Indian companies need to invest more in R&D

To stay competitive, companies have to be on their toes to cope up with integration of new technologies and sustain it in the long run, says Amit Gupta, CEO, Essar Projects (Hydrocarbons), in an interview with Sumantra Das.

Do you believe dependence on manpower has hampered the advent of new technologies in hydrocarbon?
In India, manpower has gradually become a costly commodity. Indian manpower is not cheaper anymore which used to be a couple of years ago. When we talk about overseas projects and cheap labour, it is not there anymore. So manpower as such is becoming a scarce commodity. At same time, in the last two decades, we have seen that Information Technology (IT) industry is booming. There is scarcity of getting skilled manpower for workforce supervision and managerial skills. What companies have started doing is to move from manpower dominating areas to use IT and help them in those areas. For example, earlier for any discoveries, companies used geologists and it was their verdict whether it is a proven field or not. Now you still take geologists but you use complete mapping using IT support and you can create various scenarios. Optimistic or pessimistic depending on what kind of data you have, you can do a lot of simulations within that particular field so it will give an idea if I am getting 20 per cent of the mileage what is my production going to be. If water content is high what is my output going to be. You can create such scenarios which can give you a better idea about exploration fields, if you talk about exploration market.

How far is advanced technology capable of solving various day-today issues? Can technology really the best substitute for skilled manpower?
Not in the true sense. There is a factor which is coming because of new technologies but reliability factor gets increased. You get more and more scenarios to be created. From bankability point of view, the financial institutions cater much more level of comfort in your investments. But at the same time, if you go into construction filed, manpower shortage is there. There you cannot replicate and put IT. Still we are now looking at ways and means to minimise the manpower requirement. For example, if you take from construction perspective a building that is most time consuming and manpower oriented activity. But that scenario is also changing with active involvement of technology. In hydrocarbon sector too you will find extensive use of technology. So, manpower is getting reduced on that account. Cost may be going high but today the lack of manpower is taking nowhere. You either have to pay more to manpower to get work done or remove manpower and get new technologies.

Is Indian hydrocarbon sector coping with this new integration?
In recent times, technologies are converging in a rapid rate. Indian companies are coping up with integrations of new technologies in their businesses to get at par with leading companies in this field. Having established a global footprint, many Indian oil & gas companies have imbibed the latest IT tools in their business models and are increasingly relying on their use to reap higher benefits. The implementation of IT in any company operation is a gradual process and takes up commensurate efforts and due diligence from the users to absorb it. Some tools are tailor-made for ease of understanding and handling of a complex business model and to provide vital support to its operations. To stay competitive, companies have to be on their toes to cope up with integration of new technologies and sustain it in the long run. A well planned and managed investment in IT and management ultimately increases profitability.

In which oil & gas segment do you find extensive use of technology?
It is prevailing everywhere. If you look at upstream exploration, there are places where we have not done exploration because we did not have the technology. All that is already explored is when you had technology available. At the same time, if you want to go into areas which have not been explored, you need advanced technology. Similarly, for midstream segment like in refineries too, where critical technologies are in place. In downstream, you are looking at ways to reduce cost so that projects become viable. In my opinion, to reduce the cost you have to come back to technology.

What is the cost rationale of using these technologies?
Every segment is relied completely on new technologies that are emerging because everyday you are finding ways to reduce the cost. So if it is critical equipment manufacturer, he will work on reducing cost by putting new metallurgy and expertise in place. If it is construction contractor, he will look at automation and other things to reduce his cost. If it is a supplier, he will also look at ways and means to reduce his cost by putting in technologies and new materials. So, it is applicable in the entire spectrum of value chain.

How will this new business model give an edge to the oil & gas companies?
Business with the latest IT tools have witnessed benefits of increased economic recovery from producing fields, whilst reducing cost and boosting output by improving staff efficiency. In addition to generating technical benefits, the IT tools facilitate and promote integration between disciplines. With their use, hydrocarbon asset development plans can be made technically and economically more robust and bankable, since a multitude of development options can be evaluated in a shorter time span. Furthermore, a variety of subsurface scenarios can be simulated well in advance of executing any activity. Hence, the potential risks (drilling risk, production risks, etc) can be comprehensively assessed, leading to improved planning and operations. This approach often results in optimal, fit for purpose facilities at lower costs. It also improves contingency planning, thereby increasing safety and reducing the environmental impact of operations.

Are these technologies cost-effective?
Globally, each and every company is putting a part of its share in research and development to take their product much more cost-effective, efficient, and energy saving. So, all this research and development is a part of the new technologies that are emerging day by day. With these technology changes, you are increasing your efficiency and reducing your cost and that is what companies are doing by investing in research and development.

Most of the latest technology in this segment are either from the US or from Europe, why not India?
If you look at the hydrocarbon sector, whether it is a refinery or the other, the heart of issue lies in licensing. Unfortunately in India you do not have too many of licences and all licence owners are European based. So why do we say India is lagging behind in that? It is a proprietary item for them. We can replicate it. But ultimately, proprietary item remains with European companies. Our advantage as Indian companies comes when we bring a commodity which is much cheaper as compared to the European market, but of the same standard and that is where Indian and Chinese companies have been scoring. World’s deepest offshore pipeline pipes are being supplied from India as it is cheaper than anywhere else. Similarly, we are doing a steel plant in Minnesota, US. We are fabricating structures in Hazira where we have a steel plant and we are shipping to the US and still it makes economic. But, yes we should start developing our own data. For example, in steel, today we still rely upon the European market to develop higher grade of steel. We do not have that expertise because they have the data. And because they are two steps ahead of us they have invested in R&D and come with a particular metallurgy which is well suited and to pass on the technology, they charge you a licence fee.

Where do you see India’s technological advancement 10 years down the line?
India has to move on to a much higher level of technology to remain in race in the competitive world. Today, we might have caught up with technologies the European and American companies are doing but there the amount of money they spend on R&D is much greater. So they will be ahead of us if we do not try to come at par with them. Indian companies need to invest more in R&D.

What are the major issues of concern for India’s technological advancement?
It is a complete 360 degree reversal you want to carry about. It stars from government policies down to private investors and development stages. If the government policies are not lucrative, why would a private investor invest his money? So, it is a vicious circle and you cannot find answers.