Fields of dreams? The rise of the digital oilfield

Smart fields. Intelligent fields. eFields. Whatever name you give them, the hype and promise of the digital oilfield continues to flow like a newly tapped gusher. Helping fuel the buzz is the difficulty in clearly defining what the digital oilfield is – in truth it is a polyglot of different technologies, ranging from 4D seismic imaging, through to ‘data-to-desktop’ tools that can disseminate production data to traders in real-time. Indeed it is best to see the digital oilfield as a toolkit of related technologies and processes, rather than some kind of discrete ‘solution’.

This is certainly the view of Philip Shaw a Director at Deloitte, who has been working with several players in the industry to realize the benefits of some of these new technologies. “We see the challenges as being absolutely not about the technology,” he explained to us. “What we continue to see is most of the oil companies struggling, to a greater or lesser extent, with taking what has been some very impressive R&D and actually embedding that in business as usual.”

People power

Shaw sees the biggest challenge in deploying digital oilfield techniques being in the impact they have on the existing people and processes, especially in the offshore environment. Mainly because the industry has under estimated the effort that this kind of change management process requires. “Broadly there’s a lot of very good technology out there, and I have no doubt there will be more coming over the next 15 years, and that’s all good stuff. A lot of this technology, in terms of where the impact is felt, is offshore. But a lot of initiatives, from what I’ve seen, seem to stop at the beach. There’s no shortage of business or technology improvement initiatives within organizations, but to get that change out to where it’s needed, and really engage with the offshore population, is where the challenge is.”

This is obviously problematic, because the offshore population are the ones who ultimately get the oil out of the ground. As Shaw puts it “if you don’t change anything offshore or among the first line support teams onshore, then you’re not going to change anything.” So what is happening in Shaw’s experience when new technologies are implemented? Does he find that they’re being ignored at ground level?

“No, but what the technologies are doing currently are optimizing the current ways of working,” he suggests. But as he explains, this misses the true potential of new approaches by some distance. “If you think about an oil rig, you have to remember it has been completely self-sufficient. Now, if you take the application of new technology that allows you to communicate and share data automatically, then theoretically the interaction between someone on the platform and someone in the office should be the same as between someone on the sixth and fifth floors of the platform. Ultimately that leads you to ask if there should be anyone on the platform unless they’re physically operating or touching the metal? And we’re a long way from that at the moment.”

Challenges

There are many reasons why this kind of scenario hasn’t developed yet. On the people side, moving staff offshore to offices affects their shift patterns and contracts, and is no trivial task. What’s more, many drilling operations can be joint ventures and use a number of specialist sub-contractors. This creates the added headache of managing change across diverse operations, each of which might have different agendas. “Would you want to use one central facility to support multiple operations using multiple contractors,” asks Shaw. “This is ‘challenging’, to put it mildly.”

There is also an operational risk in fundamentally changing the way production is managed. “You’ve got to be careful that you really understand the interactions and the way people operate to begin with, because there’s obviously a difference between having somebody sitting in a room upstairs on the platform, and sitting in an office onshore,” Shaw points out.

As he explains, historically all operations and communications on a rig have gone through a control room, with the result being that the control room always knows exactly what is going on. With the kind of advanced data feeds and communications technologies now available you have the potential to upset this balance. “Potentially you might have someone on a worksite collaborating in real-time with the deep subject expert who is back in Houston. While this is hugely powerful, it potentially cuts the control room out of the loop. So there is a huge danger in getting expertise out to the site if it’s not being encompassed into the overall operation.”

Value proposition

It is clear that the industry has a lot to get right in really leveraging new technologies to get maximum value. However, there is also a question as to how much value the technologies will bring, even if implemented perfectly. How does Shaw see the issue of value management – there have been startling claims made around some of the pilots in this space, but are these returns going to materialize going forward?

For Shaw there are two issues, will the value materialize, and if it does how will you measure it. “With any organization, if every project that promised a one percent increase in operating efficiency delivered that, most businesses would be running at 200 percent by now,” he wryly points out. Shaw has been involved in a lot of work looking at proving whether new approaches have been effective, and he acknowledges this is a difficult area. “The reality seems to be that there are so many factors at play that it’s very difficult to plot with 100 percent accuracy that you’ve made this much more money from using these technologies.”

However, Shaw argues you can provide evidence that makes the “leap of faith” as small as possible. He cites the example of some work Deloitte did with an oil major in the North Sea; after implementation of selected digital technology, the asset experienced zero downtime over a six month period – something not achieved previously. “You can argue that there were other things that might have impacted, but it’s really strong evidence when you compare it to historical data for downtime in that period.” Another example Shaw gives is using collaborative environments to assist turnarounds, where on and offshore collaboration reduced turnaround by half a day.

The road ahead

What is clear from these examples is that the implementation of the digital oilfield is an incremental process, and that there is a long journey ahead. What does Shaw think are the key opportunities for the industry to grasp going forward? “2007 has been about getting teams more aligned and working more effectively, and I think 2008 is going to see the roll out of more of the technology itself.” As an example Shaw suggests that Wi-Fi will be used more on site, for example it could be used to show a piece of equipment to an expert back at base for advice.

The key challenge revolves around introducing new technology without compromising production flows, and Shaw suggests this is going to be a “never-ending” process. “The next five years will be about embedding the R&D that’s already come out into business as usual,” he argues. “But then is the next step going to be to set up a program that manages all your drilling from a global center? I think you’re talking 10 to 15 years for that.”

He also raises the prospect of collaborative techniques rolling out into how the competing oil majors deal with each other. He points out that many established basins are entering the end-periods of their production cycle, and these end-periods are relatively more expensive. Historically the big players in the industry have been better at putting the upfront investment into new production than they have at exploiting the latter stages of mature basins. However, as the discovery and exploitation of new basins gets more costly and difficult, these new techniques might push them back towards existing assets.

“This sort of technology allows the majors to potentially stay in the game longer, given their opportunities are becoming more restricted,” Shaw argues. “Are they going to do this? I have no idea, but there is the potential to do some fairly creative things here.”

Ultimately the key driver of these new technologies is going to be the ability it gives to bring the right level of expertise to where it is needed – the well itself. Especially given the skills shortage that has been affecting the industry this is of critical importance. “At the moment you’ve got most of the real deep experts sitting in head office with very little day-to-day involvement with operations out on the rigs. The fact is that pattern should change.”

About the author

Philip Shaw is a Director at Deloitte. Shaw started his career at BP in 1992, and has been working in the oil industry almost continuously since then. For the last 10 years, he has been a Consultant, the last four of which has been with Deloitte, where he is now a Director, specializing in upstream oil and gas. He has a Bachelor of Engineering from the University of Nottingham, and is a Chartered Engineer. If you want more information on this subject please feel free to contact Shaw at phshaw@deloitte.co.uk.