Baker Hughes: Fueling innovation with diversity and knowledge
As one of the world’s leading oilfield services companies, Baker Hughes is no stranger to the often unpredictable world of exploration and production in the oil and gas industry. While the recent announcement of its merger with GE has made media headlines, the company’s focus on operational excellence remains steadfast.
Open innovation is, and always has been, a core part of the company’s strategy, with multiple cross-industry collaborations aimed at creating value for stakeholders – be they individuals, companies or communities. Rustom Mody, VP - Technical Excellence, Baker Hughes, has played a key role in many successful collaborations.
Rustom maintains that, in the upstream oil and gas industry, companies need innovation to pull them out of negative market situations.
“It is innovation that fuels the R&D that makes it possible for our industry to enable safe, affordable energy throughout the world, even in the toughest of times,” says Rustom.
“By definition, the industry is very risk averse, and from my perspective, this downturn is actually a blessing in disguise. In good times, companies hesitate to try new things because they’re flourishing with the status quo. But in a downturn, they’re challenged and they need to consider new ways of gaining a competitive edge,” he explains.
Baker Hughes has nine major product lines, each product line with its own research and development (R&D) group. There is also an enterprise technology group, which is responsible for developing foundational technologies that can be used across multiple product lines.
At Baker Hughes, this approach is a multi-generation technology plan that enables the company to build highly customized products for customers. Rustom defined this enterprise-level approach about 16 years ago, in a bid to build aggressive technology roadmaps within each product line. That way, he could ensure each technology pipeline remained rich with ideas.
“We do a lot of research in basic and advanced materials and Nanotechnology. About eight years ago, high-pressure management solutions were a major market demand. We identified the technology gap and realized that we had to figure out how to increase the performance of our products to higher temperatures and pressures,” Rustom recalls.
To develop testing capability, the company designed and built extensive research labs to test equipment at 40,000 psi and 700o F. At the time, no other company had this type of facility.
Several processes are in place to facilitate R&D from idea through to route-to-market:
- Product Development Management (PDM) – a stage-gate process that validates a new product’s functional and technical requirements at each stage of the R&D process.
- Scrum – an agile process within research through which people are encouraged to fail fast.
- Wildcat Challenges – a process that encourages new ideas for problem-solving by opening up issues to the wider enterprise for solutions.
“It’s vital that a company has the means to test new products against market conditions as well as the ability to anticipate market needs. R&D at Baker Hughes includes developing a robust business case based on market conditions, and with input from customers,” Rustom says.
SPECTRE completely disintegrating frac plugs, image courtesy of Rustom Mody
Technology summary:
Baker Hughes’ research into advanced materials and Nanotechnology led to innovation that has significantly improved hydraulic fracturing operations. Baker Hughes’ INTallic disappearing frac balls and SPECTRE completely disintegrating frac plugs are made from materials based on the application of a high-strength Nanocomposite technology known as controlled electrolytic metallic (CEM) material.
Developed and patented by Baker Hughes, CEM material exhibits continuous, cellular metallic grains that are dispersed in a Nanomatrix. The Nanomatrix reinforces high strength but also has a unique chemical disintegration property that conventional materials do not provide.
At each stage in the PDM process, there are multiple gates at which the business case is re-evaluated before the product is released into the next stage of development. Because markets change with time, stage ‘gatekeepers’ are responsible for making sure products meet market requirements.
New product introduction (NPI) revenue is measured within the first year to get a feel of how soon the product or technology gains traction in the marketplace. New product revenue is also measured within a five-year timeframe to inform the robust business case.
“The problem is that business conditions are not constant. Technology evolves fast, so we need to remain agile and robust in how we accommodate those changes. We need to be very aggressive in time to market,” Rustom says.
Establishing the Pumps and Pipes idea and technology exchange program
Back to Baker Hughes’ involvement in Nanotechnology, one of the achievements Rustom is particularly proud of relates to his involvement from the earliest days in the Pumps and Pipes technology exchange program. For the first time, this program brought organizations in the energy, medicine and space industries together to explore common traits and share solutions that could meet needs of similar nature.
