Mining profits from today’s Oil & Gas operations
The stakes are high in a complex environment of multiple assets, complicated sites, global supply chains, and heavy regulations. Georgina Elrington looks into some of the issues hindering this particular industry’s transformation and what the enabling providers are doing to help shift the movement up a gear.
From seismic data collection and analysis, managing uptime and maintenance of extraction and refining plants right through to forecourt delivery, just about every stage in modern O&G (oil and gas) production can be enhanced with tech. But for the O&G executives – namely the CIOs – involved in the ongoing digitalisation and automation of processes it is difficult to sift through the vast benefits of field-ready transformational options such as: AI, RPA, IIoT, data analytics, and even (more tentatively) blockchain to find the right mix. Further, on-boarding the workforce to maximise what has been implemented so that those benefits can be properly enabled is another challenge; all the while trying to turn a profit in a volatile and fluid market.
The costs involved in each stage of production are enormous, the elements are numerous, it is dangerous, and skill sets across the entire effort are retiring at one end while not emerging fast enough at the other. While some O&G companies are well on the way with a DX asset and business-optimisation plan about half still appear to be struggling to find the right way forward. And who can blame them? It’s a vast industry with hundreds of suppliers and thousands of assets on a global scale. Get it wrong and the effects can be disastrous. So yes, being tasked with business continuity in such a setting seems more than a little daunting. But CIOs should not be trying to take it all on their own shoulders. Collaboration is the buzzword right up there along with digitalisation and transformation.
Putting it another way, without all the ‘isations’, progress is easier when people plan to work together. Sounds simple enough but that does not necessarily mean that it is an easy route. A report from Deloitte conducted in the summer of 2019 entitled, ‘From strategy to action overcoming barriers to change’ features analysis from UK Continental Shelf (UKCS) participants. Some of the ongoing difficulties of moving from a strategy to actuate more effective working relationships between operators and suppliers are highlighted as: legacy structures, outdated ways of working, complex contracts and procurement processes.
Modern production processes need more than sticking a sensor on it to push (IIoT) data into a cloud for real-time ops. That said, many in the O&G sector have done a pretty good job to optimise what they already have. It is a sector that is no stranger to the need to monitor and react on data. But technology keeps leapfrogging in terms of available methods for intelligence, insight, and action options. For these gigantic enterprises the need for laser focussed consideration is paramount. This can slow down the digitalisation process.
O&G ERP is a heavy responsibility
By its very nature the O&G industry is one of the heaviest examples of data in/data out scenarios on the planet and it fluctuates by the minute. So it stands to reason that any ERP platform designed for the sector need to be intrinsically intricate and intelligently flexible. As well as the usual administration of a business these platforms need to be aware of, and handle, adherence to international and regional legislation, strict health and safety regulations, and increasingly prove their commitment to environmental considerations. Miss an update or fail to file a document and an O&G company could face an explosive disaster in terms of millions in fines and/or a potential plant shutdown for investigation.
The need to understand and react to these aspects has pushed some real innovation over the years, and this is very much the case for enterprise asset management and deeper insight into asset performance. A couple of examples of long standing O&G enterprise enablers are General Electric (GE) and Infor. GE offers Predix Private Cloud, a real-time asset monitoring capability with alerts for elevated risks. It also has Predix Asset Performance Management which looks after the actual assets (IIoT) involved in the wide cast landscape that is the oil and gas industry, helping with remote monitoring so that faults can be addressed and potential asset problems better planned. For process and operational efficiencies, GE’s platform can assist with managing maintenance and inventory costs at the same time as lowering incidents for environmental, health and safety – all of which help to increase uptime and availability of service and enhance workforce productivity. Infor also enables a watchful eye on processes thanks to years of dedicated R&D that brought mobilised asset management right into the hands of those that need to know. And its CloudSuite EAM asset infrastructure helps operators to look after oil and gas activity right the way through, be it upstream, midstream, downstream, or field based.
The O&G workforce problem is here to stay
We’re at a point, generally in the tech sector, where we know that artificial intelligence and machine learning can go a long way towards helping the industry, via predictive and prescriptive maintenance, either automatically or at the touch of a smartscreen. Roustabouts manning oilfields are being increasingly enabled with tech in hand. Wearables that can record and transmit data are also a novel addition nudging onto the scene.
However, the shortage of skilled engineers – both existing and entering the field – is an ongoing challenge. On the labour side RPA is increasingly able to take on the more mundane manual, and even dangerous (such as drones for inspection at height and other dangerous environments) tasks which helps to lessen some of the burdens of staffing and risk control.
