Digital oil fields - Ideas for the industry

Materials World magazine
,
1 Dec 2008

David Bamford, Chairman of NewEyes Exploration Ltd, UK, presents a technology response to ‘low’ oil prices.

I have lost count of the number of London analysts who have written reports in the last few months 'proving' that we can look forward to oil prices of US$60-80/barrel for the immediate future. Roughly speaking, oil prices are down to 50% of their peak six months ago. Putting to one side the cynical observation that most economists did not predict prices as high as US$60/barrel for 2008 three years ago, and that earlier this year some of the same analysts were 'proving' that prices up to US$200/barrel were likely, how are oil and gas companies responding to 'low' oil prices?

Most companies would choose a price in the range US$60-80/barrel as a basis for the next three years. This will mean significant reductions in exploration budgets and strong downward pressure on costs. There must be a focus on ‘squeezing every last drop’ - making the most of producing or soon-to-be-developed fields.

A major contribution will be made by digital oil field technologies which use sophisticated data acquisition, processing and visualisation methods to monitor and manage fields using real time information. Two key concepts are continuous seismic surveillance and intelligent wells.

Our survey says

For continuous seismic surveillance offshore, permanent sensors (with up to four components – X, Y, Z and pressure) are installed in the seabed above any oil or gas field in a one-time installation before production starts (ideally at the same time as sub-sea production equipment is installed). A relatively inexpensive seismic source vessel can sail above these sensors – when required – to generate a repeat 3D seismic survey. This could happen as often as once a week at a repeat cost of as little as US$100k, giving real-time data for analysis of reservoir dynamics throughout a field’s life. Onshore, a similar approach can be envisaged – although permanently installed down-hole sensors are more likely.

Intelligent wells are equipped at completion with down-hole controls and sensors. There can then be a continuous flow of data from these structures regarding pressure, inflow distribution, the flowing phase, reservoir saturation and geophysical measurements. Proactive remediation of fluid inflow into the well bore via remote-controlled down-hole zonal control valves is also possible, as is implementing reservoir management without intervention.

These and other technologies offer enormous potential for operators to:
• ‘Shape’ production profiles, with individual wells starting-up faster and achieving field-wide optimisation.
• Identify unexploited reserves, improving recovery factors.
• Cut both capex (less wells) and operating costs.
• Remove staff from unsafe environments.

The Gulf of Mexico and the North Sea seem to be pioneering the implementation of this technology, with offshore Norway especially progressive. The leading companies, and therefore those most likely to benefit from improved business performance over the medium to long term, appear to be Norway’s StatoilHydro and international firm BP.

While these two companies have recognised the importance of re-shaping processes, workflows, standards and procurement practices to support collaboration, integration and optimisation via digital oil field projects, many more organisations have not.

Many firms – and in particular management and commercial teams – seem to regard Microsoft Office as the cutting edge of the digital revolution. This produces an important resistance to change and means organisations are unequipped to cope with the massive flow of real-time information that results from digital oil field technologies on even a limited set of assets.

Functional ‘silos’ still abound in the oil and gas industry, especially on the engineering side. This is evident by looking at the ‘Products and Services’ listed on global information services company Schlumberger’s website, or by digging slightly deeper into the technical papers that are on offer there. A similar impression can be gained from information specialists Weatherford’s ‘Products’ tab on its website. These companies are simply responding to the way most of their customers think.

Digital and economic success

While we are not yet in the economic storm of the early 1990s, the current situation is going to take some weathering. In my opinion, businesses will only be successful on the basis of hard work on real assets – not dealing in aspirations and promises. Transformations enabled by digital oil fields will help to separate the winners from the losers.

But what does this mean for service companies? In the short term, they will feel pressure on revenues from the aforementioned exploration expenditure reductions and cost pressures. If they understood, and could deliver, the integrated and collaborative technologies of digital oil fields, they would have medium to long-term growth opportunities. However, those who have the know-how on the digital oil field may turn out to be (a handful of) the Majors and international oil companies, because they have undertaken the necessary re-engineering of their own organisations.

If so, this will perhaps re-configure relationships between oil and service companies to resemble the pattern seen before the peak in prices, and those writing off the ‘Seven Sisters’ (Exxon, Mobil, Chevron, Texaco, Gulf Oil, Shell, and BP) may find they did so prematurely as the future increasingly resembles the past.