The downturn in oil prices has made it more challenging for producers of unconventional resources, as well as service companies who assist such producers, to enable oil production from their reserves. This is because producers face greater costs when producing from unconventional resources, thereby making it more difficult to compete with traditional producers.
Perhaps not surprisingly, this is driving innovation, as the industry looks to develop new technologies to reduce production costs and remain competitive and relevant. In parallel, innovators are becoming ever more proprietary over their developed technology and more reluctant to freely share, typically choosing to file for patent protection to crystallize intellectual property rights.
There is already an uptick in patent litigation between service companies, and it is only a matter of time until similar behaviour will be adopted by the producers.
Unconventional oil resources include oil sands and shale oil.
Historically, there has been a reluctance to develop these resources, owing to the costs of harvesting this oil. Unlike conventional fields, such as those in the Gulf states, simply sticking a straw in the ground will not miraculously lift oil to the surface.
With tight oil resources, oil is trapped within rock and release of such oil is typically stimulated using hydraulic fracturing technology.
With oil sands resources, the resident bitumen is highly viscous and co-mingled with sand. For deeper oil sands reserves, there are challenges to transporting bitumen to the surface, and this has resulted in the development of steam-based technologies (in particular, steam-assisted gravity drainage or “SAGD”), designed to heat the bitumen and lower its viscosity so as to render it more flowable. For shallower oil sands reserves that can be surface-mined, technology solutions are directed towards separating the sands from the oil, while, in parallel, grappling with the challenges of processing viscous bitumen. To further complicate matters, whether unearthed from shallow or deep reserves, produced bitumen, as opposed to lighter crude derived from conventional resources, requires upgrading prior to refining, thereby creating a further cost component.
With the spike in oil prices a few years ago, unconventional resources became more economical to produce, resulting in significant investment in developing these resources, including technologies to improve production efficiency. With the collapse in oil prices, oil companies, unwilling to simply abandon capital investments, buoyed by the recent technology leaps, and optimistic of continued innovation, continue to develop technologies to reduce costs for oil production from unconventional resources. In complementary fashion, faced with a more challenging environment, there is greater willingness within the unconventional oil industry to adopt new technologies, with a view to finding a cure to its competitive malaise.
With respect to oil sands resources, SAGD enhancements and alternatives are being pursued. Solvents are being co-injected to aid SAGD and are also being considered for replacing steam as a bitumen- mobilizing agent. Residual bitumen remaining within the reservoir at the end of a SAGD project’s operating life is not being neglected, and strategies are being developed to recover this leftover bitumen. Concerning tight oil resources, downhole tools are being developed to enable fracking over an increased number of stages, while overcoming the challenges of operating at significant depths.
The overwhelming tendency is to maintain a proprietary position over these technologies, and this often manifests in patent protection filings. Service companies, such as those developing completion technologies, are certainly not shy about filing for patent protection and asserting consequential patent rights. To date, oil sands producers have been relatively more collaborative than their service company partners, sometimes forming consortiums or alliances to share technology development. Having said that, producer patent filings are increasing, and there are signs the collaborative environment is splintering. This will likely only accelerate if low oil prices become the new norm.
Mark Sajewycz is a Partner, Lawyer, Patent Agent, and Trademark Agent,at Norton Rose Fulbright.