Finding opportunity, and success, despite oil prices…
It has been a while since the last blog post, and I’ll dispense with the usual excuses. Suffice it to say we have been extremely busy, and I am quite enthusiastic about our recent successes, despite the persistent low oil prices. Since my last blog entry, we have been quite successful landing and fulfilling software contracts with clients such as Repsol and other major oil companies, and service providers such as Thrust Belt Imaging which has kept the seismic software team busy through the end of 2015 and into the first quarter of 2016. We’ve also been getting significant interest in our full waveform inversion (FWI) software and I believe it will be leading our growth in the seismic imaging software space for the coming years. AxRTM and AxWave also had significant sales to end of 2015, showing we have become a player in this space. The fact that we have seen continued success with seismic software has me hopeful that oil companies and service providers will continue to invest in seismic data in this low oil price environment. My theory is that seismic data processing (and reprocessing) to find hydrocarbons or characterize existing reserves is a relatively low cost way (compared to drilling wells, especially deep water wells) to be ready for the price rebound. In the same vein oil sands and heavy oil producers are sitting on extensive known reserves looking for better economics. While the price is low, companies can invest in research and development with the goal of improving economics for when a rebound (even if it’s a slow rebound) occurs. We spent a lot of time in 2015 developing our proprietary RF heating technology in the hopes we could use the technology to help producers drive down costs and improve their economics. Starting this year we see significant interest and growth potential from our RF heating business based on technical advancements we made in 2015, and I’ll focus most of the post today on our progress in that space.
It is clear that many R&D budgets in the oil and gas sector were eliminated or significantly reduced in 2015, and we did see some prospects defer research or pilot programs pending a rebound in oil prices. However, we have also seen a number of clients continue to pursue and advance RF heating work in spite of the low price environment because they believe that RF heating is a game changer. RF heating offers the oil industry a compelling combination of meaningful environmental benefits as well as significantly reduced production costs.
Our approach in the RF heating space has been to focus on developing technology and intellectual property that can be productized and readily adopted by the industry. While oil sands are a high-profile target given all the negative media attention on how ‘dirty’ they are (we can save that argument for another day) from a water use and greenhouse gas perspective, we have also been cognizant that our technology is applicable to any heavy oil deposit, and that it can create significant value in creating profitable production alternatives where steam is not viable.
As we worked with our clients and partners, it has become apparent to us that there are limitations to the use of what I’ll refer to here as ‘traditional’ RF heating or RF 1.0 that will make it challenging if not impossible to see it replace SAGD on a meaningful scale. RF 1.0 is technology that has been adapted from high power communications systems, utilizing traditional RF generators, transmission lines and antennas. The limitations of RF 1.0 include:
- Power transmission losses for deep wells reduce cost advantages
- Need to use complex materials and sophisticated cooling systems
- Custom antenna designs and non-standard components significantly increase the cost of deployment and the risk of failure downhole
In my blog post of June 2015, I mentioned our team has diligently attacked those barriers, and we have created new technology that we believe could address and eliminate all of these barriers for RF heating. We are very pleased that we have been successful in filing a patent for this new technology and are in the process of filing several additional related patents to further protect this valuable IP – so called RF 2.0. Also last year, we were able to successfully test critical components of RF 2.0 in a bench scale test. Further lab development and testing is on-going now.
Below are a few pictures from our early tests that show the testing tank – filled with wet sand and our antenna assembly inside. The tank is insulated and instrumented with thermometers to monitor temperatures at different locations within the sand and the antenna.
At this point we are beginning to increase our focus on commercializing the technology while we continue to refine and develop additional IP. To that end, we have reorganized our executive team. Michael Tourigny, our CMO since January 2014, will now take on the role of VP Commercialization, RF Heating to lead our work in positioning Acceleware as the pioneer and leader in cost effective, deployable and commercial RF heating solutions. Eric Trouillot will continue to lead sales and marketing efforts for seismic imaging software and oil and gas HPC services, while the marketing function will now report directly to me.
Mike’s top priority will be generating additional support from industry to continue to develop these technologies and see them through to commercial product stage. He will also be working hard to secure government funding and grants where possible to help us accelerate our commercialization efforts. In addition to the IRAP grant we received in 2015 the team has been pursuing several other sources of government supported funding for the development and commercialization of clean technologies such as RF. Our goal is to secure and complete one or more field tests of our technologies in 2016/2017 and then transition to larger scale production tests in late 2017 to 2018. Now that we have filed for patent protection and completed proof of concept testing for our technology, look for Mike to spearhead an effort to increase the public profile of our activities in this area. Mike will be attending the Propel Energy Technology forum in Calgary on March 16th and 17th to meet with industry leaders and increase our exposure to technology innovators within the industry.
In other business, we announced our latest version of AxFWI at the EAGE show in Madrid in June 2015 and have continued to develop and refine the platform since then. At this point while budgets are strained in oil and gas, we are seeing growing interest in the product and solid validation of our modular, flexible design for full waveform inversion software. Our solution allows clients to adjust and customize the platform to meet their specific needs and approaches to the science behind this powerful tool. This technology has great potential to give users much better models of the sub-surface, which in turn leads to better images and better drilling decisions. At this point we have several IOC’s and service companies interested in or evaluating this leading edge platform. We continue to be the only source for a fully-functional commercial FWI product in the market, and will continue to improve the product and solidify our leadership position with marquee clients.
As always, stay tuned!