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Energy Operators Still Cite Digital Tech Investments as Keys to Improve Wells, Capital Efficiencies

Upstream operators may be scrutinizing their dwindling finances, but they haven’t stopped investing in digital technologies to improve well completions and capital efficiencies, according to a new global survey.

The fifth annual report by Accenture and Microsoft Corp., 2016 Upstream Oil and Gas Digital Trends Survey, found that in the next three to five years, 80% of upstream companies plan to spend the same (30%), more (36%) or significantly more (14%) on digital technologies than now. Upstream professionals were surveyed worldwide, including engineers, geologists and mid-level/executive management.

Most digital technology spending is being directed to cloud-enabled mobility, data-powered analytics and the Internet of Things (IoT), the survey found.

"In the current challenging environment, the upstream oil and gas industry is focusing digital technologies on areas that help them work smarter and deliver significant efficiencies and savings in the short-term, while enabling them to make better decisions faster," said Accenture's Rich Holsman, global head of digital in the energy industry group. "So, in the short-term, we expect these companies will continue to invest in areas that help lower operations costs through technologies like increased worker productivity with mobility, lower infrastructure costs through the cloud and drive better asset management through analytics."

The survey bears out other studies that show that harnessing digital technologies are improving exploration and development prospects. Late last year, Mukul Sharma of the University of Texas at Austin and SAP Vice President Ken Evans explained how digital technology was changing the energy investment game (see Shale DailyDec. 30, 2015).

Between 2009 and 2014, average production rates per well during the first 48 months of operation found a "remarkable increase in well productivity that has been achieved through the application of various technologies, going from about 25 b/d at about 30 days of production, to almost 10 times that amount in the last year that reporting is available," Sharma said. In that same six-year period, the cost of the wells dropped by a factor of two almost every year, "which is why even at $45 oil, many of these operators have been able to stay in business and actually make money."

 More than half of those who responded to the latest survey said digital technology already has added significant value, with cost reductions cited the most. In addition, 56% said "faster and better decisions" were the biggest benefit. The five key trends cited by respondents were:

●     Digital technologies add value by reducing costs and increasing workforce productivity;

●     Most companies plan to invest at least the same amount or more in technology going forward;

●     Investments mostly are directed to mobility and the IoT;

●     Companies still need to improve their capabilities in analytics; and

●     The cloud increasingly is being leveraged to unlock other technologies.

Fifty-seven percent of those surveyed said they were making more investments in mobile technology, versus 49% a year ago. The second biggest digital investment today is in IoT at 44%, from 25%, while cloud investments are being done by 38%, compared with 8% a year ago. Over the next three to five years, investments are expected to shift more to big data and analytics use (38%), IoT (36%) and mobile (31%).

The biggest impact to date has been on the Internet-savvy workforce, with respondents citing increased employee productivity and engagement as a positive consequence of the digital age, followed by better training/upgraded work opportunities. In IoT, the biggest impact has been from "enabling connected field workers, with 60% of respondents planning to have field workers and assets digitally connected with smart devices."

The use of the cloud primarily has shifted from being used mostly within infrastructure to mobile tools use, a trend expected to increase as operators use technologies in the field to connect with their home offices.

"By taking advantage of the intelligent cloud, greater use of analytics and IoT go hand in hand with what we are seeing in our business today -- the advent of the industrial Internet enabling the power of digital across the oil and gas landscape," said Microsoft's Craig Hodges, general manager of the Gulf Coast District. "You can see this trend gaining traction from connected wells and intelligent pipelines to highly efficient digital refineries."

Although two-thirds (66%) identified analytics as one of the most important ways digital is transforming the workplace, only 13% said they thought the capabilities were mature. Almost two-thirds said more analytics would be implemented in the future.

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