Technip CEO Thierry Pilenko asked in his keynote, ‘are you sure it’s only about costs?’ The current crisis in the oil industry is the worst for a generation, probably worse even than 1986. Everyone knows what needs to be done. We hear, ‘you are all too expensive, do something now.’ Technip started with a 10% cut (i.e. its profit margin!) then turned to GE which turned to its suppliers and so on. But industry is asking for 30, 40 or 50%! Drilling is already there, but is what has been achieved sustainable? Meanwhile megatrends are working the other way. Developing a cluster of fields is more costly than a single massive field. National labor content adds cost. Inflation raises salaries. There is a fantastic reservoir of talent in India but salaries are up 50% in the last 4 years. Pilenko got into his swing on the burden of increasing norms and regulations. Here the time spent is up from 1500 man hours for a large piece of equipment to 3000. A curious observation in the face of IT productivity gains. Each operator adds its own norms and rules, some of which seem ridiculous and kill productivity.
BP head of global operations Fawaz Bitar agreed that the industry had gotten too comfortable at $100 oil and that there was too much over-specification. Workforce productivity had decreased to the extent that ‘wrench time’ may average only 4 hours out of a 12 hour shift. BP is addressing this with increased standardization, citing the OK IOGP’s initiative to standardize procurement specs for ball valves, subsea trees and low voltage switchgear. Bitar also mentioned GE’s Unified Operations, deployed in BP’s Plant operations advisor as providing ‘holistic insight’ into performance of (e.g.) gas compression systems.
Total’s Bernard Quoix (VP rotating equipment) opined that ‘engineers are as concerned by costs as finance.’ Total is addressing ‘exponentially increasing’ costs with fit-for-purpose design and process standardization. Quoix advocates standardizing before a contractor is assigned. ‘We don’t want the EPC to decide for us.’ Total works with GE on optimization and Quoix’ dream is that ‘we remain in direct contact, without having to go through the EPC who is only interested in the bottom line.’ We expect that Quoix meant to add ‘present company excepted’ as Thierry Pilenko was sitting only a few feet away! Total is an enthusiastic user of GE SmartSignal for predictive maintenance and controls all of its rotating machinery from Pau, France.
Just when everyone had got comfortable with the idea of standardization, Welltec president and CEO Jørgen Hallundbæk took the stage to argue that standardization produces a ‘low to common denominator.’ Welltec performs the equivalent of keyhole surgery on wells, and works to take people off the rig, operating a rig remotely like a drone and using downhole robots to fix issues like stuck pipe. Welltec likes to over-specify its robots so that they are ready for different tasks, creating completion system that can be deployed by pipe handlers. Welltec even automates its own factory where ‘robots build robots.’ Hallundbæk observed that the true uncertainty in field development is geology and therefore advocates a staged development process. A delineation well is thus designed so that it can become a ‘keeper’ if it produces.
CTO Elisabeth Birkeland Kvalheim’s keynote was a delicate balance between Statoil’s activity as an oil and gas producer and its desire for ‘innovative solutions to shape a low carbon future.’ Statoil is getting more competitive by simplifying and standardizing drilling. But standardization is not sufficient, we need more targeted technologies. Statoil’s annual 3bn NOK R&D spend has delivered some 80 new technologies including subsea gas compression, the unmanned wellhead and next (perhaps) ‘automatic drilling.’ On the flip side of the carbon coin, Statoil is working to reduce emissions and costs and to become the ‘lowest carbon oil producer in the world,’ in partnership with GE. Kvalheim invited other operators to join the project.
ExxonMobil Development Company president Neil Duffin compared and contrasted costs in routine and non-routine, complex projects. Some of the later have gone horribly wrong, bringing tens of billions in cost overruns and are decades behind schedule. And guess where the industry is going today? Even more non-routine projects, with more deepwater, FPSOs, extended laterals and LNG. Duffin categorized shale as a game changer but observed that the recent price collapse was not caused by a drop in global demand, which rose constantly through 2014. What happened was that the supply curve crossed the demand curve at the start of 2014. Major project costs can however be controlled, Exxon’s 75 million tonnes/year Papua New Guinea LNG plant came in early and on budget.
Duffin advocates one team working across operator, contractor and sub-contractor bringing all close together up front and reducing the number of hand-offs, which are always an opportunity to ‘drop the baton.’ Behaviors need to change. Engineers need to focus on engineering, calculating and managing risk. ‘Don’t pile contingency onto of contingency.’ Today the industry really doesn’t understand standardization. We have heard here a lot of talk about customization but even small tweaks cost more and take longer. We need to help the service industry standardize. A ‘little bit different’ is not standard. This way, the industry can and will weather the storm.
Ken Oostman, VP engineering with Columbia Pipeline Group, is an enthusiastic advocate of the use of big data and analytics in pipeline operations. Columbia’s wakeup call happened when a line ruptured in Sissonville West Virginia in 2012. The non-fatal but costly incident was down to a combination of corrosion, data management and scada/shutoff issues. Columbia turned to GE to develop a system to fix these issues. The solution (the Accenture/GE Intelligent Pipeline Solution (IPS)) now provides a birds-eye view of operations, with drill down to individual segments. The system provides fast access to information even if there are still issues with the age and format of data. Columbia is also upgrading its workflow and integrating its GIS systems. One serendipitous benefit came in a meeting with the PHIMS regulator who asked operators ‘what they were doing with big data?’ Oostman talked about IPS. The others had nothing to say!
This is our second report from GE Florence and we still haven’t got around to Predix. This will definitely come next month.
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