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Oil innovators see opportunity amid record low prices

As oil prices have dropped, energy companies have been looking for ways to save money. For innovators, this cost-cutting can actually present an opportunity. Special correspondent Leigh Paterson of Inside Energy reports from Wyoming.

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  • GWEN IFILL:

    Finally tonight, a different look at the oil industry.

    As we see record lows in crude prices, small oil companies are looking for big opportunities.

    Leigh Paterson of Inside Energy, a public media collaboration funded by the Corporation for Public Broadcasting, focusing on America's energy issues, has the story.

  • LEIGH PATERSON:

    During the fracking-induced drilling frenzy of the last few years, U.S. oil production has skyrocketed. And a lot of natural gas comes up as a byproduct of drilling for oil. That gas could be used to produce energy

  • HANS MUELLER, CTO, EcoVapor Recovery Systems:

    What we're trying to do here is capture any of the gas.

  • LEIGH PATERSON:

    But, sometimes, producers just get rid of it.

  • HANS MUELLER:

    It would get burned in those four combustors right over there. We would get to breathe it.

  • LEIGH PATERSON:

    Instead, Hans Mueller wants to use that gas. His company, EcoVapor Recovery Systems, works with oil producers to separate out the natural gas and sell it.

  • HANS MUELLER:

    Wherever there is a flare that is burning gas and that gas isn't being used for anything else, to me, it just seemed like an opportunity, and essentially using every part of the buffalo.

  • LEIGH PATERSON:

    Mueller says the value of the captured gas, once sold, can be three times greater than the cost of an EcoVapor unit. That's a strong sales pitch.

    With oil prices so low, oil companies are looking for ways to cut costs quickly with little investment up front. And so some energy start-ups are pitching their products as ways to save money during the downturn.

  • MAN:

    LiquiGlide is a truly revolutionary product.

  • LEIGH PATERSON:

    At a recent energy conference, energy start-ups were hawking their wares. They pitched everything, from a product that makes anything less sticky, including crude oil, to wearable tech, and thermoelectric power generation.

  • MAN:

    As a result, you save fuel.

  • LEIGH PATERSON:

    At the IHS CERAWeek Conference, Alphabet Energy CEO Matt Scullin sees opportunities in the downturn.

  • MATT SCULLIN, CEO, Alphabet Energy:

    Oil and gas companies are now investing in efficiency, and we fit squarely into that bucket.

  • JOHN HESS, CEO, Hess Corporation:

    What's good for shale is good for the U.S. economy.

  • LEIGH PATERSON:

    John Hess, CEO of the oil giant Hess Corporation, agreed that there is a greater role for small innovators to play.

  • JOHN HESS:

    I think the low price of oil is creating a great opportunity for young people to build careers as entrepreneurs.

  • LEIGH PATERSON:

    Representatives from big oil companies are also looking to crowd-source ideas for new environmental and economic projects.

    Bill Maloney, an executive vice president at Statoil, says that means asking for pitches online from think tanks, start-ups and regular people.

  • WILLIAM MALONEY, Executive Vice President, Statoil:

    And we hope the greater folks of our planet can come up with solutions that we can utilize in our operations.

  • LEIGH PATERSON:

    One solution already in place is downhole technology, a set of instruments which can help producers collect detailed data on their wells.

  • MAN:

    This is the inside of one our downhole gas sensors.

  • LEIGH PATERSON:

    WellDog is a Wyoming company that makes these sort of underground sensors. And CEO John Pope says, since the downturn, its sales have tripled, largely because WellDog can help oil companies get more out of the ground.

  • JOHN POPE, CEO, WellDog:

    In boom times, optimizing can lead to increased profits. In challenging times, optimizing can lead to the difference between profits and no profits.

  • LEIGH PATERSON:

    Adoption of these technologies has helped oil companies bring spending down, way down. IHS, a consulting company, predicts well costs will decrease more than 30 percent by the end of this year.

    But according to IHS analyst Chris Robart, oil companies have managed much of that by squeezing savings out of their service companies, demanding they lower their prices on things like trucking, drilling, and equipment.

  • CHRIS ROBART, IHS Energy:

    But that's kind of a one-time event, one-time occurrence. They can only really get that much pricing out of the market and out of their wells in 2015, this year. After that, then they will have to get back focused on things like operational efficiency, optimizing their wells, just getting more production out of their wells at the same costs.

  • LEIGH PATERSON:

    And many of those operational efficiencies on the table today could make oil and gas better neighbors. Innovations that would cut emissions, save on fuel, and reduce the use of resources would also minimize the impact on nearby communities.

    For example, G.E. and Statoil's project to reduce the amount sand used in hydraulic fracturing would also reduce the number of trucks bringing sand to drill sites. And that means less traffic in communities near oil and gas development.

    But industry analyst Carl Larry is deeply skeptical that big oil will get smarter, because he says it doesn't have to.

  • CARL LARRY, Industry Analyst:

    Fossil fuels, it is a simple project. We drill, we get oil, we refine it, that's all we need to do is make money on that. Coming up with newfangled ways, it's expensive. And right now, there's not a lot of margin for error to take a chance and put in a new technology.

  • LEIGH PATERSON:

    Making substantial changes in the way that we drill, Larry says, requires vision.

  • CARL LARRY:

    We need a Steve Jobs in oil and gas. We need somebody who is going to go out there and take a chance. Big companies aren't. They're just going to keep their budgets going doing what they do right now and making money. But the ones who take the chances are the small businesses, the people who have the guts to take it out and try something new.

  • LEIGH PATERSON:

    And as the price of oil hits new lows, the big ideas for oil's future may be coming from the little guys.

    For the PBS NewsHour, I'm Leigh Paterson in Wyoming.

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