MANAGEMENT

Sustaining Economic Operations

With Low-Price Oil
Julian Pickering, CEO, Geologix Systems Integration, and Samit Sengupta, Managing Director, Geologix

What does USD 60/bbl crude mean to the

oil industry? We all know that oil prices
are volatile and that we have seen oil in
the USD 60/bbl price range before, but
not since 2008.
How did the upstream industry
respond then? The short answer is that
it did what it is doing now: Projects were
canceled, drilling and production were
cut, petroleum revenue taxes declined
significantly, and many staff in operator, service, and supporting companies
left the industry through redundancy or
early retirements. In short, the industry
felt extremely sorry for itself.
The big difference between 2008
and 2015 is the state of the global economy. In early 2008, global demand for
oil had been growing rapidly as countries such as China and India were evolving as major consumers and starting
to add significantly to the traditional
demand from highly developed countries. By the middle of the year, the
world oil market was thrown into financial chaos as many global economies
fell into recession. There was suddenly
a glut of oil as consumer demand plummeted. OPEC, which at the time controlled about 40% of global oil output,
responded by implementing its deepest ever cut in supply but even this did
not protect the price. There was just too
much oil available compared with global
consumption requirements.
By the end of 2012, statistics from
the US Energy Information Administration confirmed that the picture of global oil consumption had changed significantly. By this time, China had grown
to be the second-largest consumer of
world oil with Japan in third place and
India in fourth. This was a turning point

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as the new world oil markets could no

longer accept major cuts in global production to bolster prices. So in 2015, it
looks as though the oil industry will have
to sustain production at a lower revenue
price, which means that it will have to
work smarter.
An important innovation since
2008 is the growth of integrated operations, also known as the "digital oil
field," which enables increased efficiency in operator companies. Integrated
operations allow businesses to optimize
their resources of staff, money, and facilities through enhanced collaboration,
improved workflows, and remote monitoring of critical operations in drilling
and production.
Adoption so far has been patchy:
Some companies have taken integrated operations fully on board while others have made only partial use of it and
some have not adopted it at all. In this
new low oil price climate, we believe
that integrated operations could be the
critical factor that enables sustainable
economic operations.

How Does Integrated

Operations Enable Success?
To function as a major enabler for
USD 60/bbl oil, an integrated operations
strategy must be engineered for success
right from the beginning, which means
following industry proven best practices.
They should include
t Clear deliverables with realistic
financial targets
t Technology definition based
on the corporate operating
philosophies
t Smart workflows to make the
best use of the technology

t A transition management plan

to define the people transition
process
The starting point is always a digital
oilfield strategy document. This is an open
and flexible document that companies
should expect to be constantly updated as
new technology is identified and operational priorities evolve. There is rarely a
clear endpoint to a digital oilfield project
because the factors are continually changing with time. It has been said that "a digital oilfield project starts but never ends!'
Once an operator is committed to integrated operations, it is constantly seeking new ways of increasing its efficiency in
more challenging environments.
Alongside the digital oilfield strategy document, there should be three
important project initiation documents
as follows:
t Maturity assessment. It
defines the current position
of the client organization in
digital oilfield adoption. The
maturity assessment should
be repeated at various intervals
in an implementation project
to measure progress. It takes
into account the human factors
and workflow issues in addition
to technology deployment.
t Information technology (IT)
readiness assessment. All
digital oilfield implementations
depend on the corporate
IT infrastructure and this
assessment is a measure of the
degree to which the current IT
infrastructure will support the
digital oilfield implementation
goals.

