Moving upstream with digital technology in the oil and gas industry
Digital transformation has the potential to significantly impact the oil and gas industry, much like it has in so many other sectors. Oil and gas exploration and production that integrate advanced technologies, such as sensors, automation and big data analytics, can lead to improved efficiency and cost-effectiveness in drilling and production operations. Additionally, companies that take advantage of automated tools can streamline their supply chains. The use of advanced analytics and data visualization tools also can be used to optimize the performance of refineries and petrochemical plants, as well as to improve the monitoring and control of the entire value chain.
Taking advantage of these benefits, however, will not come without significant effort. It’s important for companies that are heavily invested in legacy systems and infrastructure to adopt new technologies and integrate them appropriately, but the industry’s complexity, scale of operations, and cost of production could cause some pessimism. A commitment to resources, collaboration, teamwork and leadership is required to improve industry functions, enhance efficiency and leverage new technologies in the upstream space.
CHRONIC AND HISTORICAL INDUSTRY CHALLENGES
While each sector in the oil and gas industry has its own distinct challenges, how those challenges are mitigated, based on workflow needs, will help determine where technology can be most beneficial. In the upstream space, there’s a need for increased safety measures and better risk management, as operational costs continue to rise. Environmental and healthcare concerns related to combustion, emissions, the greenhouse effect, climate change and conservation of the world’s resources are also important. Everything adds up to a shared responsibility to improve the sustainability of oil and gas usage.
With total proven oil reserves at 1.65 trillion barrels, it has been calculated that the world will exhaust this supply in 47 years. Globally, the rate of oil discovery is at its lowest level since the 1950s. At the same time, industry professionals are confronted with increased safety risks, including vehicle collisions, falls, ergonomic hazards and electrical and other hazardous energy, according to the Occupational Safety and Health Administration (OSHA). These problems have persisted, despite programs that are aimed at reducing these concerns, including the CDC’s National Institute for Occupational Safety & Health’s (NIOSH) Oil and Gas Extraction Program.
ADDRESSING ISSUES THROUGH SOPHISTICATED TECHNOLOGIES
There are numerous existing and developing technologies that serve the upstream segment of the industry in capacities such as exploration, geological surveys, obtaining land rights, onshore and offshore drilling, and production. Examples of these technologies include automation, drones, robotics, cloud and big data management tools, augmented reality (AR), virtual reality (VR), sensors connected to the Internet of Things (IoT), and the fifth-generation mobile network (better known as 5G), Fig. 1. New technologies can generate potential value that could boost recovery by 3% to 4%. The actual sums could be larger or lower, depending on transformation success, the price of oil, and other variables.
Sensors based on IoT are most effective in predictive and self-learning systems for increased productivity, and so is the use of artificial intelligence (AI) to address gaps in production that have resulted, due to a shortage of skilled-labor employees.1 Likewise, IoT sensors can be used to detect changes in each environment and collect data from that environment. They are the pieces of an IoT ecosystem that connect the digital world to the physical world. According to a forecast that looked at industry trends up until 2030, the primary market drivers for sensors in this market will be the need for modernization, refurbishment and upgradation.2
The Council of Petroleum Accountants Societies (COPAS) credits the use of robotics to automate repetitive and dangerous tasks—such as the use of aerial drones and underwater machines for welding, drilling, and the exploration of dangerous areas—with reducing the odds of injuries during most phases of production, while improving profit margins, Fig. 2.3 Overall, automation is expected to boost efficacy and benefit to investors.2 Other business-related benefits through automation include reduced labor costs, better scalability and improved time management while increasing job site safety during drilling, by implementing machines into human-type manual tasks, such as pipe handling.1
When upstream activities are scheduled in remote locations, the automation of drones can assist in monitoring the inspection process and collecting measurements of pressure and flows.1 An interesting example includes the monitoring of meter readings; intelligent cameras can conduct these reviews constantly and send alerts to all necessary stakeholders in real time. These smart cameras can help to ensure employee health and safety by initiating alerts if someone crosses the border into an unauthorized area, if someone is not wearing a helmet, or if employees are engaged in any risky or illegal activity that could put them or their co-workers in danger. Drones also can be used for surveillance, monitoring, and nearly any kind of inspection.
COPAS officials also credit advanced cloud solutions with incentivizing better storage and administration processes, for gathering information that can be analyzed in larger amounts, in real time and in a more cost-efficient manner.4 Sensitive materials related to exploration, development and production are more likely to remain confidential within a private cloud platform.
