Oil and gas producers, particularly independents operating in the US Lower 48, are adapting digital technologies to trim expenses and increase well productivity, according to recent findings from an upstream report by Wood Mackenzie Ltd. and a separate energy executive survey by Deloitte.
Anuj Goyal, WoodMac Lower 48 upstream analyst, said independents are known to adapt new technologies faster than the majors. That trend also holds true with Big Data applications.
“As the industry continues its path into the digital age, this propensity to rapidly adopt new and innovative technologies has helped many Lower 48 operators stay ahead of the curve and be further along the path to realizing the benefits of digital transformation,” Goyal said.
Deloitte’s “2018 Oil, Gas & Chemicals Executives” survey results showed respondents working in upstream oil and gas operations believe digitalization offers cost control and near-term efficiency gains.
WoodMac findings
WoodMac’s report, “Digitalization in Upstream: Show Me the Money,” examines how companies use digital technologies to save money. The report estimated digitalization could help upstream operators worldwide reduce spending by billions of dollars every year in coming years.
Digitalization has helped increase drilling speeds through automation and improved production management, WoodMac said.
In the past 4 years, drilling speeds across the Lower 48 increased by an average of 10% with some operators reporting 20% increased drilling speed. Meanwhile, Lower 48 oil production is at an all-time high despite running only half the rigs compared with 4 years ago.
Machine learning algorithms that use production, completion, and subsurface data are starting to help Lower 48 operators improve well completion designs.
Manually managing production from mature wells is repetitive and labor-intensive. Current artificial intelligence systems detect production anomalies and recommend adjustments. Production results fed into algorithms enable operators to adjust field operations in real time.
Typically, Lower 48 horizontal wells start generating positive cash flow within 3 years. After that, remaining returns depend largely on lease operating expenses (LOE)—making these wells prime targets for optimization.
The WoodMac report estimates placing mature wells on smart production management systems could lower LOE by 10%.
Deloitte survey
About two thirds of surveyed executives characterized the digital maturity level of the oil and gas industry as being what they called relatively moderate.
Oil and gas executives ranked operational efficiency and productivity as the top benefits derived from their use of digital technology so far.
Nearly half of oil and gas executives (44%) and chemical executives (49%) listed artificial intelligence, machine learning, and advanced analytics as the technologies yielding the most benefits based on early returns on investment and achieving specific business objectives.
John England, a Deloitte & Touche LLP partner with oil, gas, and chemicals, said, “Industry seems much better off than a year ago…. Most upstream executives surveyed see better days ahead but are managing more with caution.”
Speaking with reporters during a recent Deloitte Oil & Gas Conference in Houston, England noted cost management remains a top concern for operators. “With growth and recovery top of mind, digital technologies could become critically important for productivity and profitability and should serve as a lever to help mitigate rising costs,” he said.
Digitalization examples
The WoodMac report lists a few examples of applied analytics. These include the following:
• Cairn Energy shaved months off its 3D seismic processing schedule, improving the speed at which the company can make drill-or-drop decisions. A better understanding of the subsurface helps avoid drilling dry holes.
• Equinor, which established a digital center in 2017, believes automated drilling will enable faster drilling. Equinor is applying automated drilling on a mobile rig in the Barents Sea.