“We realized that Houston has been a center of excellence for energy, medicine and space, but we never talked to each other. The whole object of Pumps and Pipes was to get these three disciplines together in one room and exchange ideas,” he explains.
“It was based on the premise that, if I know what’s in your technology toolbox, I will know when I need it. That’s how we formed the first Nanotechnology group about seven years ago, because of my exposure to Nanomedicine.”
One of Rustom’s younger bio-medical engineers once asked him about the commonalities between energy and medicine, quipping: “What’s common between medicine and energy? To which Rustom replied: “It’s all about flow assurance.”
In this conversation, he alluded to the fact that companies in medicine spend huge sums of money trying to make sure blood flows properly through a person’s veins and arteries, while companies in energy spend significant sums ensuring that produced oil flows through pipelines with minimum restrictions. Chemical treatment of pipelines, inspection procedures, coatings – there are multiple practices of a common nature.
Petroleum engineers and medical researchers collaborated in the creation of a heartbeat simulation flow loop. Complex control algorithms used in the oil industry to simulate the strain and deformation of rock under stress led to the replication of the movement of blood through heart valves. Source: The Houston Methodist DeBakey Heart & Vascular Center.
Rustom also makes mention of space – enter NASA. Rustom was there seven years ago interviewing NASA engineers when the decision was made to downsize the space shuttle program.
“My answer was that it’s all about exploration. We’re looking for people with that kind of mindset, people who are risk takers. The rest can be taught. That’s the kind of individual we’re looking for, and that’s what we pride ourselves on. We’re always looking for the next big challenge and then solving the problem.”
To reinforce Rustom’s point, NASA places major emphasis on safety, automation, sensor technology, computational modeling and reliability – all of which are addressed on a daily basis by Baker Hughes. Collaboration has become a crucial ingredient for innovation. Internal development alone is no longer an option to build competitive advantage.
Heartbeat simulation flow loop. Source - The Houston Methodist DeBakey Heart & Vascular Center (Image provided by Baker Hughes).
Technology summary: Petroleum engineers and medical researchers collaborated in the creation of a heartbeat simulation flow loop. Complex control algorithms used in the oil industry to simulate the strain and deformation of rock under stress led to the replication of the movement of blood through heart valves. Source: The Houston Methodist DeBakey Heart & Vascular Center.
“Collaboration can be cross-industry or with vendors, research institutes, universities, third-parties, you name it. I might be switching channels a bit, but the reason I’m such a big proponent of collaboration is because it brings a diversity of knowledge. Diversity is the fuel that drives innovation in an organization,” he says.
Key focus areas for the next 12 months to drive open innovation
For many companies in the oil and gas industry, commodity price strongly influences which areas they need to focus on. Rustom notes that when the cost of oil was $110, customers had concerns about the cost of doing business. And now, with the cost at $50 a barrel, the problem is still present.
“All of our technology development is focused on ongoing industry challenges; i.e., how to reduce the cost of doing business for our clients."
In other words:
- Efficient wells – reduce finding and development costs.
- Optimized production – how do we optimize? Reduce risk?
- Ultimate recovery and booked reserves – how do we increase, to add value to the bottom line?
“In unconventional reservoirs, you’re lucky to get eight or nine percent yield from a well, and the production decays very rapidly within the first 18 months,” he explains. “On the other hand, the risk of failure in unconventional plays is limited compared to deepwater projects, so companies are amenable to trying new things and it’s a perfect place for us to try new technologies.”
With that in mind, the priority for Baker Hughes is to deliver technology to clients that can extend the life of a well (in terms of initial production). Even if it’s an increase of a few percentage points, that can translate to millions of barrels.
“It’s all about creating value for our clients by improving efficiency and reducing the risk of using the technology. You cannot have any one of those factors missing,” Rustom adds.
I hope you found the article insightful. Rustom is one of several specialists that will present a featured case study at the Texas Open Innovation Conference (March 28-29 - Houston, TX).
Specialists from NASA, Shell, Transocean, Lone Star College, CenterPoint Energy and more will come together to discuss how to source good ideas, take them through to the proof of concept stage and successfully launch them into the market.
If you're involved in cross-industry partnerships, or responsible for driving collaboration with other organizations, be sure to check out the Conference program.