Opening the 2014 GE O&G annual meeting in Florence, Italy this month, Lorenzo Simonelli announced GE’s R&D hook-up with Chevron and emphasized synergies between GE’s oil and gas unit and its many other branches including healthcare. One such example is the X-ray imaging developed for healthcare that is used to inspect pipelines. GE is building a new oil and gas HQ located in Oklahoma. Simonelli expects the US non-conventional sector to grow 50% by 2020.
Chevron’s Manny Gonzalez embellished on the technology transfer theme citing solutions from ‘unexpected places.’ Chevron was recently confronted by casing collapse in HPHT wells caused by mud expanding as it heated up. Discussion with laser scientists at LANL were fruitful as they has exactly the opposite problem with a polymer that shrank on heating. A novel mud system was developed with the new polymer and ‘it worked!’
Accenture’s Jean-Marc Ollagnier addressed the value of big data stating that, ‘we believe that the big data revolution will bring value to business.’ Accenture is mapping big data processes and relevance across industries. In the upstream, data driven analytics will reduce shutdowns, enable asset optimization and predictive maintenance. All with a significant $/bbl impact. ‘Yes there is a big data revolution and it is relevant to your industry.’
Gianluca Pisanello (Caterham F1) was asked for parallels with Formula 1 racing. Formula 1 could not exist without data. Today a racing car is a laboratory on wheels with hundreds of onboard sensors streaming information in real time. Before the race, a ‘driver in the loop simulator,’ (described as a very expensive video game) blends data from the race track and gathers driver-metrics. ‘Virtual data’ such as computational fluid dynamics used in design is as important as real data. Formula 1 leverages massive amounts of data as cars evolve continuously.
Manny Gonzales (Chevron) compared the changes in F1 with the digital oilfield revolution. The GE/Chevron developed Safire multi-phase meter has allowed Chevron to move from one well test per month to one per hour and engineers now see how wells perform in near real time. This information leads to increased production and better, data-driven knowledge of the field. Similar improvement has come from continuous (as opposed to once per year) wireline pressure gauge measurement.
GE’s Brian Palmer asked how talent and data were managed in organizations. Ollagnier stated that the aging workforce issue is for real and is being addressed with significant training programs. Communications technology also plays a role as it lets you move work to people. De-manning offshore platforms is seen as desirable in terms of HSE. The real time operations center is a ‘massive change,’ one Australian operator uses engineers based in India, moving the work to the people. And there is much more to do here.
Gonzales concurred, work now involves teams around the world exchanging data during product development and transcending corporate boundaries. In operations, data is channeled to central locations where reservoir engineers can analyze and recommend courses of action. Chevron has fiber to thousands of wells in the San Joachim valley—but not to Indonesia!
Formula 1 used to rely on its older engineers but this is changing with less reliance on individual experience. Processes have evolved such that data is more than a single person can process. Since year 2000, F1 has seen a ‘spending madness’ that almost brought the system down. Companies were going for as much data as was possible—building multiple wind tunnels at $50 mill a pop! This was unsustainable. New rules have capped testing time, teraflops and wind tunnel use. There is a shift to intelligent, automated leverage of data.
Palmer asked if IT should be viewed as an enabler, as a core operation or indeed if IT and operations technology should merge. Ollagnier recognized the IT/OT convergence issue. We like to talk about data and analytics, cutting across the silo boundaries. But this is not so easy. Companies are just not organized this way and have OT/IT silos which may be at different maturity levels. Operations know the needs of business—but you also need experienced IT folks. One solution is to mix up the roles—to train IT on OT and vice versa. This is an issue, ‘I don’t know what the answer is, but the status quo is not an option.’ Pisanello did not see the problem with IT/OT integration, ‘what are you afraid of? Get IT into your core business!’
Palmer introduced the thorny topic of security and the risk of disruption to operations. Gonzales described security as the biggest challenge to the industry and as at the intersection of IT/OT. Once a company has been penetrated, hackers can ‘sit there and gather information for long time.’ Processes could be altered and cause huge disruptions and safety issues. Industry is working hard to address these issues. For Accenture, ‘security is now a board level issue.’ When every device has an IP address (q.v. GE’s industrial internet?), it will be a new world and a headache for IT security. ‘You can’t have a safe enterprise with all your operations exposed!’
For Ollagnier, the digital oilfield has been a mixed experience with a lack of talent, sponsorship and data quality. Companies ‘may not get what they expect.’ The digital oilfield is not a technology project, it is a game changer with the potential for reduced maintenance, increased production and decreased costs. You need a big target and the right sponsor or you will run into the silo problem. A risk/reward balance needs to be struck, operations may have a comfort zone but there may be interesting ‘exotic’ technology with more risk. The value comes from a holistic approach, this is not just an IT/OT issue.
Palmer invited panelists to give their best shot for big data driving performance. For Chevron—look over your fields and go for extra recovery through transformational technologies including use of data. F1 could not do its business without data—but you need to focus on data quality, availability and move closer to real time and remote operations. More and more of race strategy is dictated from the factory but we fight daily for data quality. Accenture believes that in every business there is a place that can benefit from the digital transformation—look for and find it!