Similarly, today’s data management software includes advanced analysis services that produce more informed perspectives on gathered information. For example, analytical software can optimize the output of an entire oil field by assessing how wells are designed, drilled, and brought into production.4 According to COPAS, experts predict this type of approach to data management will significantly reduce costs in U.S. shale oilfield operations over the next 10 years.
These processes are empowered most effectively through the growing use of 5G technology—the strongest global wireless standard. The connection enables a network that is better-equipped and designed to connect people with machines and other devices. This offers several advantages to the upstream sector, including:
- Faster, more reliable transfer of data, which results in better communication between upstream operations. This capability also can improve the accuracy of real-time monitoring and control systems.
- Improved remote monitoring that supports a larger number of connected devices, allowing companies to deploy more sensors and monitoring devices in remote locations. This can improve the monitoring of equipment and processes in real time, while enabling earlier detection of issues and more effective maintenance when needed.
- Increased safety through the ability to remotely control and monitor equipment that’s located in hazardous locations. Additionally, advanced analytics and machine learning algorithms can be deployed on real-time data streams, to identify potential safety risks and provide early warning alerts.
- Reduced maintenance costs and reduced downtime, due to better monitoring of equipment.
- Improved collaboration, with the use of high-quality video conferencing and other collaborative tools that enable geographically dispersed teams to work more effectively together. This can lead to better decision-making and more efficient operations.
Digital innovations are also being utilized to construct, operate and maintain refinery resources, with more prominent security and effectiveness. An estimated 80% of plant losses are preventable. Digital solutions can help capture some of these losses by moving to advanced laborer-enablement arrangements, more predictive resource connectivity, analytics, and the creation of virtual, remotely overseen “digital twin” refiners that can recognize root causes of lost production and empower more secure working environments.
OVERCOMING MISCONCEPTIONS AND FEARS
Despite the evidence that exists in acknowledging the benefits of advanced technology, there are professionals in the oil and gas industry who remain uncertain of the expansive role that technology should have in this environment. Examples of their concerns include fear of work disruption—as a result of potential cybersecurity hacks—as well as the length of time that it takes for the migration to new technologies to be completed. The threats of malfunctions causing oil or gas to leak from a pipeline, through theft or a terrorist attack, are justified and require the establishment of stringent protocols for implementation and security. However, future-facing digital pipeline solutions will provide customers with more secure, reliable and uninterrupted services, not only for monitoring and maintenance but also for intrusion detection and prevention, Fig. 3.
These solutions are made up of five key components:
- Backbone transmission, including a fiber cable that runs the length of the pipeline.
- An integrated solution for remote site power supply.
- Communication and IoT edge-device intelligence.
- A machine vision security monitoring system, with smart cameras trained on different types of problems that can be detected and reported on in real time.
- ML software, trained for various types of intrusion and leakage, that will also be able to report concerns immediately.
Taken together, these elements meet all the communication and production requirements of pipelines and introduce intelligence to operations, helping to slash costs and improve overall efficiency.
Of the total number of global cyberattack incidents that occur by industry setting, the oil and gas industry reportedly does not rank within the top three most vulnerable. According to a report that included events through 2022, the financial services, healthcare and education industries were the most likely to experience a cyberattack. Coming in at fourth, the energy/utility industry is certainly a sought-after commodity, with one of the biggest ransomware attacks of 2021 happening on the Colonial Pipeline.5
Still, it is believed that reliance on advanced technology is the more secure method because of the additional layers of security that can be utilized,6 such as encryption algorithms, to ensure that only authorized personnel have access to documents, files and system controls. A key component to this concept, however, is that companies must employ and train professionals who have the requisite education and background.
According to officials with MojoTech—a software development company that specializes in digital transformation and product development—digital transformation will be difficult for those in this industry to accomplish, if there is a lack of technical expertise within an organization.7 A lack of technological leadership also can lead to poor communication about technical concepts and challenges, while driving up costs. Stakeholders or subject matter experts who aren’t tech-savvy or are tech-resistant can impede the fact-finding and approval processes for better technology adoption, experts say.7
FUTURE IMPLICATIONS OF DIGITAL TRANSFORMATION
Despite the existence of some hesitancy today toward advanced technology, the expectation is that the oil and gas industry will become more digitized in the near future. One new report states that AI will dominate the industry’s technology agenda moving forward.8 According to author and futuristic digital transformation expert Alaa Elshimy, other short-term impacts on the use of technology could include:
- Seeking out more systems for decision support, failure prediction and diagnostics for artificial lift and mechanical systems.
