{"id":32131,"date":"2018-11-13T14:25:54","date_gmt":"2018-11-13T19:25:54","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/process-development-disruption-in-the-oil-gas-industry-open-innovation-to-drive-value-in-uk-under-explored-areas\/"},"modified":"2018-11-13T14:25:54","modified_gmt":"2018-11-13T19:25:54","slug":"process-development-disruption-in-the-oil-gas-industry-open-innovation-to-drive-value-in-uk-under-explored-areas","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/process-development-disruption-in-the-oil-gas-industry-open-innovation-to-drive-value-in-uk-under-explored-areas\/","title":{"rendered":"Process Development Disruption in the Oil & Gas industry: Open Innovation to Drive Value in UK Under-Explored Areas"},"content":{"rendered":"

In early 2016 in the midst of the oil price crisis, David Cameron, former UK Prime Minister, announced an action plan to boost the oil & gas industry in the country. Included in this package was a \u00a320 million UK Government-Funded seismic program to promote exploration activity in under-explored off-shore areas. This data would then be openly available to allow academia and companies to identify and target a range of opportunities [1]. Traditionally, seismic acquisition expenditures are directly incurred by companies; also, as costly information, this data is not openly shared. What encouraged the UK Government to take this approach? What was the value proposition of this open innovation model in this industry?<\/p>\n

Seismic surveying is a key aspect of the oil & gas exploration process. Geologists use seismic surveys to produce detailed images of the various rock types and their location beneath the Earth’s surface and they use this information to determine the location and size of oil and gas reserves [2]. From this information, an expected economic value can be estimated and, if the expected economic benefits are greater than the costs, an exploratory drilling campaign is planned. Drawing a parallel to a product development funnel, the seismic acquisition could be considered one of the earliest phases in the concept development; the analysis of this information narrows uncertainty and leads to greater product definition [3].<\/p>\n

The acquisition and use of seismic data depict in several ways the overall situation of data in the industry. The oil & gas sector generates large amount of data, according to IHS Markit, data volumes are now exceeding 10TB of data per day for a single well [4]. However, the information is generated through expensive process, creating high entry barriers. \u00a0Moreover, the data is considered proprietary information, controlled by firms to safeguard its competitive edge.<\/p>\n

By publishing the seismic data under open licenses, the UK government is embracing a process development megatrend: open innovation [5]. According to one of the project stakeholders \u201cThe completion of the data acquisition stage of the seismic programme is very good news at a time when the sector is challenged with attracting fresh investment into the UK. It clearly demonstrates that government and industry can work together to make a significant contribution to developing understanding of the basin. By ensuring that the data will be made available to both industry and academia, the Oil & Gas Authority (OGA) is promoting maximum value from the surveys, which will help to stimulate further exploration activity in the UK.\u201d <\/em>[6]<\/p>\n

The UK Government is using open innovation to reduce entry costs, generate more ideas, and accelerate the exploration process in UK under-explored offshore basins. Under-analyzed basins information is being allowed to go \u201coutside\u201d to be incorporated freely in other\u2019s innovation process. And the strategy seems to paying off, according to the UK OGA, in October 2016 promising applications were received for this frontier licensing round. Multinational companies and new company entrants submitted high quality applications on blocks that did not attract interest in previous licensing rounds. [7]<\/p>\n

The UK Government has push even further, adopting the open innovation model as a long term driver of value and investment in UK\u2019s oil & gas sector: in 2018 the UK\u2019s OGA announced the publication UK petroleum-related information (such as well, geophysical, field and infrastructure data), the UK Oil and Gas National Data Repository \u2013 NDR. By enhancing collaboration and driving innovation and learning as an industry, the NDR is expected to deliver 3 billion barrels of production over the next 17 years. [8]<\/p>\n

External stakeholders, including well stablished industry leaders, see this megatrend as great promise to the oil & gas industry. According to Chevron\u2019s Upstream Europe Managing Director \u201c(\u2026) we need a shared understanding and commitment to collaboration for digital in the industry. The Oil and Gas Authority (OGA) has launched their Open Networks which enables anyone to access a wealth of public data on the United Kingdom Continental Shelf (UKCS) in an amazingly easy way. It\u2019s for anyone to use to drive better business decisions.\u201d <\/em>[9]<\/p>\n

From a government perspective, the value proposition of the open innovation model in the oil & gas industry is clear. However, several questions remain regarding whether this model can be used by the entire industry:<\/p>\n