CERAWeek: Smaller budgets shouldn’t sacrifice on oil industry innovation, Saudi Aramco says

Fuel Fix ^ | April 20, 2015 | Robert Grattan

[thackney]

Innovation is vital for the energy industry, even when times are tough, three industry executives told IHS Energy CERAWeek attendees Monday.

Crude oil prices have fallen by roughly 50 percent since the summer of 2014, and the resulting squeeze has strained budgets and led to thousands of layoffs across the industry.

But Muhammad Al-Saggaf, the acting head of Saudi Aramco’s shared operations and services, warned that while research might appear easy to cut, abandoning innovation during a downturn can put the future of a company at risk.

“A downcycle is actually an opportunity,” Al-Saggaf said. “It is easier to find collaborators who are eager to work with you during a downcycle. Many times it’s also cheaper.”

Steve Bolze, President and CEO of General Electric’s Power and Water division, said that research during tougher times must be more focused and aim even higher.

Bolze described how GE Power and Water — a massive industrial manufacturer with billions in revenue and tens of thousands of employees across the world — had hired five “entrepreneurs in residence” to attempt to shake things up at the large company.

“This is not the time to be timid. You’ve got to make bets,” Bolze said.

That drive toward innovation had helped the 123-year-old GE design more efficient power generators and wind turbines, Bolze said.

Nawaf Al-Sabath, the CEO of the Kuwait Foreign Petroleum Exploration Company, warned that cutting too deeply or during tough times can stunt future growth.

Al-Sabath cited the massive layoffs of the 1980s that have much of the industry short on engineers and human capital in this decade.

Companies that stick to their vision through both good times and bad are the most prosperous, he said.

“In the longer term, underinvestment reduces future production,” he said. “What we’re going through is a business cycle, it’s not oil Armageddon.”