US producers seek to scale up tech advances

Oil and gas producers are making rapid improvements in deploying digital technology to enhance operations. But they face the challenge of keeping pace with and adapting to digital advances while scaling up digitisation to maximize returns.

Investor pressure to keep costs in check and improve margins is unrelenting. In a volatile oil market, these demands are more compelling, pushing the sector to implement the use of digital technology and demonstrate that it is streamlining processes and will show a return on investment. "The speed at which we have to figure this out is unprecedented," Marathon Oil senior vice-president for technology and innovation Bruce McCullough told an FT Digital Energy Summit in Houston this month. "This human-computer interaction did not exist even five years ago."

The industry has generally been slower than sectors such as banking, healthcare and automotives in incorporating advances such as data science, computer algorithms, modeling and automation. "We have been risk averse and as a result we have been slow," Schlumberger chief information officer Eric Abecassis says.

The burden on US unconventional producers to rapidly adapt to digitization is particularly high. Sharp well decline rates mean they need to keep drilling shale wells to sustain output, and to figure out how to manage "these hundreds and hundreds of well efficiently over the years", McCullough says. Some producers are seeing digitisation cut costs by 10-20pc in the early days.

"Everyone is doing something, but just nominally doing it does not mean you are realising the full value," consultancy McKinsey partner Nikhil Patel says. "How do you tie them all together [in a way] that actually transforms the work flow?"

Increasing the use of data available is the first barrier to break through. Companies already have an enormous trove of data, but its use in finding solutions to drilling challenges or pre-empting maintenance or breakdowns is minimal. Google vice-president for oil and gas Darryl Willis says only about 5pc on average of total data held is used by oil companies, and many use only 1-2pc. And using the cloud to transform operations is still in the early stages, he says.

Big data

Part of the problem lies in sharing data, Halliburton chief data scientist Satyam Priyadarshy says. Companies need to break down silos within the information, as well as silos between departments within a company. "Data has just not been looked at that way… that learnings from data can be applied to the real world," Priyadarshy says. Another challenge is getting oil sector engineers and geologists to buy in. It is never an easy task to tell an engineer that a machine could make a decision more quickly, McCullough says. But management hopes to impress upon staff that leaving some decisions to machines should free them up to innovate more and find other improvements.

Producers need to transition from command and control to more self-organized groups to make the learning process quicker, Chevron general manager for technology Sebastian Gass says. In the unconventional space, the major got serious about data around five years ago, and progress since then has been phenomenal, he says. "We have a precise view of where we need to advance, and that is around scaling."

Marathon Oil says it has been able to increase output in some wells by 3,000 b/d of oil equivalent (boe/d). "We can show a return on investment," McCullough says. BP says digital models are reducing offshore visits, saving it $450,000 in three months at its Trinidad operations. Its US Gulf of Mexico teams are executing or operating seven sub-sea tie-backs with an average 10-month improvement in cycle time, upstream chief executive Bernard Looney says. "Digital is going to be as important a capability in our industry as knowing how to drill a well," he says.