GE’s Jerome Luciat-Labry introduced the panel session on the state of the oil and gas industry observing that while the oil price and economics are good, cost inflation is impacting investment and subsea suffers from an execution bottleneck. Gas is now abundant, coming from sufficiently diverse sources to qualify as the 21 century urban fuel. Gas can be a bridge between the ‘brown’ 20th century and green 21st. This will require a massive investment in infrastructure to connect LNG terminals, pipelines and households. There is a role for small scale solutions (q.v. GE’s LNG in a box) and for a new class of digital technologies, ‘brilliant machines’ that will extend the life of mature assets from Texas to the Middle East.
Christof Rühl (BP) summarized the conclusions of BP’s World Energy Outlook as follows. Looking forward to 2035, there will be enough resources to fuel world demand (which is high but less than previously believed) thanks to unconventionals, oil sands and tremendous energy efficiency. Energy security is a harder question to answer with disruptions from movements like the Arab spring. Sustainability is problematic. Little has been achieved re CO2 emissions which have doubled since 1990—‘climate scientists are alarmed.’ The good news is that massive energy efficiency has produced real reductions even if fossil fuel substitution is still too low. Replacing just 1% of coal used by natural gas would be equivalent (in CO2) to all the current production of renewables. BP sees tight oil production continuing globally and rising to 7% of world production. Shale gas could account for 21% of global gas by 2035, but conventional gas production will increase more than shale gas. For Rühl, the biggest risk is human folly—witness EU energy ‘policy’ and countries with energy subsidies like India and Argentina.
ENI Chairman Giuseppe Recchi described today’s oil and gas outlook as unclear. We are moving from cheap and easy oil to expensive and technically challenging projects. This is reflected in the oil price and in what has become a crowded arena with competition between internationals, independents and, especially national oil companies whose expenditure is growing fastest.
With technical challenges such as 3,000 meter water depths in the Gulf of Mexico, ‘expenditure is growing much faster than production.’ The average delay from deepwater discovery to sanction is now seven years—up two years since 2012. A fact that is reflected in the IHS upstream capital costs index. These are rising because of the increasing role of frontier themes and growing execution times. The latter are partly due to ‘irresponsible outsourcing.’ ENI for one is looking to ‘re-source’ (i.e. bring back in house) core competencies. 80% of ENI’s future will come from giant projects.
Statoil ‘s Lars Christian Bacher discussed the role of technology and globalization observing that our interconnected economies expose us to shocks. There are risks above ground (human rights, corporate responsibility, terrorism) and there is complexity below ground, making for ‘substantial headwinds.’ But the biggest challenge is CO2, where there is ‘indisputable evidence for anthropogenic global warming.’ However, ‘energy is not evil’ and we will need more energy and oil and gas. Another 50% of today’s oil and gas production will be required by 2035 to meet demand (according to the IEA). Bacher reported on a novel green metric, the ratio of metric tonnes of CO2 per unit of revenue. Here, Statoil leads, Gazprom comes off worst. More on this from the Carbon disclosure project. For Statoil, technology is a differentiator—a ‘sub-sea factory’ capability is planned for 2020 with a producing platform and tank farm on the sea bed. This ‘will provide access to new resources in a sustainable and profitable manner.’
There was a wide-ranging debate at the software-focused ‘Predictivity’ session chaired by GE Oil and Gas CTO software, Jesse Demesa. If a $100 printer can tell you when its cartridges are about to expire, why shouldn’t a $100 million piece of machinery? This is one of the core concepts behind GE’s industrial internet paradigm—a ‘social network’ of machines, sensors and software. Demesa reported that GE has sunk $1 billion into this venture over a three year period. Around 1,000 people now work at its San Ramone software HQ in Silicon Valley on data science, cyber security and the cloud. ‘Predix’ is the core industrial platform for all GE’s verticals, on top of which, ‘Predictivity’ solutions are built for each vertical. One such solution is GE’s Reliability Max that centralizes alarms and notifications from remote assets, offering drill-down into plant data. The system is to be deployed on BG Group’s Curtis Island coal bed methane to LNG plant.
Another Predix application is the new ‘Field360’ electrical submerged pump monitor and performance optimizer. This provides a prioritized view of high impact wells along with ‘big data’ analytics from GE’s 14,000 strong installed base. Wells requiring attention are highlighted. GE’s roadmap extends to the subsea where a data agnostic approach allows for data collect from heterogeneous installed systems (not just GE). The embryonic subsea integrity offering gathers pressure, temperature and flow data and rolls it up into a holistic overview. The plan is to raise the confidence level of meter data and to present validated data on a subsea control module dashboard.
The International Energy Agency’s Maria van der Hoeven described the coming changes in the energy economy. Even though there will be a move to lower carbon sources, the share of fossil fuel in world energy will not change much. Coal is still king—especially in China where huge coal expansion is drowning green efforts. The abundant supply of gas is our only salvation. But gas is squeezed between coal and low carbon sources. The world needs efficient, well functioning markets. Shale gas can cut CO2 emissions but beware of fugitive emissions. In one scenario, these make gas look worse than coal! The IEA wants to initiate a conversation on the transformation of the industry to ensure that business is profitable and economically robust. van der Hoeven wound up saying that in the future, ‘You will be gas and oil companies, not oil and gas.’
The session on human resources offered some useful advice to those seeking to engage recent graduates in an industry that is often perceived as ‘dirty’ or ‘not sexy.’ The trick is to get at potential hires towards the end of their university careers. Then, ‘if you pay them more than the vultures (venture capitalists and others in finance) , they will come flocking to your door.’ Visit the GE annual meeting minisite.
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