Field of dreams

Digital oil field technology entered the industry in the early 1960s, originally to help assist with exploration activities, particularly in the form of digital seismic technology. In wasn’t until the next couple of decades that the term ‘digital oil field’ gained prominence and began to include the use of software, hardware, instrumentation, communications, business and engineering process improvements in the EMP activities. Indeed it wasn’t until the mid 1990s that the term was used by the super majors who were then working on cultivating strategies. So, how have digital oil fields changed exploration? “It’s changed exploration in that it’s often allowed companies to leverage new or emerging technologies,” explains Catherine Madden, Research Analyst for IDC’s Energy Insights. “When I think of the digital oil field I’m thinking of technology that will help me achieve the ultimate goal, which I think is the same for all oil companies no matter how large or small, and that is the economically feasible recovery of hydrocarbons.”

While the digital oil field has essentially been around for the 50 years it is only now that the fundamental objectives of the concept - enhancing reservoir recoverability and optimizing production - have evolved to a point that people are looking at the digital oil field as a way to run all operations from exploration to the refinery, incorporating standardization and process integration. "Digital oil field concepts efforts have essentially resulted in a positive impact on reservoir recoverability, production rates and total cost of ownership and those numbers probably vary from company to company depending on their strategy and the level of investment they have made," explains Madden. "Energy Insight has done case study work as well as reports that have concluded reductions of cost and improvement, and many large oil companies like Shell and Chevron have reported the same in relation to implementing a digital oil field strategy."

However, while many of the largest oil companies in the world have a program in place to support the digital oil field, many are still looking at how to accelerate it. Madden believes that the top priority remains the same, namely hydrocarbon extraction, however, she highlights the feeling among many companies that a critical link in the digital oil field remains. "It has essentially revolved around the fact that initially there was much attention on technology as the answers for companies to solve their problems, and optimize the exploration and production processes and improve the ROI," says Madden. "There wasn't much attention paid to the role of people and processes in achieving those objectives and now I think the top objective is to sustainably support the development of the digital oil field strategy, and that includes not only technology as a tool to aid that process but also the teams of people that do the work as well as the different business tools or processes that are associated with exploration and production."

In essence companies that wish to accelerate their digital oil field will be required to understand the equation that permits the right balance between technology as well as the integration of people and processes in the process. Looking at the digital oil field in 2009 these three objectives needed to be lined up together as opposed to implementing technology alone. Madden goes on to explain that the importance of this equation is being recognized and that she sees improvement in many areas, including the degree of human involvement in the oil field process of exploration and production. "Some of the changes we're seeing such as looking at workflows and what can be automated. We're talking about the integration of technology across distinct areas, so integrating more processes between exploration and production, for example. I think we're talking about these things like project management portfolios when essentially I see that we should be looking at the entire value chain and allowing for as much integration and as much collaboration across the value chain. And when I talk about the value chain I'm really talking about from the moment exploration begins, the process of drilling until finally recovering it and delivering it to its refinery source."

The power of three

Madden goes on to explain that the three main factors - people, processes and technology - will play a major role in the next generation digital oil field. Indeed, as each facet of these factors improves so to will the digital oil field itself. On the technology side for example, Madden expects to see an increased use of sensors, as well as a continued improvement in high performance computing. "I also think remote visualization and service orientated architecture are going to continue to grow within virtualization and I think that communications that allow collaboration and even communications around security will be important too," explains Madden. "Technology that aids collaboration is going to continue, and while it's already playing an important role, it's going to become critical that you can share information, not just using email but maybe working in a virtual room together or using virtul technology to look at the same document together and make changes to it, or use a virtual whiteboard to point out certain things you want changed."

In terms of the people factor, Madden believes a significant improvement is needed in addressing the top two challenges facing the industry - the aging workforce and the need to work with geographically dispersed teams. The aging workforce is playing a critical role in the number of available employees in the oil and gas industry, and while the number may be mitigated to a certain point by the global financial crisis, the number of skilled workers available is set to shrink. So in addition to a shortage of skilled workers the increasing amount of global projects impacts how these projects will be managed.

