Extended Integration The Key To Future Productivity Leap

Robert P. Peebler
Landmark Graphics Corp.
Houston

Integration, combined with advanced information technology, will be the lever that moves exploration and production companies to their next level of productivity and profitability.

Integration is enabling the E&P industry to shift its focus from simple structural interpretation to complex 3D-and even 4D-reservoir characterization and simulation.

Now, in addition to defining the structural "container," E&P professionals are integrating 3D seismic with all available data-geologic, geophysical, and engineering-to better model both rock and fluid properties of whole stratigraphic intervals. This shift marks a major leap in technology-based productivity by the modern oil and gas industry.

Very soon, however, a much more dramatic productivity leap will begin. The most visionary companies-those that adopt technology early-are looking beyond integrated reservoir characterization and simulation to the next long-term business advantage: leveraging knowledge.

I believe the industry is entering a new era of growth in which better decision-making, business advantages, and exponential gains in productivity will depend on a company's ability to integrate the collective knowledge of the entire organization.

The leap into this era of growth will extend integration from a single scientific process to an entire E&P enterprise. I call such companies I² enterprises because they multiply "informationalization" by "integration" to increase enterprise-wide productivity-exponentially, not just incrementally.

The next leap will happen faster than its predecessors. Extending integration to encompass entire organizations will change forever the way people work.

Productivity leaps

In terms of finding and managing petroleum reservoirs, the first significant impact on productivity probably came in the late 1950s and 1960s with the widespread use of well logs and 2D seismic data.

Together, these technologies greatly improved structural interpretation of the subsurface-one through direct measurement, the other through indirect imaging. They were as important to E&P professionals as exploratory surgery and X-rays were to physicians.

Productivity improvements from this first leap peaked during the 1970s, with only incremental gains since that time. Logging tools and 2D seismic processing have been refined, but the basic science has changed very little. As the first leap leveled off, the second began (Fig. 1 [23714 bytes]).

With the introduction of 3D seismic technology in the early 1980s, the industry took an even greater leap in productivity.

From the beginning, 3D seismic was enabled by computers. Acquisition required computing technology in the field just to record the digital data; processing required powerful systems in the computing center; and interpretation and visualization of large data volumes required a new breed of interactive workstations in the office. To date, the primary use of 3D seismic has been focused on better structural interpretation of faults and horizons.

Companies that pioneered this technology since the 1980s have experienced tremendous productivity benefits and now recognize 3D seismic as a key ingredient to success. Companies just discovering 3D seismic today are already late adopters of the technology, even among the independents.

In terms of pure 3D structural interpretation, I suspect that gains will be mostly incremental from here on. But that doesn't mean the second leap is complete. Over the next 5 years or so, I believe the industry will see additional dramatic productivity improvements building on 3D seismic technology and the recent shift in focus from structural interpretation to reservoir characterization and simulation.

Integration of data allows oil companies not only to characterize static properties of the reservoir today but also to simulate dynamic flow through the reservoir over time, adding a fourth dimension.

Already, some companies are acquiring 4D seismic-multiple 3D surveys shot over a field at different times-to monitor and improve recovery efficiency. By the year 2000, as these techniques become widespread, productivity increases associated with the second leap will probably taper off.

The third leap

In the coming third leap of E&P productivity, I² enterprises will use sweeping, rather than targeted, integration to reap new benefits from "informationalization."

For years, the petroleum industry has been "informationalizing" many aspects of the business, investing hundreds of millions of dollars in computing technology. Many executives, however, haven't seen the productivity gains they had expected.

One reason is that most organizations have only applied information technology to specific tasks rather than whole processes. Instead of significantly changing the way they work, they have simply automated old methods.

Informationalization, therefore, is necessary but not sufficient to achieve dramatic improvements in productivity. Integration, on the other hand, requires whole new ways of working.

"Integration" simply means concurrently combining raw data and information from all parts of an organization and connecting different peoples' perspectives, expertise, and ideas to make better business decisions in less time. Three of the most important information technologies that enable integration are desktop systems powerful enough to handle complex technical analysis, client-server computing for access to shared resources, and distributed databases.

These enabling technologies no longer come from niche players, as they did a few years ago. Now they are developed by large horizontal market suppliers such as Silicon Graphics, Sun, IBM, Oracle, and many others. As a result, price/performance ratios of computing technology are constantly improving.

