The SPE is one of the definitive events on the upstream calendar and assembles some big hitters for its plenary session. This year top executives were invited to pontificate on “the global oil industry in the 21st century.” All saw a rosy future for oil over the next few decades. Kuwait Petroleum CEO Nader Sultan sees steady demand growth grow of 5% per annum. Sultan quipped that Energy, not e-commerce, underpins the economy - “You can't have B2B without BTUs!”
Exxon
Exxon’s Harry Longwell anticipates a novel, non-oil energy source arriving in 30-50 years time. Meantime, oil and gas ‘will dominate energy supply.’ But Exxon forecasts suggest that 10 years from now, half of the oil that will be used is not currently in production. Getting this new oil and gas on stream will require a $100 billion per year investment over the next decade - a huge increase on today’s spending. Tom Langford of Morgan Stanley suggested that investor sentiment is returning to the oil sector. He illustrated this with a graphic showing the weight of oil and gas stocks in the S&P 500.
Weight (%) of oil stocks in S&P 500
Schlumberger
It is extraordinary how Schlumberger’s stance on Open Spirit has evolved over the past few months. Earlier this year Open Spirit was ‘tolerated’ as a means of integrating non-GeoQuest applications. Now the platform is everywhere. Is Open Spirit to replace GeoFrame as Schlumberger’s integration ‘Framework?’ It looks that way, as increasingly Schlumberger leverages the Open Spirit (OS) integration layer to connect products as diverse as the Omega seismic processing system, the InterAct WellWitness rigsite activity monitor, and its growing number of ’Cube applications. Of particular note is the OS-enabling of SimCube - opening the reservoir simulation world of Eclipse to the upstream. Schlumberger is touting Open Spirit so much that one has to suspect a degree of marketing hype. No doubt Landmark’s continued refusal to play ball with OS provides some momentum to this effort!
E-business booming
The dot-coms may be in trouble, but e-business is actually booming, particularly in the field of web-based monitoring and control of drilling rigs and production facilities. Datawise’s TruVu Pro uses the web to acquire and manage real time drilling data onshore and offshore. The system acts as an electronic drilling recorder, for wireline, mud and production logging. Rig-site data can be accessed anywhere from a browser. TruVu offers a variety of display options from digital dials, ‘kill well’ displays to graphs and reports. TruVu uses the WITS data exchange standard and is used by Schlumberger to log its MWD systems.
MyWells.com
Epoch’s MyWells.com promises remote viewing of daily reports, electronic tour sheets, drilling and mud logs. A user-friendly interface allows for selection and browsing. If required, the system will work even over slow dial-up connections. Data is collected via satellite and stored on the Epoch hub. Secure access allows control over who sees what.
The $10 million website
Outgoing president Bruce Bernard described the SPE’s mission as ‘collecting and disseminating technology.’ The new SPE.org website is designed to fulfill this mission. Bernard claims ‘IT is not our business.’ So development of the site was farmed-out to Autonomy, Vignette and the Socius Group. The website sets out to make technical information more useful and accessible to ‘constituents’ - i.e. both member and non-member visitors. The SPE.org project has a $10 million budget and will go live in the week of 5th November 2001 with a new industry-specific search engine, lifetime email and a personalizable interface – ‘mySPE.’ Autonomy’s ‘Portal in-a-box’ is the core technology deployed.
Marko
Bill Marko of the Oil & Gas Journal Exchange presented a pertinent review of shareholder return on upstream capital investment. Peer group comparison of the majors shows 5-year shareholder returns in the range of 17-19% for market leaders Shell, Exxon, TFE and BP. Large independents come in with similar returns. Smaller independents show more variability - range +40% to -20% (Chesapeake). Note that returns are driven by acquisitions (for all peer groups). Marko’s talk was a good antidote to the old canard that the industry produces lamentably low ROI.
Competitor Analysis
IHS Energy Group’s Pete Stark showed how far you can go in portfolio evaluation - without even approaching a target. Using IHS’ Probe and Peps applications, the case history involved Agip’s analysis of the British Borneo and Lasmo portfolios. From a world map view, reserves and production data are shown by stakeholder as pie charts. Potential acreage synergies are immediately highlighted, and consolidated portfolios can be built to test what-if scenarios.
Web based SCADA
Lynx Technologies’ eLynx is a web-based SCADA system for well automation and remote surveillance. The eLynx service has been up for one year and currently is monitoring 1200 wells. eLynx provides hosting and web enablement for clients including Baker Hughes and Lufkin.
PDA
Maurer Technology has packaged its Drillers Toolkit for use at the rig site on the Compaq iPAQ Pocket PC. Around 100 software utilities are available for computing bottom hole assemblies, casing design, costing, mechanics and hydraulics, mud, well trajectories, torque and drag and well control. The Pocket PC toolkit costs $1995 and includes an iPAQ 3650 with color screen.
ProDataOnline
ProDataOnline (PDO) is described as a Data Service Provider. PDO is a PDA*- based data capture system coupled with a hosted SQL Server database. A pumper enters data onto the PDA in the field, which is transmitted over a dialup connection to a secure SQL Server 7 database hosted by PDO. Clients can log in to the database - and produce graphs and reports.
Eclipse add-ons
ScienceSoft’s S3 Graph - provides easy to use post-processing and analysis for simulator output. Drag and drop a dozen different file formats to compare for instance, observed and simulated production profiles. Or view a simulated grid along with well locations and design a well list. In house simulator packages can be read and integrated into S3 Graph. Clients include BP, Shell, Exxon, Texaco and TotalFinaElf.
Mepo
Scandpower - known for its MEPO automated history-matching tool - is one of the few companies to have hands-on experience in integrating 4D seismics with reservoir engineering. But Scandpower believes that a product is still ‘two years away’ from commercialization.