Another issue is that the upper end of the traditional workforce in many an oilfield is approaching retirement. While this makes room for more digitally-akin staff to lead on modernised operational strategies, there is a lack of the right data scientists to fill those roles. The oil and gas companies that can find and keep these new-world entrants to lead on new ways of working will be the ones with the best insights to cut costs, realise more business efficiency, satisfy investors and keep ahead of the energy price game.
Outdated systems mean outdated processes
Over the years various legacy systems have been meshed together (somehow) largely due to the lack of a better option existing at the time. This means that, for many operators, it is difficult to introduce more efficient ways of working to elicit better returns on the barrel. Adding to the legacy burden are decades of business mergers and acquisitions all of which come with their own way of doing things, i.e. different systems and data filing. Trying to meld one company’s widgets and structures into another even just once creates tangled data strings to deal with. The task of streamlining before moving to a clean enterprise platform needs a strategy in itself. That strategy needs to track down duplicates and file away the excess (just in case), fix mismanaged and forgotten access rights, and probably stumble across some odd storage ideas on outdated networks.
ERP systems based on manufacturing environments may have formed part of a base blueprint but the oil and gas sector is a unique and giant undertaking. It has many nuances that are not found in other industries such as sensors down mines and on the seabed with special connectivity needs, security concerns with disastrous effects if compromised, legislation and health and safety considerations, multiple global supplier party involvement, complicated logistics, volatile markets screwing prices to the ground and back up again, which are accompanied by all the usual business factors such as staffing, invoicing, offices, overheads, and customer satisfaction. DEACOM ERP is one O&G tailored offering that can help with inventory management and regulatory compliance, as it does at Pinnacle Oil Holdings to help keep pace with business demands. The ERP platform provider (which also helps companies involved with the business of sausages, cannabis, and confectionery) recently announced a new presence office in Frankfurt, Germany that should help companies advance production in Europe.
The challenges of global collaboration strategies
The lean cost challenge for production and logistics goes much further in that the industry supply chain relies on OSVs (operational service vessels) which bring supplies to the people working on platforms and vessels, as well as healthcare and sustenance. All of these parties, if onboard with a universal enterprise management system, can help move towards a more efficient and cost effective business. And it is a big ‘if’. Joining up all involved parties is no small undertaking. ERP and associated technology providers have noticed the opportunity to help overwhelmed cLevel O&G executives enhance production efficiencies for greater profit. One example of this is the acquisition of Global io by Deloitte Canada. Global io helps with integrated operations for the mining, energy and utilities sectors, specialising in breaking down the organisational silos and third parties that can hinder progress. It will now become part of an operations transformation offering with Deloitte to help with better focussed processes and decision making.
Another comes from a Texan land drilling operator, Endeavor Energy Resources which has a whole division specifically tasked with efficiency objectives. It monitors the needs across trucking, well services, construction, roustabout, wireline etc to help with business growth for both field service and manufacturing operations. The division, called Endeavor Energy Services, recently enlisted help from ERP platform provider, IFS which already has several customers in the oil and gas space including: Interwell, Technip, Maersk Drilling, BW Offshore, Trans-Northern Pipelines Inc., and Rosenberg WorleyParsons. Implementing IFS Applications to streamline services in the field should enable more value for Endeavor at the same time as bringing various business operations together such as: internal asset management, facility maintenance, facility construction, and billable field service work. Field ticketing and work orders via mobile devices and up to a general ledger, automated updates of inventory records and tracked job statuses will help to contain costs for the work and staff involved.
Securing the information of things and enlisting collaborators
The streamlining of administrative processes is also nudging at the potential blockchain movement but there is still an education period to go through. Aside from trading, blockchain can help with security, document optimisation (the removal of paper based processes for supplier contracts, invoices and payments), and the secure logging of extraction asset data. A blockchain that links up involved suppliers can also assist with adhering to the multiple regional regulations and stringent legislation for safe and legal practice. But understanding how and where to apply a blockchain as background muscle is taking a little time – and so might be convincing all the parties necessary to be involved in order to make it work at best capacity.
“In my view, almost every industry is still in proof-of-concept mode when it comes to blockchain and this almost definitely is the same in the oil and gas industry,” said Wayne Lloyd, founder and CEO at Smarter Contracts. “Regulatory uncertainties, regional regulations, cultural silos, legacy technology stacks and inefficient data and processes are often the ingredients of poor customer journeys, inefficient reconciliations and consequently, inaccurate or unreliable reports that lead to endemically poor customer experiences. Blockchain technology and its convergence with other emerging technologies is certainly well placed to address many of these problems but there is no quick fix, no silver bullet. We find that it all starts with education but that is something that takes time. You have to understand the technology and its principles before you can start applying new business models on an enterprise level.”