How Technology is Revolutionising the Oil and Gas Industry

Friday, September 12th, 2014
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When a compressor at Chevron’s massive Sanha gas field off the coast of Southern Africa showed subtle signs of overloading, the first person to notice was not one of the crew on site but rather a drilling expert sitting in front of an array of screens and monitors high up in a Houston office tower around 6,000 kilometres away.

 The operator who noticed the issue was situated in the comfort of the company’s Machinery Support Centre, from where he and his colleagues monitor thousands of pieces of equipment across six continents.

While the crew on site would most likely have discovered the problem, acting on the operator’s tip guaranteed the company was able to save several million dollars in downtime and lost production.

This is one example of a phenomenon that is hardly new but which is becoming increasingly common: the digitisation of oil and gas fields – essentially an umbrella term used to refer to computerised networks and processes which help create a sophisticated monitoring and controlling system for oil wells.

Between 2005 and 2010, according to a Peak Oil news report last year, the number of patents filed in classes relating to the oil and gas industry in the United States doubled from just under 700 to almost 1,400. Meanwhile, in the United Kingdom, a CIL UK spot poll of 17 senior oil industry execs had almost 80 per cent of them saying digital advancements areas as diverse as land seismic imaging and e-Learning had ‘revolutionised’ the industry.

Indeed, medium and high impact opportunities for use of digital technology exist across almost all aspects of operations, from modelling to drilling to maintenance and capital productivity.

Take maintenance, for example, where risks of process disruptions and catastrophic failures can be minimised and equipment reliability and production efficiency maximised through the radio-frequency-identification tapping of equipment, along with use of other sensors. This allows for the tracking of activity and enables applications that can monitor the condition of equipment and support predictive maintenance and automated operations shutdowns.

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The business impacts of this are significant. A recent benchmarking analysis by McKinsey & Company of offshore platforms on the North Sea showed a 40 per cent ‘performance gap’ between ‘best-in-class players’ (many of whom have highly digitised operations) and other companies.

This is important as even a 10 percentage point efficiency improvement can yield bottom line benefits of between $US220 million and $US260 million on a single brownfield asset, the research firm suggests.

Several factors are driving the push in these areas. Developments in increasingly hostile areas such as deep-water or arctic exploration require reliable automated or semi-automated operations.

The lack of tolerance for safety or environmental incidents means costs associated with operational failure can be huge – witness the speculation that BP could be fined as much as $US18 billion after being found to be primarily responsible for the Deepwater Horizon explosion, on top of the $28 billion odd the company has already forked out on damage and clean-up costs.

Finally, the anticipated retirement of thousands of petrochemical workers will leave a gaping hole in labour resources, forcing greater reliance on technology as opposed to labour intensive operations.

Still, things can go wrong, McKinsey principals and associate principals Stefano Martinotti, Jim Nolten, and Jens Arne Steinsbø suggest in one of the research firm’s insight articles.

Again using maintenance as an example, having only isolated data availability as opposed to broader network-based availability or having equipment level profiles only of at-risk components as opposed to comprehensive coverage at the asset level can lead to data “leakage.” More broadly, some companies simply are not good at aggregating data and conducting meaningful analysis or converting such analysis into action.

In order to improve chances of success, McKinsey suggests companies build multi-disciplinary teams, differentiate between greenfield developments where digitisation can be built inbuilt into project design from brownfield ones where it must be largely overlaid, and use small-scale pilot implementations to begin with before upscaling once the concept is proved.

While challenging, the McKinsey leaders above say the benefits of digitised operations are worthwhile.

“There is a clear competitive imperative for increasing automation in oil and gas production,” Martinotti, Nolten, and Steinsbø wrote. “Companies that successfully implement big data and analytics, sensors, and other new technologies will be well positioned to meet their industry’s challenges.”

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