And finally, in regards to processes, Madden sees one fundamental factor to the digital oil field strategy, which is aligning the business and technology strategy as well as implementing automated workflows, improving business practices, re-engineering existing workflows in order to address the workflow. "So there may be great new technology out there, but IT alone can't be the driver for the implementation of digital oil field strategy, and neither can a business, so the two have to be working together," summarizes Madden. "The business has a need to improve production and there's technology out there that can aid that."

There is no doubt that some of the super major oil companies like Exxon Mobil, Chevron and BP, are working towards this right now. Many of these companies have either reorganized their company or certainly realigned their goals regarding their digital oil field strategy to include business as well as the IT strategy and improve the communication between the two groups, indeed companies like Chevron, for example, have invested a huge amount in emerging technologies in the oil and gas industry. The largest oil companies are certainly looking at that next generation digital oil field and accelerating it from how it was perceived in the mind-1990s.

"While it is not fully mature there is a significant amount of investment happening. We've gone through the first wave of the digital oil field and learnt from that first level of implementation that it's not all about technology, so we're looking at ensure people and processes are aligned with the technology, using best practices, looking at getting a return on investment and improving production rates," says Madden. "Energy Insights' primary research indicated in 2008 that national oil companies weren't just investing in back office IT such as ERP systems. So while that's where some of the largest oil and gas companies started, but they too are looking at investment and setting aside investment dollars for the digital oil field. SO while it may not be on the same scale as some of the largest oil and gas companies, it is a priority for smaller companies too."

Information overload

However, while investment is being poured into the digital oil field, one huge criticism is the absolute exponential explosion of data. By implementing a tremendous amount of technology it is no surprise that there is now a wealth of information being collected from sensors that reveal how well the field is performing to different information about the reservoir. This data is usually flooding in 24 hours a day and it is usually much more than can be dealt with. Madden believes that this is certainly an aspect that companies are attempting to address, although there continues to be a lot of discussion about the information architecture within a company around the processes of sharing the information as opposed to gathering it.

"Companies are looking at their approach towards structured and unstructured data in order to understand how to best use this information and ensure that employees don't have to spend days wading through information as opposed to actually using it. It is certainly a challenge for oil and gas companies, but I think that if it is optimized in the right way it ultimately helps benefit the digital oil field. You have to address things like how to handle structured and unstructured data, using business intelligence and dashboards to indicate the performance."

Looking to the future of digital oil field it is no surprise that the global recession has had an impact on this sector of the industry. Indeed, Madden cites the greatest risk associated with the recession is the likelihood that oil and gas companies will delay capital expenditure exploration budgets due to tight financials. "This is the area that has made the industry the most nervous," confirms Madden. But while businesses are focused on the short-term boost to the budget sheet the long-term risk is that by not making an investment to explore for new sources of oil, the company is left at a significant disadvantage, four or five years, or even further, down the line. And with economically accessible reserves getting increasingly hard to find, companies are required to look for reserves further offshore and deeper in the ocean.  

So while Madden believes that the next generation digital oil field is in the pipeline it is clear that the investment in the technology alongside the people and processes should not be neglected at the this crucial stage in the development.

IT spending to recover

The impact of the economic recession has not left the oil and gas industry untouched, and the spend on IT has slowed as confirmed by the latest forecast from IDC Energy Insights. Overall, the annual forecast is lower from 2009 through 2012 and, in the first look at 2013, IDC is forecasting total IT spending of $42.9 billion. Spending declines from 2008 to 2009, begins to recover in 2010, and grows annually for an overall compound annual growth rate of 4.1 percent from 2008 through 2013.

The new worldwide IT spending outlook supports the indicators that the market is taking a hit in 2009 with a recovery in IT spending in 2010, and long-term growth, but a slower pace than the previous outlook. Despite the current economic conditions, the long-term demand for oil in the global economy gives much incentive to continue pursing current IT initiatives such as mobile devices and digital oilfields, as they are critical to a competitive position in the oil and gas industry. In the short-term, a focus on optimizing production from existing reserves will play a key role in improving recovery of hydrocarbons. Information technology can serve the production process in many ways, but, in particular, technologies that permit predictive analytics and well monitoring remain critical in 2009.

Source: idc-ei.com