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Process

People

Technology

Fig. 1-The three-tier pyramid models depict the maturity levels of the people, process, and technology elements of a
digital oil field.

t Digital oilfield project

road map. It is a detailed
definition of how the digital
oilfield project will be
delivered. It covers technology
deployments, workflow
requirements, and people
transition management. The road
map must be based on the client's
functional requirements and
accounts for corporate priorities,
goals, and objectives.
It is widely accepted throughout the

industry that the three elements of people, process, and technology are all critical to a successful digital oilfield implementation. Fig. 1 shows these elements
as three-tier pyramids, with each layer
having a defined level of maturity. An
effective digital oilfield strategy should
aim to advance the maturity of all three
elements in parallel; any imbalance is an
indication of a weak strategy.
Geologix Systems Integration uses
the maturity assessment to build an
understanding of the maturity balance in
the pyramid model by interviewing operator staff and documenting "as is" work
processes and installed technology. We
then conduct a gap analysis to transition

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the organization to a balanced maturity

including required people development,
"to be" work processes, and appropriate
technology. This enables a strategy to be
developed based on a process of continuous improvement, thus avoiding sudden
major changes to the organization.
The following case studies show the
results of stable and unstable maturity
pyramid models.

Case Study 1
In this case, all three areas were well balanced: The company understood its work
processes and had begun the process of
updating them to meet the new technology that would be introduced. Staff were
well engaged, recognized the potential
benefits of the digital oil field, and were
willing to adapt to new ways of working.
Here, it was easy for us to implement
integrated operations and move the company forward. The improvements in efficiencies took place in a relatively short
time frame and the company was able to
see a productivity benefit in fewer than
2 years.

Case Study 2
In this case, people, process, and technology were not in balance: The compa-

ny had invested in expensive technology

but only some staff were on board with
it; others were either wary of it or saw
it as a threat to their jobs. The management had a poor understanding of actual work practices and consequently had
not worked out how the new technology
would be used.
It is not uncommon for operator companies to demonstrate a much
higher maturity in the technology pyramid than in the people and process
pyramids and, as could be predicted,
this company was struggling to deliver
the expected value from its digital oilfield strategies.
In this case, we had to begin by
working with the company to get it to
understand its own work processes.
We also ran workshops to explain to
the staff the benefits of the digital oil
field and also to bring together different disciplines so that they could begin
to see how effective a collaborative way
of working might be.
Although it took a little longer, we
were eventually able to achieve a maturity balance and the company was not
only more profitable and efficient, but
also the staff were happier with how
things were being run.

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'I

MANAGEMENT
Digital Oilfield Change
Requirements
The digital oil field has become a generic
term for the application of smart information technology to improve the safety, efficiency, and productivity of oil and
gas operations. It can deliver benefits
in many discipline functions including
reservoir characterization, well production, facilities optimization, and
export systems.
However, many oil and gas companies have failed to realize the true potential of the digital oil field because they
have overlooked one or more of the following prerequisites:
It The right staff for the job.
Digital oilfield processes
require people with different
skills from traditional oilfield
operations. There is a strong
focus on IT but the critical
factor is to merge IT skills with
discipline knowledge. Experience
has shown that it is relatively
easy to hire personnel who are
experts in IT or are experienced
in oilfield services, but it is much
more difficult to find experienced
oilfield workers who have a
mastery ofIT.
It Appropriate training. A
consequence of the above is
that many oil company personnel
will have to undergo training to
help them adapt to new ways
of working. For example, the
role of a site drilling manager is
very different from the role of a
drilling expert supporting many
drilling operations in a remote
collaboration center. Digital
oilfield implementation projects
must include a significant
element of training and
coaching of staff.
It One size does not fit all.
The design of a digital oilfield
solution must be matched to the
economics of the operation. In a
deepwater, tight gas well in the
US Gulf of Mexico, where labor
costs are high, it is easy to justify
smart well technology because

