Most of those with any exposure to the oil and gas industry must have got tired of all the drama that’s been coming from this direction in the last couple of years. The Big Drama of Big Oil (and bigger drama for small oil, of course) seems to have largely ended with prices stabilizing around $50-55 a barrel and everyone more or less accepting this level as the new normal.
This process of accepting reality was a hard one – after all, it was not so long ago that Brent traded at $140+ a barrel and the higher you rise the worse it hurts when you fall. In fact, this process has been so painful that now the whole industry seems to be obsessed with cost cuts. It’s the new mantra, really. “Let’s cut some more costs.”
This cost-cutting drive has been devastating for many – just think about the six-figure job losses across the world and the shelving of billion-dollar projects – but it has also proved to be a boon for the industry. Basically, it’s become a highway for adopting cutting-edge technology.
One industry expert, a Schlumberger engineer, told me that during the last four years, the oil industry has been making a huge compromise with research into cost reduction at every stage of the oil extraction process. It seems that when the price of crude was nicely high, Big Oil just didn’t see the point of investing in cost-cutting research. Ironically, when the results from these investments would have come in handy, the price was too low for them to be made.
Yet, investments in tech research were more or less forced on the industry by the persistence of the price rout. Apparently, few expected prices to stay so low for so long and most were completely unprepared for this change in the landscape. As they started coming to terms with the new normal, they also woke up to the fact that if there is one thing to invest in during this crisis, it’s technology – technology that brings down production costs by making seismic surveys more reliable, drilling more effective, and production higher and sustainable for longer.
Here is, for example, a news report about a mud testing gadget from British Salunda – a developer of sensor technologies, equipment, and fluid monitoring tech. The new device, according to the author, can speed up the analysis of mud properties during oil and gas well drilling. Faster means cheaper, while accuracy remains, coupled with the convenience of using a handheld device. The MudTester is promoted as the first of its kind but it won’t be the last, that’s for sure.
Here is another new piece of equipment, this time developed by French Veolia, which promises to reduce wastewater disposal from oil wells by as much as 80%. This is potentially huge: oil wells produce tens of billions of gallons of wastewater that needs to be disposed of and this disposal, in underground reservoirs is what many blame for increased seismic activity around fracking sites.
In another snapshot from the high-tech highway, Canada’s Meg Energy earlier this year announced a C$590-million investment in a process called enhanced modified steam and gas push, which should add 20,000 bpd to the output from its Christina Lake project.
None other than Exxon recently boasted that it had made a breakthrough in oil and gas deposit exploration using a supercomputer with a power equal to that of 22,400 computers with 32 processors each. According to the company, the exercise will significantly improve the reliability of exploration results – an important achievement given that one of the reasons behind the shrinking of investments in new projects was precisely the unreliability of results, leading to uncertainty about the return potential of those projects.
Then in March BP announced it had made a breakthrough in seismic imaging, allowing it to discover what it called a whole new oil field lying below its Atlantis field in the deepwater section of the Gulf of Mexico. Some 200 million barrels in new reserves were identified thanks to the sharper imagery, with the tech so promising that BP is already preparing to deploy it across operations in several countries.
At the latest Offshore Technology Conference in Houston, Baker Hughes revealed a new drilling tool aimed at enhancing efficiency in offshore oil exploration. The DeepFrac technology, the company says, can reduce costs per offshore well by 30-40% and significantly cut drilling times, from over a month to less than two weeks.
These snapshots, however, small, reveal two main trends: automation and the Internet of Things.
Automation is already making the oil and gas workforce worried: after the massive layoffs during the crisis, now a lot of workload in the field and around it is being automated, reducing the need for human participation. My Schlumberger source told me that the company already has tech that can replace people in charge of wireline operations in the field: just two operators at the field and one engineer in an office somewhere else will be enough when the tech gets rolled out. That’s besides their Rig of the Future and a variety of other automated solutions. Oilfield services are getting automated very quickly.
Meanwhile, Siemens and ABB are working on a new type of offshore platforms: entirely built on the seafloor. These self-sufficient oil and gas extraction factories as Siemens calls them will have no crew and will not be subject to weather changes, saving a lot of money in wages and maintenance, plus safety expenses.
These factories will be operated remotely from the shore and will be much more productive than existing ones. There are challenges, however, in the form of huge pressure at depths of several thousand meters, which necessitates the development of special materials able to withstand such pressure for a long period of time, as well as reliable – and abundant – power supply. The engineers are working on these, however, and Statoil, which is ABB’s partner in the subsea platform project, plans to start using such platforms in just three years.
Robots, of course, are the next stage in automation and a very hot topic right now across industries. Bloomberg recently reported on a design by National Oilwell Varco, called the Iron Roughneck, which connects segments of drill pipelines, replacing the humans that used to do this heavy, repetitive, and dangerous job. It won’t be the last of robots we see in oil and gas, that’s for sure.
In fact, automation – and technology in general – will drive the development of the oil and gas industry in the next eight years, according to a report from DNV GL, the Norway-based advisory and certification services provider. Cost efficiency and improvements in exploration and production results will spur the growing adoption of smart technologies and automation, resulting in better safety and productivity, DNV GL said. Also, automation will help Big Oil make the most of smaller oil and gas deposits, which are already drawing a lot of attention because of the lower investment needs and quicker return prospects.
Then there is the Internet of Things, a buzzword comparable to “innovation”. If we disregard the buzz, the IoT is what all industries are headed for: connectivity, process optimization, data analytics and interpretation, and, yes, cost reductions. Here’s an overview of how the IoT is faring in oil and gas by Camgemini energy adviser Murali Venkatesh. In short: the oil and gas industry is yet to leverage the potential of connected systems and devices but it is beginning to acknowledge this potential across operations – from oil and gas recovery rates to operational efficiency across the enterprise and, of course, cost control.
Automation and connectivity: the promise for a brighter oil and gas future. Or maybe not because there are threats lurking in the shadows and these threats can be potentially deadly. I’m talking about cybersecurity, of course, another very hot topic and bound to become even hotter as automation, robotics and the IoT all move further into the mainstream.