Energy watchers say Houston needs fresh thinking to stay on top

In the 1950s, Elvis was the king of rock 'n' roll and Tulsa, Okla., was called the energy capital of the world.

Then Elvis got fat, and Tulsa lost its claim to oil and gas greatness to Houston.

Now Houston may go the way of both Tulsa and Elvis unless its big energy companies can start tapping each other's research talent to put new technologies to work faster than the 15 to 20 years it historically has taken.

That cautionary outlook, offered in light of the news that United States' oil production is dropping as demand keeps going up, dominated a recent meeting of energy professionals organized by the Houston Technology Center.

CLAIMING THE TITLE

"We need to tell the world that we are who we say we are," says Robert Cossick, a center development manager on loan from Dynegy Inc.

A solution might be found in mimicking California's Silicon Valley, where tech researchers move from company to company much more frequently than they do at energy companies and take fresh thinking with them, energy consultant Scott Nyquist told the crowd at the Allen Center Doubletree. That keeps ideas fresh, he says.

"When it comes to innovation, we may need to rethink the entire process," says Matthew Simmons, president of Simmons and Co. International in Houston. "Keeping the lead is not a slam dunk. In the past, we got the job done, but progress was happenstance and unplanned."

He notes that Tulsa and Baku, the capital of Azerbaijan, previously have claimed the title of world's energy capital. Next to take the title could be a city in Brazil or along the North Sea, two hot spots for trying out the latest in oil-field equipment.

ON THE TREADMILL

Simmons says the energy industry trails other businesses, including computers, where research is richly rewarded and executives recognize the risks of experiencing some failures on the way to successful projects.

And it is difficult for an energy researcher to get a chance to show his stuff, says Simmons, whose firm invests in oil projects.

"We get asked once a month if we can get a demonstration project going," Simmons says. "But there are few test wells. It is hard to test something new in an oil field."

Much of the new oil-well technology of the last 20 years has been devoted to getting more oil out of already drilled wells, and that has created a "treadmill" that is hard to leave, he says.

There have been some promising advances in deep-sea drilling, including methods that separate gas, oil and water while they are all still under water, Simmons says .

However, "are these really breakthroughs?" he asks. "Our cupboard is starting to look really empty. We are in for some surprises if it takes another 15 to 20 years (to develop new technology)."

One success story has been in the application of medical scanners for inspecting oil pipes. The money escaped Houston -- a Pennsylvania medical technology company came up with the idea, Simmons says.

He says a deep-water disaster such as a fire -- something the industry has been fortunate to avoid in recent years -- might hasten the development of new safety equipment.

"There is no deep-water fire truck yet," Simmons says.

YOUNG AND INNOVATIVE

Nyquist, director of the Texas energy practice at McKinsey & Co., says companies become sluggish as they get older and are unable to develop new technologies because executives become devoted to a handful of core businesses.

The brokerage Charles Schwab & Co. was able to free up several executives for several years for a top-secret team that created a successful Internet business, Nyquist says.

He says companies can expect to belong to the benchmark Standard & Poor's 500 for only 15 years. Those that do well shepherd the best new ideas, products and opportunities, and "we find that companies are most innovative when they are young," he says.

"Our capital markets are quite brutal in how they spit out losers," he says.

The city's most innovative and quick-moving energy companies include Dynegy and El Paso Corp., he suggests.

Houston still can "grow and get its unfair share," he says, "of these companies that are innovative and grow value for their shareholders."

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