Digital Oil Part 2

Previously I delved into digital communication standards now commonly used within the oil industry and the importance of sharing real-time operational data between data centres and contractors. There is also a strong move towards a completely digital virtual oil well operated and controlled by a minimum of workers, but why are companies spending millions to develop and integrate these virtual systems?

Oil prices consistently rise year on year, even when the stock markets crash, oil is always one of the first commodities to recover its costs. However the industry has always faced a shortage of skilled workers for the many areas of hydrocarbon production. It has been estimated that over 100 million barrels oil will be needed everyday by 2015 and with this amount of supply required many more engineers, geologists and rig workers will be needed. In many African countries expats are used due a lack of skilled local workers, therefore the idea of a digital oil field turns from the realms of fantasy, to now becoming reality. So what is meant by the term digital oil field (DOF)?

Software is now available to capture the daily operations and behaviours of an oil rig and can be used to manage the whole production lifecycle.  Such software should allow for a full visualisation of the reservoir and the wellbore. This enables managers and engineers to see real-time monitoring and control data offsite, real-time drilling data which should include down-hole pressures, drill directions and rotational speeds. Furthermore Real-time surveillance will trigger alarms when production integrity has been breached. This allows companies to fully audit operations and procedures. Booz&Co reported that one company had introduced selected oil field technologies and has saved a massive US$20 million annually by automating data storage facilities, data integration across multiple systems and wellbore visualisation by using fewer but more skilled staff, located at a central control centre.

If such savings can be made why are the technologies not being taken up by every petroleum operator? Many smaller organisations are simply unable to absorb the initial implementation costs or have the forethought to properly use the available software. Often when a new system is required it causes a ripple effect over the current system while it is being integrated into working practices. From my experience managers often struggle with new technologies, both with their effectiveness and implementation. Furthermore workers at the ‘coalface’ can be resistant to change asking questions like ‘I have done it this way for years why should I change now?’ and this can be a major drawback to the implementation of a virtual digital system. The whole point for a digital oil field is to help tackle some of the following areas: Supporting staff development allowing for functional specialisation of assets and operations. Supplementing an ageing workforce where oil workers with years of experience are able to move into a less physical role as they age but still utilises their immense knowledge. Modern oil fields have a large amount of data to process with sensors being placed on almost every piece of equipment and a digital oil field brings with it the advantages of visualisation software. Also the risks and uncertainties are reduced if not eradicated due to the use of workflows and risk prediction algorithms. The problems of a lack of skilled workers are also eased as computer integration usually allows one person to do the work of many. Finally information and knowledge is easily exchanged with organisation that have different specialism, tasks and agendas which may be very different from the main oil production skill set of the operator.

However there are issues to consider as with any new technology one must first decide on what aspect to digitise. With so much data and information to be processed a company can be quite literally overloaded and as a result paralyse a company’s decision making processes instead of helping them be more proactive with decisions. Therefore it becomes necessary to carefully select or ‘cheery-pick’ the data required for specific information goals. The problem is if you record all available data then storage costs become prohibitive and the times required to process and sift through to find something relevant increases with every upload. Alternatively by only selecting certain types of data, you risk deleting information that might have intrinsic value to the company. So good visualisations are vital, which allows complex data to be shown in a graphical format to simplify the decision making process.

Oil rigs produce huge amounts of data on a daily basis, so it is not about implementing digital technologies but how oil companies use it to communicate the right information to the right people in the field. The Chevron Machinery Support Centre (MSC) looks at real-time data distributed over 6 continents from Kazakhstan to Colombia they monitor 65% of the U.S gas supplies. At their hub computer operators, overview a number of computer monitors looking for distribution paths to meet current gas supplies and to check for system alerts. Recently one of their African drilling operations started to overload. An alarm immediately alerted the controllers of a compressor problem at MSC some 6000 miles away from the original incident; this allowed the fault to be found and resolved quickly without any injuries to the workforce and saved millions of dollars in possible production downtime. Chevron has now implemented a number of digital systems to its upstream operations one of which is called Upstream Workflow Transformation (UWT) which has taken decades of investment and development to produce, but is now at the forefront of its digital campaign.

As a way of combining IT, automation and instrumentation technologies DOF software offers many benefits from faster reservoir production and analysis, increased workforce safety and operational management through the use of workflows, as long as data is properly analysed and filtered to give expected results for manager and engineers to make timely and accurate decision.

