Strategic Upstream R&D Collaboration
Authors: Dingle H.B. 
Published: March 2010

Introduction
The Canadian upstream oil and gas industry-like any other non-renewable resource industry-is ultimately a ‘sunset’ industry.

Renewal Through R&D
Our traditional mechanism for renewal (Fig, 1) has been to explore for and to develop new reserves, Estimated undiscovered conventional liquid in the Western Canada Basin is one-eighth the unrecoverable volume remaining in discovered pools. Estimated undiscovered conventional liquids in the frontiers may be large but has prohibitive development costs which have kept existing discoveries from production. The undiscovered natural gas resources in both the Western Canada Basin and the frontiers face supply cost vs price hurdles at least through the balance of the decade. Our known heavy oil and oil sands bitumen in place are a world-class hydrocarbon resource with prohibitive supply cost hurdles for the foreseeable future.
This is a challenging, but not an impossible scenario. Canada has the hydrocarbon resources-discovered and potential- to sustain a domestic production industry well into the 21st Century. We also have the economic and scientific will to fulfill that potential.
R&D is crucial for renewal for several reasons. First, it will enable us to control and reduce ever-increasing unit operating costs in our existing operations. Secondly, it will enable us to maintain our aging infrastructure-even in the face of ever more stringent environmental and safety requirements. R&D is also necessary to extend the life of our existing pools by facilitating the enhancement existing recovery processes. It is a critical tool, moreover, in renewing hydrocarbon reserves through the development of new recovery processes, and through the development of technologies to enable the development of the inherently high supply cost frontier and oil sands resources. Finally, R&D is necessary to add value to our commodity products in order to retain our existing markers in the face of international competition.

Changing the R&D Paradigm
Historically, with real growth in energy prices and with reserves additions exceeding production, upstream research and technology development has been fragmented and duplicated. It has been aimed at obtaining competitive advantage with the local industry, in an effort to capture the largest possible piece of a prize which has failed to materialize. The industry as a whole has spent a great deal of money on R&D - AOSTRA estimates that over a billion dollars has been spent on oil sands R&D alone. Thus, the level of R&D effort is not the problem so much as the way in which it has been conducted.
Collaborative research and technology development must now be the major mechanism for renewal of our domestic upstream industry. Today our principal competition is global-low supply cost crude from overseas. Our domestic industry is not competitive in the world marketplace, as is evident from our returns on investment through the 1980s. Canadian companies must soon agree to selectively replace research competition with strategic research collaboration and then act on that agreement in order to initiate and sustain the necessary level and pace of R&D, in order to increase the number and quality of those technological innovations which will maintain and renew our industry.