing contracts—it comes out of know-how," Wallace observes, stating the amount of engineering in offshore oil and gas development is a particular case in point.

Currently, anything that cuts the cost of production or transportation and anything that assists in satisfying environmental constraints, attracts interest, Towson says. He cites changes in horizontal drilling, and three- and four-dimension measurement of seismic data as two significant advances in the last five years.

The advent of the computer has also bred strong local innovations, such as data combination and storage. "Information technology is very strong in Canada and extremely strong in Calgary," Towson says. "The work is being done by teams, now. The initial contact is often on an engineer-to-engineer basis." 

Those smart solutions that never made it to the patent office may become targets for future development.

"We’ve toyed with the idea of establishing an enterprise for examining and perhaps developing some of these one-off solutions (to field problems," speculated Don Morberg, communications co-ordinator for University Technologies International (UTI) Inc. in Calgary.

A Calgary-based technology transfer company spun off from the University of Calgary, UTI has drawn national and international interest.

"We get calls every week from universities in the U.S. on how we set up our model," Morberg observes.

"If you were in Edmonton or Toronto, you wouldn’t find a UTI that would offer its services to both the university and the community," says Hugh Jones, UTI ‘s manager of Business Developments.

Where the innovation originates – company or individual, also affects the approach, tactics and support it receives. "If you’re at home in your basement, that would be a different matter," says Towson.

Industry Canada – located in downtown Calgary constitutes a good first place for an innovator to visit. "If we’re approached with an idea, we can say ‘Okay, here’s where you can go’," Vernon comments. "Many times, the person who tends to approach me tends to be the entrepreneurial type."

Funding again enters the picture. IRAP for example can advise anyone but fund only companies past the start-up stage – not individuals with a good idea. Towson admits there is "really a lack of funds for people right now to get their projects moving." IRAP will, however, refer individuals to possible funding sources. 

Where a person or company with a good idea can go varies, but there are a number of options, including the IRAP. Other destinations may include National and Alberta Research Councils, or UTI.

For a small company, it could include PTAC Petroleum Technology Alliance, the Canadian Oil Sands Network for Research and Development (CONRAD) or a patent office. 

All of these organisations can provide advice (some provide funding), others, such as PTAC provide "match-making" between innovator and market. They do have some differences. PTAC, for example takes an approach based on a project rather than a package, Towson says.

Knowing of them, innovators target them for some very curious questions. "Some guy phoned in the other day to ask where he could get an industrial laser," mused UTI’s Don Morberg.

Any innovation has a number of stages. Towson named them as: 

• The idea 
• The engineering drawings 
• The prototype 
• Testing of the prototype 
• Production and marketing of the final product. 

For people dealing with ARC, the name changed on April 1 to the Alberta Science and Research Authority (ASRA). The door in remained the same – through the Technological Commercialization office.

These organizations do not operate in isolation; they serve on each other’s boards, check each other’s web sites, and refer people to each other. 

Innovators with a good idea should also check the websites. UTI and PTAC, for example, have "Request for Proposals" where a web surfer can find out what industry currently wants, and submit a proposal on-line.

An innovator with a good idea, for example, may first approach Industry Canada, be referred to IRAP, who may seek technology information from ASRA, then refer the person to PTAC.

All organizations queried waxed emphatic on the same thing – they welcome any and all new innovations. UTI, for example, does not restrict itself to U of C research – although it is a spin-off company from the university.

Once these ideas cross various desks, however, they are evaluated very strongly on their business viability. If the innovation needs technical assistance in terms of advice, testing, or prototypes, that can also be provided. 

All IRAP representatives have engineering backgrounds, and IRAP itself has a number of assistance programs – the newest being pre-commercial assistance.

Just starting, the pre-commercialization program has a client focus, and may expand in the future. Projects are considered on the basis of soundness, the company’s available resources, commercial potential to provide jobs and repay the investment. The innovator must also invest financially.

"What we’ll do is make decisions on a case-by-case basis," Wallace says. "There is no doubt in my mind that the personality of an inventor is a lot different from the personality of a businessman."

The financial support can come in the form of a grant, or a buy-in by the organization. A buy-in by an organization means that in exchange for a share in the proceeds, they provide up-front financing and technical expertise.

Financing can also get as innovative as the technology it supports. Welcome to the world of technology transfer, consortiums and joint ventures. How a company wants to proceed with its financing and protect its ideas also count as business decisions. 

Innovation, known as intellectual property, is protected by patent, and patent law in Canada is enforced. They are not as well enforced in countries outside Canada, all parties contacted said.

Patenting is an expensive process, and its main function is to ensure use of the innovation rather than to protect the innovation from another innovator.

"As soon as you go to an outside person, you lose a degree of control," Wallace said. By going to an outside person, you may also gain valuable expertise. Ryan Energy Technologies is a case in point.

Ryan Energy had a new idea on how to track directional drilling. The firm approached IRAP for assistance. Dr. Paul Camwell, then an IRAP representative, joined them on staff.

