Analysis - Oil drilling tech spending buoyed by crude prices

SAN FRANCISCO (Reuters) - Life's looking good for techies in the oil patch.

Along with offshore upgrades to meet a U.S. regulatory crackdown, budgetary purse strings have loosened as their employers, cued by higher oil prices, ramp up efforts to tap challenging new resources.

The firms that pioneer drilling techniques and deploy the latest equipment detect a greater willingness among clients to spend, following a belt-tightening forced on them by a collapse in U.S. oil prices to about $40 (£25) a barrel in early 2009.

"With $80 a barrel, oil companies are a little less stringent with their engineers in allowing them to buy some extra technology," Andrew Gould, chief executive of the world's largest oilfield services company, Schlumberger Ltd (SLB.N), told investors on a conference call last month.

This spending is driven by more than just a desire for new toys. A relentless effort to extract heavier oil, at greater depths, in deeper water, and in more dangerous regions, means energy companies have no choice but to invest.

Schlumberger rival Halliburton Co (HAL.N) anticipates more expansion by customers, including in Iraq, and is boosting its own investments by at least a fifth next year.

"Pumping molasses is tougher than pumping water," said Jim Cashman, CEO of engineering software firm Ansys Inc (ANSS.O), referring to the deteriorating crude quality. "It puts more strain on equipment, which can cause equipment failures."

Energy is one of Ansys's three fastest-growing sectors, he said, as a surge in computing power allows for better project modelling before building begins, while the higher cost of doing business makes mistakes and delays costlier than before.

"If you're wrong, it can be millions of dollars a day," Cashman said in an interview. "The real cost, in many cases, is the calendar. It's not the cost of the hardware anymore."

Last quarter, Ansys landed major orders from Royal Dutch Shell Plc (RDSa.L), Petrobras (PETR4.SA) and Halliburton. This month, Ansys shares traded within 50 cents of a record high.

A DATA GUSHER

The benefits of more computing power extend beyond project design into the underground search for hydrocarbons, through three-dimensional seismic imaging of geologic formations.

John McDonald, Chevron Corp's (CVX.N) chief technology officer, said what once took the oil company's math modellers weeks to do can now be done in a day, offering a better look at deposits like those below the salt layer -- previously deemed unreachable, and now a huge prospect for Brazil's Petrobras.

"Every time we hear the words, 'Well that's the end of that one, isn't it?' ... we reinvent it again through technology - seeing deeper, more clearly," McDonald said in an interview at Chevron's headquarters in San Ramon, California. "You never really say it's over until you've pulled your last straw."

But all that 3D imaging comes at a cost. Chevron now generates 6 terabytes of data per day and manages a total that is more than 10 times the 160 terabytes of data collected by the U.S. Library of Congress web archiving project.

"That data has great utility if you can start making sense of it," McDonald said.

He said "real-time reservoir management" had allowed Chevron's Tahiti, a 135,000 barrel-per-day Gulf of Mexico project, to start up three months early, in May 2009.

That was nearly a year before the BP Plc (BP.L) well blow-out cast a shadow over U.S. Gulf oil production, first through a drilling moratorium and then due to tighter regulations.

While the rig drilling that well, Transocean Ltd's (RIG.N)now-sunken Deepwater Horizon, was new by the standards of offshore rigs, it was actually built a decade ago, and Ansys's Cashman said design technology has improved vastly since then.

"Some of this computing capacity wasn't really there," he said, citing the disaster as a reminder of how much design work deepwater wells require. "Now people see, well, maybe it's not as automatic just because nothing's happened in 'x' years."

DEEPER AND HOTTER

Oil and natural gas production from deeper and hotter wells, both onshore and offshore, is driving a variety of technological leaps forward. In one case, Chevron worked with Schlumberger for nearly a decade on software that can simulate trickier reservoirs, known as Intersect, which they launched last year

McDonald said wireless is also playing a bigger role, both through a Chevron spin-off with Los Alamos National Laboratory that helps monitor tougher wells, and with remote-controlled sea floor sensors that capture seismic data better than those on a boat by eliminating noise and the muffling effect of water.

Sensors are an important part of the energy strategy of U.S. conglomerate Honeywell International Inc (HON.N), which was banking on more spending on infrastructure for cleaner-burning fuel when it agreed last year to pay $400 million for Germany's RMG, a leader in natural gas measuring and control products.

"We anticipate overall growth rates in capital expenditure for oil and gas at around 11 percent, being similar to 2009 and 2010 levels, with a trend towards natural gas upstream projects and midstream infrastructure," a Honeywell spokesman said.

The wait to find out will not be long, since early December is when leading U.S. oil companies, including ConocoPhillips (COP.N), Hess Corp (HES.N) and Chevron, tend to unveil their capital spending plans for the following year.

(Reporting by Braden Reddall, editing by Gerald E. McCormick)