OSEA2014: Digitalisation of Oil Fields More Than Just Investment in Technology

Nov 19, 2014 12:00 JST

Source: OSEA

Andre Baken, Founding Partner of Digital Oilfield Assessment Services, expects rapid adoption of digital oil field methods by major players in Asia Pacific

SINGAPORE, Nov 19, 2014 - (ACN Newswire) - Digitalisation of oil fields is more than just investment in core technology, states Mr. Andre Baken, Founding Partner of Digital Oilfield Assessment Services (DOFAS), in a recent chat with OSEA2014. Mr. Baken will be presenting a case study on the new Intelligent Oil Fields on Wednesday, 3 December at the OSEA2014 International Conference.

Going into the broader aspects of Digital Oil Field (DOF) methods, he shares his views on the true definition of DOF, and how oil companies should take a holistic approach towards its adoption.

Impact of rapid adoption of DOF methods in APAC

AB: Oil companies focus strongly on ways to optimise the value of their assets and have a common objective of enabling fields to remain productive for a longer period, and to ensure that the economic benefits of their assets deliver greater value. The urgency of this issue varies from place to place and is felt at its strongest in areas where assets are either of marginal value, in locations that are difficult to reach or where there is danger to employees, for example deep sea wells, the arctic and conflict zones. In all these areas, the digital oil field (DOF) concept plays a potentially vital part in delivering added value to the countries and corporations engaged in E&P activities.

Historically, the pace setters in Intelligent Oil Fields (IOF) have been outside the Asia Pacific region but there are clear signs that companies in this area are now starting to focus strongly on how to maximise ROI through use of DOF methods. The reasons are not hard to understand. The region is now firmly established as the manufacturing centre of the world, and governments across the region are also engaged in a strategic drive to improve the standard of living of its people. There is a growing need for access to energy resources and this leads not only to major political developments such as the recent Chinese-Russian gas deal, but a need to improve the efficiency of energy production when this occurs in the region. The only surprise, in our opinion, is that major players in the Asia Pacific region have not been earlier into the DOF/IOF field. We expect their participation to accelerate rapidly from now on.

DOF more than implementing digital technology

AB: The DOFAS view of this concept is strategic and holistic in nature. Simply implementing digital technology does not, in itself, lead to a dramatic improvement in performance. We have seen major DOF/IOF projects in which investment has been high and ROI has been either low or impossible to measure. Digital technology is simply one aspect of a major corporate change project, which delivers significant ROI ONLY if this project also covers all other relevant parameters, including organisational change, cultural change, management mobilisation and optimisation of the entire business model.

One of the key issues in the discussion of DOF/IOF projects is the excessive focus on core technology, and it is sometimes hard for the oil & gas industry to understand quite how unfortunate this is. The wider industrial world, senior business leaders understand that technology has its part to play in enabling change but is not the decisive factor in ROI. Numerous studies exist that demonstrate how technology may account for no more than 10 per cent of the ROI in successful change projects, and that 70 per cent of ROI improvement is actually attributable to people and organisation-related developments.

We see major projects led solely by companies that we think of as "software vendors", and which have virtually no capability or point of view in wider change management. ROI cannot and will not be significantly improved as long as the discussion remains at the technology-only level.

Different business rules for NOCs

AB: Although few people want to discuss the issues in this way, we need to understand that oil & gas is the most political of all industries, as it provides the energy that makes all economic and social success possible. For National Oil Companies (NOC), this is more urgently the case than for "normal" corporations. NOCs are national champions, charged with making the most effective possible contribution to development of their nation's economy, building prosperity and enabling social progress. This means that optimisation of assets is not simply a good business approach but is a political necessity, as well.

It should be stressed that such an approach holds good for all NOCs: after all, perhaps the most successful of these in its contribution to national and economic development is to be found in Norway.

In our opinion, the economic role of NOCs means that they tend to take a different view of how their assets should be managed compared with the "average" corporation. An oil major, for example, may walk away from an asset once its performance dips below a certain level, or can certainly sell it on to a smaller company with a lower cost base. An NOC cannot and will not do that. The assets are in their national territory and need to be worked as long and as efficiently as possible. Business rules are thus rather different, with asset longevity being more important than absolute ROI, and with a constant focus on how to squeeze greater value for longer for the benefit of the country.

These factors can and should drive a faster uptake of DOF/IOF projects inside NOCs, but we frequently see social issues that tend to restrict the speed and success of such projects. There will be cultural concerns, with some NOCs being organised in ways that reflect the wider society, like in some parts of the Middle East this gives a particular character and difficulty to all change projects. In other areas, strong political leadership may have an impact on project design and make decision-making slower than we would like.

In the end, however, the logic for DOF/IOF projects within NOCs is unanswerable. The drive to increase asset performance is so strong that persistent project management can and eventually will overcome obstacles. It may simply take them a rather long time.