70

,I

the additional investment is

relatively small and the costs
can be recovered quickly.
However, in an onshore drilling
operation on a conventional well
in an area where labor costs are
relatively low, it becomes much
more difficult. It may be that
the investment is still economic
but almost certainly, it will
necessitate simpler technology.
It Internet access. It is easy to
assume that low-cost, highbandwidth access to the Internet
is readily available on a global
basis, but this is often not the
case in areas where oil and
gas resources are now being
developed. Poor communications
will degrade the value of digital
oilfield technology. This has
frequently resulted in the
need to develop a regional
communications infrastructure,
a time-consuming and very
expensive project in its own
right.
It New work processes.
Implementation of a digital
oil field requires new work
processes. There are many
cases in which significant
investment has been made
in technology such as smart
instrumentation in the field,
good communications, and a
well-designed collaboration
environment. But the
implementation is not a success
because the work processes are
not adapted to the technology.
Using good design practices,
changes in well performance
can be relayed to a collaboration
center on a continuous basis.
However, if support teams are
not organized to analyze this
information and take action
with minimum delay, the value is
lost totally. In fact, the situation
may be worse than not having
the technology at all, as field
personnel may make incorrect
assumptions about the level of

remote support. The danger is

that they do not pay the same
attention to the operation that
they would in the absence of
remote support.

Transition Management
and Training
The greatest challenge that most operators face in implementing a successful digital oilfield strategy is effective
people engagement. Many staff will not
have considered the consequences of the
digital oil field such as increased collaboration, remote working, information sharing, and "out of hours" decision making. It is important that staff
personalize the digital oil field and view
it from their own perspective, which
will probably be very different from the
company's perspective.
Normally, this transition is more significant for more experienced staff than
for younger staff. They should be asking
It What does my job look like in a
digital oilfield environment?
It Will I feel satisfied or will I feel as
though I am losing control?
It How will I relate to younger staff
who are likely to adapt much
more quickly?
It Will I be giving away personal
power by sharing information so
widely?
It Is this transition necessary as I
have been doing my job well for
the past 20-plus years?
It Am I willing to be a strong
advocate of the digital oil field
or will I take every opportunity
to show that it was the wrong
decision?
Training is a key component of all
digital oilfield implementation projects
and should be planned carefully. If an
operator company is new to digital oil
field, then the following topics must be
addressed in an introductory course:
It How do I start a project and who
will be involved?
It How do I engage all critical levels
in my company from senior
managers to field technicians?

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t Does my company have the

necessary skills to support the
technology?
t Is my company prepared to suffer
reduced performance initially for
better returns later?
t Will the staff be responsive to
new work processes that may
be very different from the work
processes today?
Once the digital oilfield project is
established, the training requirements
shift toward design and operational
requirements. These may cover a broad
spectrum of knowledge depending on
the scope of the digital oilfield project
and the number of functional areas that
it will touch.

Can We Function Profitably

at Lower Oil Prices?
The next 2 years may present a more
financially challenging environment for
oil and gas operators. However, it does

provide an opportunity to smarten our

operations and to focus on increased
drilling and production efficiency, as well
as long-term recovery. This in turn will
help us to build a sustainable industry
exploiting both conventional and unconventional reserves and technologies

for the benefit of all our customers and

future generations.
If we can start viewing the digital oil field and the smart operations it
brings as "business as usual," then the
low oil price environment could be much
less threatening. JPT

Julian Pickering is the chief executive officer of Geologi x System s Integration, a

nonexecutive director of Geologix, and managing director of Digital Oilfield Solutions.
He has overseen the development of real-time operations centers and digital oilfield
workflow and transition management projects in several major oil and gas companies.
He was chairman of the Digital Energy Subcommittee of the 2011.j SPE Annual
Technology Conference and Exhibition and formerly the chairman of the WITS ML
Executive Team . He previously worked for BP for 32 years and was the head of the
global digital drilling and completions program and the head of BP's Field of the
Future facilities program .

Samit Sengupta, managing director of Geologix, has more than 30 years' experience
in the upstream sector of the oil and gas industry. He worked in the subsurface
data acquisition and analysis industry in Australasia, the US, Africa, and Europe with
Schlumberger, Gearhart, and Halliburton before creating Geologi x, an international
company providing integrated software and services that include well log authoring,
data management, and real-time monitoring. He holds a degree in civil engineering
from the Institute of Technology Bombay.

Society of Petroleum Engineers

Annual Technical Conference and Exhibition

Houston, Texas, USA 28-30 September 2015
George R. Brown Convention Center www.spe.org/go/atcelSj

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