A lot has been written on cost justification for IT projects. The question was asked again at the ESRI Petroleum User Group earlier this year (see our report on page 6 of this issue) in a panel discussion on geographical information systems (GIS) and the digital oilfield. The replies ranged from ‘You can’t do GIS just because you want to!’ to a more measured argument along the lines of GIS being a sunk cost, and a technology waiting to be leveraged. It seems as though for some, we are entering an era of cost cutting with a hangover from the boom years. Almost a mirror image of how the industry entered the boom only a couple of years ago with a firmly anchored cost-cutting mentality that only evaporated when oil broke the $100 barrier. I think that the ‘sunk cost’ notion of an IT asset contrasts in an interesting way with the project-based approach. But before going further with that, I’d like to back off a bit and do some soul-searching regarding the raison d’être of Oil IT Journal itself.
At last year’s Society of Exploration Geophysicists conference, I was chatting with an SEG luminary and, as is my wont, gave hive a copy of Oil IT Journal for his subsequent perusal. He got back to say that he had enjoyed reading the publication, describing it as ‘eclectic.’
I suppose that that was not quite the analysis I was hoping for! ‘Brilliant’ perhaps, ‘insightful’ maybe. But ‘eclectic’ is close to ‘grasshopper’ and ‘lacking in focus.’ It is true that if you are a geophysicist, then process control is probably off your radar. And vice versa. In the old days of Petroleum Data Manager, we were indeed more ‘focused.’ But at subsequent tradeshows and conferences, little by little we were exposed to stuff like enterprise resource planning (ERP) applications, production data, communications, high performance computing and process control. ‘Eclectic’ just kind of crept in.
At the panel session on ‘Digital Oilfield Strategies’ at the 2009 SPE Digital Energy conference in Houston this month (full report in next month’s Oil IT Journal), moderator Mehrzad Mahdavi (Dexa Systems) invited panel members to define the ‘digital oilfield.’ I thought that I had a fairly good idea what the digital oilfield was about at the start of the debate. I wasn’t so sure by the end. But during the buzzword bingo exchanges, one remark from ExxonMobil’s digital oilfield lead, Russ Spahr, caught my attention. Spahr noted that technologies like the digital oilfield are ‘chasing the same barrels as other asset management processes.’
When I first heard this I thought it was kind of strange that digital technology should be in competition with other projects. In an ideal world, digital should naturally integrate projects. But this is not an ideal world.
This dilemma was echoed by Chevron’s Jim Brink at the ESRI PUG who argued that there are smarter ways of improving a brownfield asset that drilling new wells. You can imagine the kind of discussions that could take place inside a major between a geologist with a hot shot ‘attic oil’ play that requires a new well and a technologist with a proposal for a radio frequency identification (RFID) network for oil country equipment tracking or a new supercomputer for real-time production data analysis.
Such considerations add a new dimension to portfolio management. You’ve probably read about methods such as ‘efficient frontier analysis’ which are used to arbitrate between different acreage opportunities or to decide which wells should be drilled. These could take on an almost fractal complexity if you try to optimize investment across acreage, prospects, well targets, technology and IT investment! Which is pretty much why we resort to ‘competing’ for the same barrels, and also, by the way, why management is more than just executing projects that fall within some kind of multi-dimensional creaming curve.
Occasionally, technology comes along that is so compelling it is implemented without any financial justification. My favorite example is the Fax. Never before has a technology had such a wide impact, revolutionizing communications almost overnight, and in the total absence of any hype! There were no conferences on ‘How the Fax will Change your Business.’ No longwinded debates on the Fax’s return on investment! You just heard about it, went out and bought one, plugged it in and switched it on. Bye-bye telex!
Such IT ‘no brainers’ are few and far between, although NetApp’s filers were so compelling to the geophysical interpretation community that some business units went shopping for them without a by-your-leave from the IT department. The ESRI PUG folks see GIS in a similar light and talk enthusiastically of having drunk the GIS Kool-Aid. But more often than not, there is enough uncertainty attached to a new technology to defy monetary analysis.
I think this pretty much nails down the state of the art in technology management, especially regarding IT. It is ‘competing’ with other opportunities, and calling the shots is tough. To the extend that, when Mahdavi asked the panel who was ‘closer to the digital oilfield finish line?,’ panellists were falling over themselves to get to the back of the queue. The consensus was that everyone was close to the starting point of the digital oilfield journey.
The likelihood is that this will be a long trip! ‘Digital’ is constantly re-inventing itself. Just as you have nailed down a perfect combo of digital and process, and when everything is running smoothly, along comes another paradigm, Web 2.0, RFID, social networking, a better mousetrap or whatever; and the whole process starts over. As companies try to look at more dimensions of the creaming curve, more and more technologies and processes are up for ‘re-invention.’
In which context, I think I can live with ‘eclectic.’ I like to think that by venturing out and about into foreign realms—process, engineering construction and finance for instance, our eclecticism is helping in the technology arbitration process. I also think that we are doing a reasonable job in helping ‘de-layer the jargon,’ as one panelist described the process, in a neatly self-referential comment.
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