- Utilizing robotics, drones and intelligent cameras equipped with edge computing for security, pipeline inspection and general inspection, to generate intelligence and deliver messages to teams or departments in real time.
- Intelligent assistance and virtual agents.
- Intelligent inspection for wells, pipelines, facilities, mobile drones and machine vision.
- Image analysis for seismic data processing.
- Predictive maintenance with ML, for well and facilities equipment, that detects system failures, sounds the alarms, and sends notifications early enough for corrective action.
- Digital twins that create predictive models and expert systems for production optimization in gas lifts, electric submersible pumps and pipeline flow assurance.
- Asset management and tracking that leverages intelligent connectivity for managing and tracking assets across the field and facilities in real time.
Taking a more long-term look, industry professionals can also anticipate that:
- Robotics will do most of the inspection functions in many facilities.
- Automatic-guided vehicles, using AI and the IoT, will conduct virtual metering versus traditional electromechanical meters for flow, temperature, pressure, etc.
- Machines will be intelligent enough to make autonomous decisions on their own, such as shutting down or restarting a well.
- Fully autonomous drilling planning systems will become more standardized.
- Facilities and wells will communicate with each other.
- Autonomous, self-steering drilling systems and asset planning will help to facilitate unmanned facilities and offshore platforms.
- Autonomous drilling systems will improve precision, well placement and gesturing, especially in tight reservoirs. This will require edge computing in the drilling bottomhole assembly.
- Higher fidelity reservoir models and simulators, using AI-based proxy models and advanced analytics, will reduce uncertainty.
Commitments are needed at the board and executive level to balance short-, medium- and long-term plans and investments. Now is the time for organizations to appoint dedicated chief digital officers, who are empowered to follow through with the execution of technological transformations. Dedicated budgets are also essential for research and development, as well as for leveraging transformation.
The industry’s complexity, scale of operations and high cost of production could cause some companies to overlook the benefits of adopting some of the new tools that are already, or will become, available. Those companies that do make the conversion are expected to realize the better efficiency that digital technology offers, as well as benefits to the health and safety of their employees, as well as the environment. By implementing thoughtful strategies, the industry can make the needed migration happen more quickly and effectively.
- “Oil and Gas Automation,” Cognizant, 2023. Available online: www.cognizant.com/us/en/glossary/oil-gas-automation#:~:text=How%20does%20oil%20and%20gas,by%20a%20skilled%20labor%20shortage
- “Oil & Gas Sensors Market,” Fortune Business Insights, 2022. Accessed online: www.fortunebusinessinsights.com/industry-reports/oil-gas-sensors-market-100943
- “Use of Robotics in the Oil and Gas Industry,” COPAS, Oct. 22, 2021. Available online: https://copas.org/use-of-robotics-in-the-oil-and-gas-industry
- “Cloud Computing in the Oil and Gas Industry,” COPAS, Aug. 10, 2021. Available online: https://copas.org/cloud-computing-in-the-oil-and-gas-industry/
- “The Top 5 Industries Most Vulnerable to Cyber Attacks,” Process Bolt, 2023. Available online: https://processbolt.com/top-5-industries-most-vulnerable
- “Cloud Storage vs Local Storage: What is Right for Your Business?” DataScope, March 24, 2020. Available online: https://datascope.io/en/blog/cloud-storage-vs-local-storage-what-is-the-right-for-your-business
- “Digital Transformation Challenges for Oil and Gas Companies,” MojoTech, Available online: https://www.mojotech.com/blog/digital-transformation-for-oil-and-gas-companies
- Davis, D., “3 Trends to Watch in Oil and Gas in 2023,” Oil & Gas IQ, Jan. 18, 2023. Available online: www.oilandgasiq.com/operational-excellence/articles/3-trends-to-watch-in-oil-and-gas-in-2023
- Executive viewpoint (November 2023)
- Digital transformation: Accelerating productivity, sustainability in oil and gas (November 2023)
- Technological innovation delivers transformative product suite to upstream sector (November 2023)
- Taking the next step in offshore digitalization (November 2023)
- Optimizing BHA and fluid selection with a machine learning-based drilling system recommender (October 2023)
- Digital twin mitigates recovery risk of damaged riser, offshore Brazil (September 2023)