Operating out of an obscure location in Foothills Industrial Park, the firm with the better idea on directional drilling now has offices in Calgary, Atlanta, and Caracas, and will have projects in the North Sea and the Middle East.

For Ryan Energy, the new technology put one principle up in lights: innovation breeds new innovation. It also highlighted some of the twists and turns with technology transfer.

A service company that drills wells, Ryan Energy started in 1993 with mud pulse drilling tools for directional drilling. It decided to complement this conventional technology with technology it could own or develop in-house. 

Instead of using just a mechanical mud pulse method to transmit information to the surface, Ryan Energy developed an extremely reliable tool using an electromagnetic method of tracking a drill’s progress.

Where a mud pulse method of directional drilling sends information to the surface by creating a pulse by opening and closing off a valve within the pipe, Ryan Energy’s method involves an electrical current crossing a break in the drill stem.

The electrical current generated near the bottom of the drill string creates a signal containing information in digital form that can be picked up by a surface sensor, which is then combined with other information to give the driller a very accurate picture of what is going on beneath the surface.

The drillers can literally dial in what they want to see on a monitor using Ryan Tru Vu hardware and software. The equipment downhole is fully retrievable in the event of problems. It particularly shines in underbalanced drilling where use of gas reduces fluid pressure – which can potentially damage the reservoir and formation. 

"We are one of the very few drilling companies that can capture all the downhole information and all the surface information and merge it into one log using a drilling data management package called ‘Fusion’," comments Camwell. 

"It is unique in Western Canada, that a little company has its own research and development (R&D) department, owns its own technology; it’s not a ‘me-too’ company," he says.

Started in 1993, Ryan Energy was nominated in 1997 and 1998 as a finalist in the ASTech Awards, sponsored by the Alberta Science and Technology Foundation. 

It has since developed more tools for drilling, including a Geological Steering Device that can actually tell a driller when the wellbore path has to be adjusted, and a dynamic pressure device that can very accurately measure, transmit, and record pressures both inside and outside the drill pipe.

The firm has also found out that when one develops new technology, it has to develop the support for new technology. Essentially new technology must be invented to create it, test it, and transport it, Camwell explains.

Along with manufacturer, the firm had to become educator and teach people how to use and service the new technology. Innovation bred innovation.

Once an innovator has made the marketing decisions, PTAC could be a powerful ally in finding potential markets, and placing the innovation before the oil and gas community.

"We’re that dating service, the match-makers," quips PTAC President, Eric S. Lloyd.

PTAC is an association of producers, service and supply firms, universities, and government and research providers that facilitates collaborative research and technological development in the oil industry. It has launched 27 projects ranging from onsite electrical generation using flare gas to evaluation of markets for produced sand, since its inception in 1996.

"The old system is, you go buy lunches; the new style is a petroleum information session," Lloyd says.

Petroleum information sessions, where an innovator with a company sponsorship can meet potential clients are one of several PTAC avenues. Others include workshops, a library of ongoing projects, and a web site.

Joint ventures can come out of the information sessions as well as new forms of financing. C-FER Technologies Inc. has seen the benefit. 

An independent research and development company, C-FER counts Amoco Canada, Imperial Oil and Suncor among its member companies.

Citing a $3-million water-oil separation project shared by C-FER and other investors such as Chevron and Alberta Energy, C-FER president and CEO Pat Jamieson, calls consortium financing "…an extremely powerful way of moving technology forward." "The leverage they (companies) gain is just incredible," Jamieson says.

C-FER has found that innovation is cross-applicable, allowing for technology transfer. The oil-water separation knowledge, for example, can be transferred to geothermal energy.

Started 15 years ago to capitalize on the Beaufort Sea development, the firm has developed a diverse portfolio and a sophisticated lab that other firms can use.

Jamieson adds, "We basically cover everything from mined oil-sands to conventional oil recovery."

"Our lab facility, overall, is unique in the world," he commented on the lab, which includes a deep well simulator, hyperbaric test vessel, tubular testing system and instrumentation.

C-FER’s own innovations include a 3D analysis tool that reduces the risk of well casing failures by magnifying localized casing deformations, giving insight to probable failure before it occurs.

The firm has also developed a form of software—PIRAMID—that minimizes risk for maintenance and inspection by using quantitative engineering data as opposed to qualitative subjective approaches.

Like other projects, it too, is a joint effort that includes TransCanada PipeLines Limited and B.C. Gas Utility Ltd. 

Joint ventures, technology transfer, consortiums, diversification, project participants are types of financial arrangements that often come into play once the innovation gains a backer—a client. They also provide at least a buffer for hard times by spreading the expense. 

For these agencies and technical visionaries, innovation does not stop at the laboratory door. It extends to the new methods of financing and business methods that support technical innovation and ultimately brings it to market.

In doing so, it sows the seeds for new innovation, and the circle continues.

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