Digital Oil Part 1

Today is a very different world from the time I was at school. No mobile phones, internet and only 1 computer in the whole school. Now things are very different with computers being used to control many aspects of our day to day lives. I recently saw a documentary about the Toyota car factory and how they used computers to control automated robots to build the cars. Designers would sit in offices using 3D software to prototype the new models and use virtual turbines to check for wind resistance and airflow over a computer created model. Now just think of the possibilities of using such technology to control and operate a modern oil rig.

Firstly let’s look at the issues of communication. Many companies will sub contract specific operations to specialist teams. Each team would need technical information about the rig and traditionally this operational data was sent using American Standard Code for Information Interchange, otherwise know as ASCII code. However it was quickly seen that the amounts of data that needed to be transmitted was huge and ASCII transfer was not going to be quick enough to deal with the growing data requirements. Therefore another protocol for transmitting data needed to be deployed quickly. Wellsite Information Transfer Standard Markup Language (WITSML) was developed to overcome the limitations of ASCII and has now become a standard for transmitting technical and operational data between organisations within the oil industry.

Why is a standard system so important for data communication? Hyper Text Markup Language (HTML) was created as a standard protocol for website screen design so that many different computers and browsers could display web pages in the same format. In the same way WITSML is a standard way to collect and transmit drilling information to separate and previously ‘closed’ systems, giving operators a method of collaborating and communicating shared data. This standard has now been developed for over 12 years and has undergone a number of changes and versions by the global consortium that facilitates the development of the standard. The benefits for companies using this standard is that is allows for a much broader use of commercially available tools and software during the drilling process. Previously being a very niche market, such software and tools were written on a bespoke basis and at considerable cost. 3^rd party software companies wanted to access the mass drilling markets with their real time virtual systems. Unfortunately many of these developers locked the operator into a specific system which was not much different to the original bespoke methodology. 

WITSML effectively unlocked the data which could be collected from vendor software or directly from surface and drilling tools in real time. The data would then be stored in this standard format to be used by a variety of analytical tools. It may come as a surprise that petroleum operators have been collecting the technical data from the drills at least 20 years ago and the idea of a digital oilfield is not a new one. On the fly data logging (wireline logging) is essential within a modern drilling environment. Sensors are used to monitor a variety of variables from the drilling head, its speed and angle to the flow of oil and water pressure. Accurate data logging is vital for the prevention of blowouts which can cause fatalities and seriously impact a company’s reputation.

BP was one of the first global oil producers to fully integrate digital technologies and they have found that such systems produce a noticeable increase in efficiency and recovery of operating costs. WITSML has helped BP too accurately measure performance from its global reservoirs and to aid in the transport of fast data analysis over 1200 miles of high-end fibre-optic cable was laid linking BP hubs with their contractors and Advanced Collaborative Environments (ACE). This means a safer and more productive environment is created for everyone. The use of WITSML operations has made it possible to use virtual reality and real time systems enabling three main areas of oil and gas production to be enhanced.

Firstly a well can be remotely monitored. BP developed an Integrated Surveillance Information System called ISIS. This sends alerts when a well reaches a certain operational condition. Well analysis can take place instantly and many hazards and accidents have been reduced as a result. Compare this to 100 years ago when you found out a well had gone critical only after it had exploded in a fireball of destruction. Next facilities are greatly enhanced by using Data to Desktop (D2D) software which allows the petroleum engineers to monitor and remove potential bottlenecks. For example if a valve is not operating within certain limits or a drill head is about to fracture, then these will be highlighted and action can be taken immediately. Also where mechanical breakdowns have occurred a new workflow can be created while parts are being delivered to make the repair.

Finally data integration and standardisation helps to support daily operations. Model Based Operating Support programmes (MBOS) are used to enhance operations by using decision making flows to predict outcomes and reduce potential risks. By using flow controls the operator can quickly access production needs and the amount of oil required compared to the suitability and availability of the well. If another 1 million litres of oil are required, MBOS will help the analyst to gauge production costs and then to plan the distribution needs to supply the increased oil. It is not enough to be able to produce more oil if it cannot be delivered on time and if necessary stored at a depot until required by the customer. As you can see data communication software plays a vital part in oil production, risk analysis, operational controls and safety management.