Every phase in the typical life cycle of an oil field (Fig. 2 [39017 bytes]) requires various E&P professionals to integrate field operations (data acquisition, drilling, enhanced recovery) with "knowledge work" (data processing, analysis, interpretation). Quality and productivity improve in each phase where people collaborate and have easy access to all the information they need. Ultimately, integration across all phases of the life cycle will yield even greater gains than integration within any particular phase.

Having cut virtually all of the "organizational fat" from their technical staffs and operating budgets, oil companies increasingly must address the fat that can be found in inefficient decision-making processes. Many technical and operational decisions are flawed not because people lack intelligence but because they lack information.

The goal of the I² enterprise is to eliminate this "decision fat" by leveraging the company's collective knowledge more effectively.

Hierarchy of integration

I believe oil and gas companies have a hierarchy of integration needs, much like the hierarchy of human needs postulated several decades ago by Abraham Maslow, the social scientist.

Maslow noted that people can move up the hierarchy only when their more basic needs are met. For example, unless a person's survival needs-air, water, food, shelter-have been met, he or she cannot even consider "self-actualization," which Maslow identified as the pinnacle of human need.

In our industry, I've observed four distinct levels of integration needs:

(1) data integration,
(2) integration of workflows within teams or operating groups,
(3) integration of processes across different operational groups, and
(4) company-wide resource allocation (Fig. 3 [35909 bytes]).

• Level one: data. The most basic need industry professionals have today is "mechanical" integration of all the data within their organizations in digital forms that facilitate more efficient work at every phase of the oil field life cycle. The ultimate goal is to provide "just-in-time" information to all knowledge workers.

  Millions of dollars have been spent to develop standard E&P data models and some basic integration technology. While considerable progress has been made, the industry has not fully attained level one integration.

  The problem is enormous. Companies store huge amounts of "legacy" data in numerous incompatible forms (from paper to digital) and electronic formats.

  What's more, the quantity of new data being acquired is growing rapidly. It has been estimated, for example, that the total amount of well log and seismic data acquired during the 1980s averaged less than 100 terabytes per year. During the 1990s, that number has jumped to an average of 500 terabytes per year. By the end of the decade, it could be nearly 1,000 terabytes per year. The industry is experiencing a data explosion.

  In addition to raw physical data-well logs, seismic surveys, pressure tests, production rates-companies would also like to capture, and integrate, accumulated knowledge about a reservoir over its life span. That knowledge, however, is stored in the minds of the geoscientists and engineers who convert raw data into a better understanding of the reservoir.

  Unfortunately, the people who start the process usually do not carry it through the life cycle, since that cycle often spans decades. Along the way, increasing amounts of knowledge are lost as people change jobs or leave the company. To capture that knowledge will require more than a "data management" system; it will require new types of "knowledge management" technology as well.

  Lack of basic data integration costs the average E&P professional a considerable amount of time. According to various estimates, geoscientists and engineers spend from 20% to 30% of their total project time searching for, loading, and formatting data. Obviously, significant productivity gains are still locked up in organizations that do not have level one integration.

  How long is it likely to take before the industry achieves "just-in-time" data? Currently, I estimate (and this may be optimistic) that about 20% of oil companies have some type of level one integration. By the year 2000, however, 75% of the industry may have achieved this level (Fig. 4 [31754 bytes]). That means most companies can expect tremendous productivity gains over the next 5 years.

• Level two: workflows. As E&P organizations begin to achieve data integration, then they can move up the hierarchy.

  Today, many are reorganizing work processes around multidisciplinary teams within their operating divisions. Most teams focus on one or two phases of the oil field life cycle, such as prospect generation or reservoir development. Then they hand off to another team. But a few companies are starting to view the life cycle of assets as a whole.

  Turning a collection of individuals into a high impact team requires certain enablers-some social, some technical. Socially, they must be launched with a holistic view of the business objectives, as well as clearly defined roles.

  An interdisciplinary team may be chartered, say, to increase reserves 40%, or reduce cycle time by 25%. Each team member's role and priorities, then, would be determined within the context of such objectives.

  To integrate their workflows, high impact teams also require four technical enablers.

  First, they need access to data "just-in-time," which can be defined as "right when they need it." Waiting for data interrupts the workflow and consumes valuable time.

