Interview: Technology, AI transforming all parts of Shell: CTO

Shell is using technology and artificial intelligence in every part of the business from relationship with consumers to offshore operations, with sub-surface imaging still central to its upstream R&D activity, its chief technology officer, Yuri Sebregts, said in an interview.

Speaking earlier this month in Florence, Italy, Sebregts outlined how part of Shell's $1 billion annual R&D budget is targeted at the use of technology and particularly mobile phones to reach customers both in established markets and emerging economies, as the company moves further into the power sector and newer forms of energy.

In developed markets, Shell is deploying AI to tailor rewards for consumers of fuel or household energy, echoing trends in retail generally.

However, in emerging markets, and particularly remote locations that lack electricity, it is looking to develop phone-based payments for energy generated and stored in local "micro-grids".

Sebregts highlighted a commitment by Shell CEO Ben van Beurden to bring electricity to an additional 100 million people by 2030, including consumers who may have mobile phones but no bank account.

"Access to energy is a very important challenge and opportunity for the world. We are now thinking about technology solutions like micro-grids coupled with battery solutions and generator back-up," he said.

"That is often a micro-grid rather than a full-grid solution and it is often based on credits that you might trade via mobile phone...rather than a bank account that people will probably not have."

Sebregts estimated Shell's digitalization drive enabled more than $1 billion in cost reductions, production increases and improved margins for the company just in 2018.

Shell's offshore business remains an important focus of its R&D activity, he said, even as the company has set a goal of halving the emissions from its products by 2050.

In its upstream operations Shell has a particular focus on enhancing 'predictive maintenance' techniques, in which sensors are used to create a virtual or digital twin for critical equipment such as turbines, making it easier to anticipate when parts are wearing out and need replacing.

AI is increasingly being used to monitor and detect weaknesses in entire production systems rather than only the most expensive equipment, Sebregts said, describing this area as "still evolving fast".

"Predictive maintenance as such is not new [but] we can now augment that with machine-learning models that look at the data cloud around the history of a particular unit and then [detect] in that cloud which combinations of data are outside normal operating conditions."

DEEPWATER FOCUS

Consultancy Wood Mackenzie has estimated that digitalization could, in time, yield $150 billion in operating cost savings annually across the energy and natural resources sector.

Despite Shell venturing into US shale in recent years, sub-sea imaging is set to remain a core focus as an enabler of exploration and resource recovery. It is an area where Shell can more easily hold on to intellectual property than with general offshore technology, Sebregts said.

Shell's $53 billion acquisition of BG in 2016 heightened its focus on sub-salt imaging, reflecting the nature of BG's Brazilian sub-salt fields, and an obligation to re-invest 1% of turnover in R&D in the South American country, he said.

"In the deepwater you want to have fully developed reservoir modeling, as accurate as you possibly can, before you physically go in, given the expense. There is a lot of technology that goes into understanding the resource base in much more detail because every well that you drill is a major project in its own right from a financial point of view," he said.

"The geology program to understand the sub-salt South Atlantic basin, which is quite different types of carbonates than you find anywhere else in the world, has suddenly become a very important area of focus," he said.

In terms of protecting intellectual property, "Sub-surface de-risking, managing the uncertainty in the sub-surface, is an area that's more attractive for differentiating yourself," Sebregts said.

START-UP INVESTMENTS

Sebregts also highlighted Shell's program of buying stakes in start-up companies aimed at developing specific technologies. These purchases by the Shell Ventures unit number in the "high" double-digits and span everything from sub-surface to renewables — Sonnen, a German provider of solar power solutions to households, exemplifies the latter.

While large companies can be relied on for much innovation, Shell Ventures aims to encourage ideas that might be missed, Sebregts said.

"If you get the probability of success estimated right and the likely future value of the company, you can take a stake, keep it for a number of years, help the company deploy their technology then use it like other clients. And by then the company will have grown in value so you recoup your original investment," he said. "If on a portfolio basis you get it right often enough, you can stimulate technology development at no cost."

Overall, however, the secret to R&D success for Shell is to be selective, he said.

"One of the things that is very important is you choose what you want to do in-house because it has proprietary value —- that is a limited number of things because although we develop close to $1 billion in R&D, that is only a small fraction of the innovation going on in the entire industry," he said.

"For many solutions you're better off collaborating with others...or simply being an informed buyer that looks at what innovations are available in the supply chain. But then if you were to only do that, there's nothing differentiating your technology."