Industrial ASP
Founded in 1997, by partners Lockheed Martin and Cable & Wireless, the M2M Matrix is described as ‘The Industrial ASP.’ The company provides remote monitoring and control services leveraging the “anywhere to anywhere” nature of the Internet. M2M claims an ‘unequaled’ offering in last mile connectivity. M2M solutions for oil and gas target production and other operations. Schlumberger is a major client.
AssetExplorer
PetroleumPlace’s AssetExplorer (AE) electronic data room was rolled out at this year’s AAPG. AE uses OpenJournal to access textual information on an asset. CGM, Acrobat PDF and regular Office file formats can be uploaded. Four service levels are on offer - from a simple listing, to an invitation-only online interpretation environment. A branded version of AE is in use at Unocal.
WebWitness
InteractWebWitness (IWW) offers secure access to information, alarms, emails and real-time data from the well site into an Internet browser via the web. IWW is Open Spirit-enabled for connection to desktop interpretation systems. On well abandonment, all IWW transactional data can be backed-up to a CD or archived to LogDB. Morning drilling reports (in pdf format) can be viewed. The Drilling Console offers a driller-type display of weight on bit, mud volumes etc. A log console does the same for logging data, and alarms can be set for events such as resistivity going over a set value. Frac jobs and well tests can be monitored in real time.
SpudIT.com
SpudIT.com provides real-time data on contractable rigs through its website. SpudIT knows where rigs are operating, because they have GPS transponders on participating rigs. SpudIT claims 3,300 of the estimated 5,000 rigs operating in the Americas and 80% of US land rigs. A complementary service - RigAlert identifies rigs with unexpected openings in their schedule. Another tool - RigMapper provides a GIS interface to SpudIT’s database. SpudIT uses asset tracking technology from American Millennium Corporation, Inc.
StreamSim integrates GOCAD
StreamSim has integrated 3DSL into the GOCAD/JACTA environment allowing for simulation on fine-scale models. Jacta computes the static uncertainties in the model while StreamSim’s 3D Stream Line (3DSL) brings uncertainty into flow modeling. 3DSL is claimed to be a fast way of ranking and screening full-field models to show how geology, structure and petrophysics combine to influence fluid flow. Color coding shows drained volumes and fluid paths between injectors and producers. Output to Excel allows plots of uncertainty in the dynamic model.
WesternGeco - Qmarine
We were looking for real-world use of 4D seismics in reservoir monitoring, but found little. Instead we were shown some of Schlumberger’s Q-Marine technology that has been developed for 4D acquisition. WesternGeco has studied factors influencing 4D repeatability and found that streamer and source positioning is a major limiting factor. Q-Marine’s Q-Fin allows a streamer to be re-positioned in its original acquisition configuration - independent of the current sea conditions. WesternGeco’s Leif Larsen showed PDM a great Power Point of location data from 6 streamers. These were ‘driven’ into position during shooting, to match exactly the previous survey. A new Q-Marine boat, the Western Pride, has just been commissioned and will deploy 8 streamers, each 8 km in length, with around 20,000 channels.
World Markets Research Center
Established last year, World Markets Research Center’s (WMRC) Energy Sector offers corporate clients web-based access to legal, regulatory, environmental, legislation and news in (mainly) emerging markets. The Energy Sector is broadly defined to span oil and gas, electricity and utilities. Energy sector clients include Texaco, TotalFinaElf and Schlumberger. WMRC signed its first corporate intranet deal earlier this year with an energy sector client taking a license for 250 concurrent users.
Near-field
Hamish Wilson of Paras Consulting presented a paper co-authored by Tim Marchant and David Bamford of BP on the evolution of BP’s near field* exploration program. During the late 1980’s and early-mid 1990’s, pre-merged BP and Amoco invested large sums of money exploring close in to their core producing fields in traditional ‘heartlands’ such as the North Sea, Alaska and the lower 48. These investments were largely unsuccessful. Amoco coined the term ‘stealth exploration’ to describe the activity carried out by individual assets. The cost of failure only later appeared on the corporate balance sheet as exploration write-off. Horror stories abounded - such as $13/bbl finding costs in Canada and Amoco’s infamous ‘Natural Gas Strategy.’ Both the Canada and Egypt units had ‘near-death’ experiences.
Short-term
Recent industry focus on boosting short-term production has reawakened interest in near-field exploration. Despite the corporate perception of failure, it became apparent that some business units, notably Canada Gas and Egypt Oil, were making a quiet success of near field exploration. BP engaged Paras Consulting to investigate what was behind these successes. The key conclusion to be drawn from this story of ‘corporate learning’ is that near field exploration in large companies can make money provided three actions are taken:
Do not compromise on subsurface technical risk in the face of pressure from engineers and others attracted by the economics - an investment with a positive EMV** or high RoR*** with a high technical risk is still a high-risk investment.
Manage the activity as an integrated part of the production asset to minimize cycle time.
Set tight performance metrics and manage the portfolio globally.
Seed capital
BP checked out these findings by allocating a limited amount of seed capital to five business units where it had a dominant ownership of the regional infrastructure. This diverse group of upstream businesses has successfully managed a limited exploration program and demonstrated that near-field exploration can be controlled and can add value through short-term production.
50% success rate
Today, exploration is only approved where a success rate of over 50% can be assured. The production from such near field exploration is anticipated to fill the gap between BP’s declining historical ‘production capital’ and new production that has yet to come on stream.
* ‘near field exploration’ is conducted in the vicinity of existing operated production, and benefits from the economics of nearby infrastructure.
**EMV - expected monetary value
***RoR - Rate of Return (on capital)
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