  Second, they need integrated software applications that share data easily and build bridges across the gaps between disciplines. Geostatistical software used in modeling complex reservoir properties would be an example of an integrating application.

  Third, teams must have a highly interactive computing environment, so that every time they change a variable the effect can be seen immediately.

  Finally, they need 3D modeling and visualization technologies to display the team's collective results. Team members may think about the reservoir differently, but modern visualization tools enable them to integrate all the information in a common 3D (or 4D) model.

  When professionals work concurrently rather than sequentially to solve problems, they often collapse cycle times and boost productivity dramatically. The U.S. Air Force, for example, found that concurrent workflows reduced engineering cycle times by as much as 40%.

  One of Landmark's customers-a multidisciplinary team with a major oil company-cut its interpretation cycle time on one project about 65% using integrated geoscience applications and a shared database. More importantly, however, interactive testing of multiple reservoir scenarios improved the quality and accuracy of the final interpretation. As a result, the team increased reserves by several million bbl and extended the field's productive life by 20 years.

  So how long will it take for oil companies to reorganize around high impact teams and integrated workflows? Despite advancements in technology, probably only half of the industry will achieve level two integration by the end of the century, largely because of social and cultural barriers to change.

• Level three: operational groups. Once a petroleum company has integrated team workflows within operating groups, the next level would be integrating operational processes across groups.

  For example, reservoir characterization teams need to work closely with drilling groups and facilities planning to reduce long field development cycles. But each of these groups operates quite differently. Unless they can share common information quickly and easily, the company could make extremely costly errors, such as over-engineering production facilities for a new offshore field. Because expenditures tend to be much higher at this operational level than at the team level, gains in productivity could have enormous economic impact.

  One of the challenges of integration at the operational process level is that in so-called "virtual corporations" not all of the "groups" are in-house. And in the future, even more work may be outsourced to service companies, consultants, and vendors.

  Seamlessly integrated information systems across organizational boundaries will be vital to success. That means companies will have to find innovative ways of breaking down communication barriers while maintaining the security of proprietary information.

  Considering the challenges involved, I suspect that only 30% of the industry will successfully integrate across groups by the year 2000.

• Level four: resource allocation. Throughout the life cycle of a typical oil field, managers at all levels make business decisions that can set millions of dollars into motion. Decision-makers need interactive access to the collective wisdom of an organization so they can understand how to allocate limited resources wisely.

  For example, if they have 50 good prospects, but only enough budget to drill 20 wells, how do they optimize the selection process? Effective resource allocation requires integration of information from all across the company: reservoir size and risk, cost of production facilities, location of pipelines, regulatory restrictions, market status, and so on.

  For this reason, level four integration cannot be achieved until the first three levels are essentially complete.

  Some companies and universities have begun experimenting with different approaches to resource allocation, replacing ad hoc decisions with statistical approaches similar to those used in investment portfolio management. By applying such an approach, one major oil company increased the net present value of its investment portfolio by $20 million and cut capital expenditures by $20 million, for a net benefit of $40 million.

  In most cases, however, these new approaches are hampered by lack of enterprise-wide information technologies needed to support significantly better decision-making. Eventually, managers and executives will have software tools designed specifically for resource allocation, giving them the ability to locate, integrate and visualize an enormous variety of data.

  This level of integration may yield some of the greatest productivity benefits of all, but it will probably take much longer to realize them. Not only must level four build on the previous three, but it will also require considerable changes in management style and philosophy.

  By the year 2000, probably fewer than 20% of the companies in our industry will achieve fully integrated resource allocation. Clearly, this technology will be in the very early adoption stage during the next 5 years.

The I² enterprise

Once an oil company has completely informationalized and accomplished all four levels of integration, it will be an I² enterprise. It is doubtful that any true I² enterprises exist today, but some are well on their way.

Which companies will get there first? The ones that are focusing now on the second stage of the second great productivity leap: integrated 3D reservoir characterization and simulation. Of course, companies differ widely in size and style. So not all I² enterprises will look exactly the same. But they will share a common goal: eliminating "decision fat" from their organizations.

Using knowledge to compete will be the new core competency. I² enterprises will deliver data "just in time," form high impact teams, improve intergroup cooperation, and optimize resources. In the process, they will make much-better decisions faster and achieve exponential gains in productivity.

The Author