The true price of oil

We have all seen the price of oil fall dramatically from over $100 to less than $50 a barrel and this is mainly due to supply being greater than demand. It seems the world as we know it likes creating mountains of produce, from cars, butter and now oil. Yes the price has rallied lately to over $50 a barrel but predictions suggest this is only temporary and a further fall is imminent. When I first started distributing oil in Uganda the price of a truck of petrol and diesel from Kenya was around £28,000 now it can be had for £17,000. This sound very good as I could almost buy two trucks for the same money increasing my profit margin, however the tax per litre has been increased thus making it more difficult to supply oil within East Africa. 

There are fundamentally two issues that need to be resolved within the East African petroleum markets, firstly is the continued increase in the price of oil and secondly how to expand the demand for oil. Demand can be seen as region specific and as someone who lives in Uganda the demand has always been high and will continue for many years to come. When you then compare African and Asian demands for crude oil against the West and in particular America, the requirements for energy and its consumption greatly differs.

People in the U.S, have not suddenly stopped using power or driving cars, but the energy they use is now very different as many campaigners have argued for cleaner and greener supplies of energy to replace fossil fuels. This has resulted in companies using alternative sources of energy and where fossil fuels must be used for engines, generators and power stations they have become more efficient requiring less fuel to run resulting in lower carbon emissions. This situation means the supply of oil is far too great for the major markets, which in turn drives the price even lower. 

The cost associated with E&P (Exploration and Production) are some of the highest in the petroleum lifecycle and must be recouped for oil producers to stay profitable and invest in the exploration of new oil wells. However a recent report showed that so much oil has been produced that storage is now becoming a primary issue. The longer a supplier has to store petrol and diesel before it is delivered to the customer then the higher the cost of oil will be at the pumps. However because supply has outstripped demand this additional cost has been swallowed up by the producer and not the customer, effectively becoming a buyer’s market and as car drivers rejoice at the lower cost of filling up their beloved vehicles we must remember that the lower price of oil will pose a risk to jobs. Simple economics state that if input (income) is less than your output (costs) then you make a loss and the easiest way to cut losses is to reduce the number of workers within your organisation.

Globally the way we use oil has shifted enough for prices to take a long term dip and the problem will only get worse as more countries join the green zone of economies. Unfortunately the price of oil at the pumps in Uganda has slightly increased due to underhanded measures of restricting supply causing a number of petrol stations to run out of fuel forcing an artificial demand to be greater than the available supply and elevating the price. It appears some of these oil suppliers have yet to learn the lesson of controlling the amount of crude they take from the ground. 

Considering the huge amounts of crude oil being stored I find it disgraceful that supply is restricted at point of sale to keep profits high. Oil suppliers need to wake up as this cannot continue and only makes the situation worse. The problem is compounded by many investment planners having put a lot of investors’ money into petroleum as a sure fire way to increase long term profits and you may think this will only hurt a certain number of private investors who have decided to take a gamble on the stock market. Unfortunately many pension plans are also in the hands of equity fund managers who as I said have played their petroleum card and put too many eggs into that basket. Therefore when the price of oil fell, so did the pension plans. If the price of crude goes as low as $20 a barrel, then a few analysts have predicted a financial meltdown. This may be no more than scaremongering but it will hurt in jobs linked directly to oil production, indirect employment necessary to keep supply and production operational and petrochemical sales.

There certainly has to be equilibrium in price, but how to achieve it is at the moment debatable and should not continue down this path to the extent of a petroleum depression. Yes rigs may need to be closed during the short term and jobs may be put on hold as petroleum stocks are used, but in the long term it will produce a healthier market that is hopefully not artificially inflated. I remember when car manufactures made too many cars and 1000s of them were stockpiled getting rusty because supply did not match demand, it caused a number of big U.S car manufactures to declare bankruptcy. Furthermore the price of oil must be sustainable; If we look at the football analogy do you think these premiership footballers are worth £200,000 a week for kicking a ball? No the price is artificial and has caused a number of UK football clubs to close due to lack of funds. Simply put petroleum and petrochemicals are tightly woven into the fabric of today’s societies and economies. If the pricing structures presently in place are not corrected then it creates a boom-bust economy which can and will destabilise emerging nations.