This time last year I made the brilliant—if obvious—deduction that oil and gas consumption will recover to pre-pandemic levels by mid-2021. The open question I posed was from where supply was going to come. At the time offshore, particularly deepwater, was making splashes, but it has gone a bit quiet out there, save for BP taking delivery of Argos for Mad Dog Phase 2 and Shell announcing a new Gulf of Mexico discovery.
Fracturing, however, has roared back. At end of first quarter this year, Rystad reported a 12-month high in the number of newly fractured wells in North America, which was nearly back to pre-pandemic levels with 1,064 wells in March alone.
There is still room to grow. Baker Hughes US land rig count is about 140 rigs down from this time last year. The Permian basin, as ever, leads the way, and not by a little bit.
I also predicted that petrochemicals were going to soak up a lot of petroleum demand that otherwise would have gone into fuels. I wasn’t alone in making this prediction, which recently has been seconded by Precedence Research, a Canadian-Indian group which estimates 5.1% yearly growth in petrochemical demand to 2030. Reasons cited for this growth include increasing demand for petrochemicals in commercial applications, growing adoption of petrochemicals in the construction and automotive industries, and petrochemical capacity expansion by major players.
Construction, automotive, aviation, food, electricals, paint and coatings, and paper are major industrial applications for petrochemicals, and construction is expected to dominate revenue. Automotive will also expand significantly over the forecast time frame. Ethylene and polypropylene have the largest product segment among petrochemicals. The former is expected to grow in the packaging industry, and the latter will grow with the automotive sector.
Jet fuel demand is also increasing. April’s daily aircraft passenger total was 60% of typical pre-pandemic levels. Growth in that industry is just getting started as vaccines become more prevalent.
Despite all this demand, Rystad expects increases in E&P spending to be gradual, growing to $480 billion by 2025 from $382 billion last year, still below the $530 billion pre-pandemic level. Regardless of the accuracy of these predictions, expect employment per barrel to continue a downward trend.
Which brings us to this month’s special: the digital oilfield. Make no mistake, digital applications primarily aim to improve workflows, increase performance, and provide safer operating conditions. At its best, the technology is transformative, allowing applications that simply could not exist without it. Boston Consulting Group reported that digital applications at oil and gas companies which successfully introduce digital across their businesses, as opposed to one-off applications, produced up to 40% faster well delivery, 50-60% reduction in data interpretation time and cost, 20-40% reduction in maintenance costs, and 20% reduction in lost personnel time.
But by increasing efficiency, digital applications also reduce demand for human labor, helping keep payrolls at a minimum.
Late last year, BP presented an offshore rig maintenance and inspection study of Boston Dynamics SPOT robots. BP’s LinkedIn announcement touted a supplemental rather than disruptive role for the robot; essentially to perform routine tasks and leave more interesting and challenging issues to staff.
The community on LinkedIn wasn’t having it. Many commentors claimed that the purpose of the robot was to replace people. After a number of these posts, BP replied that “SPOT is looking to improve safety and efficiency—not replace anyone.”
The oilfield is changing. Do not expect to see the same old fields operating in the same old ways. Brush up on your tech skills. If you don’t have a computer science minor, start working on one. With it, you will be unstoppable. Without it, you will be obsolete.
Alex Procyk | Upstream Editor
Alex Procyk is Upstream Editor at Oil & Gas Journal. He has also served as a principal technical professional at Halliburton and as a completion engineer at ConocoPhillips. He holds a BS in chemistry (1987) from Kent State University and a PhD in chemistry (1992) from Carnegie Mellon University. He is a member of the Society of Petroleum Engineers (SPE).