Guidelines for Asian companies embarking on a DOF project

AB: Digitalisation projects within oil & gas businesses are not unique, as this is a universal phenomenon, and far more advanced in such diverse sectors as manufacturing, financial services, pharmaceuticals and even healthcare. The drive to use real-time information to enable better-informed decisions, maximise process efficiency and build closer relations with clients is now a basic creed within all these and other industries. Oil & gas is actually very much behind the curve on this entire subject and is struggling to catch up with best practice elsewhere.

In giving guidance to digitalisation more widely, we always urge oil & gas companies to look around them more widely for best practice insights and to understand that technology is not a solution in itself: it is just an enabler. A successful digitalisation project requires a clear strategic vision, the willingness to adopt quite new methods of organising and operating, and the ability to make fast decisions. There is no point having the best real time data, for example, if hierarchical and sclerotic organisational structures mean that you are not able to make fast decisions.

Key benefits for businesses are easy to quantify and fit into the areas of proactive intervention to resolve issues before they become problems, ability to dispense with historical assumptions and inaccurate algorithms, and a single view of the truth end-to-end across the entire operational landscape. These factors can have a transformational effect on the efficiency and competitiveness of a business but ONLY, and we have to stress this over and over, ONLY if the organisation is able to adapt and optimise itself for real-time working. Once again we have to say that technology is actually the easy part of this whole discussion. Numerous good and proven technology components exist today, both inside the oil & gas industry and, more widely, in discrete and process manufacturing. The question for Asian companies is this: do they have the will and capability to adopt more agile, flatter organisational models in order to unlock the benefits from the new technologies?

DOF projects - Only as good as a country's communication networks?

AB: Real time information is only as good as its communication networks, and this is an uncomfortable truth for all companies operating in remote or dangerous locations. We would add a further point here, which is that communication must not only be fast, it must be secure. This is an issue for all international industries but we do accept that it is more of an issue for oil & gas, because assets may be located in areas that are very hard to reach and where no viable communication infrastructure currently exists.

Fortunately a great deal of work is now taking place to enable fast and reliable communication in such areas, including use of satellite technology, microwave transmission, advanced encryption, data compression and asymmetrical transmission of data (i.e. setting urgency priorities and compromising by combining a stream of real time performance data with batch/historical information for less urgent parameters). The experiences of the past 20 years suggest that rapid progress can and will be made when sufficient time and attention is applied.

Finally, we need to consider the extraordinary ways in which emerging countries' communication technologies have developed in recent years. 25 years ago, when fixed line data and telephony links were seen as the "natural" backbone for effective infrastructures, it appeared almost impossible to imagine how emerging countries could afford the investment needed to lay optical fibre across their territories.

In fact most of these countries did nothing of the kind but instead created effective wireless networks in their place. As a direct result of this, mobile phone uptake in African countries has now reached similar levels to developed European countries, and the levels of service innovation achieved in Africa are world-class. It will not be easy both to extend the bandwidth and improve the security levels needed for real-time data transport but it is possible. Emerging countries will also embrace this technology enthusiastically and well. We believe the difficulties may be less extreme than might be imagined.

Holistic approach catalyst for change in Asia Pacific

AB: Once again we need to state that the term "digital oil field" for us is broader and more strategically ambitious than being just another technology change. Digitalisation implies building a business infrastructure that enables speed, operational efficiency, agility and a climate of innovation. We recommend this approach to any major corporation because it enables them to maximise the value of their assets and the potential of their people.

Within the Asia Pacific oil & gas industry, the reasons for moving to this more agile, modern digital model are clear and even urgent. Expertise is in short supply, assets need to be managed with the greatest of care, and demand is rising inexorably: it is not possible any longer to take a cavalier approach to the subject. The entire industry needs to move to the point where operational efficiency is not simply higher than it is today but is continuously improving, and where human capital is valued and fostered as much as technology.

We believe this will be one of the great strategic projects for the Asia Pacific region in the next decades and could act as the catalyst for change in business organisation, social relationships and people development, as well as in asset management. It will be a huge challenge, but is undoubtedly necessary.

OSEA2014 International Conference: Unlocking the full potential of offshore reserves with innovative solutions

Held concurrently with the OSEA2014 exhibition from 2 to 5 December at the Marina Bay Sands Singapore, the OSEA2014 International Conference is a prominent arena in Asia where oil and gas industry thought leaders and experts from around the world come together. The Conference will unveil 12 new tracks and a new theme "Unlocking the Full Potential of Offshore Reserves with Innovative Solutions". For show updates, please visit the OSEA website, Facebook and LinkedIn.

OSEA website: http://www.osea-asia.com/
Facebook: https://www.facebook.com/osea.asia
LinkedIn: http://www.linkedin.com/groups/OSEA-2743037

Related URL
Digital Oilfield Assessment Services: http://dofas.info/

Events at a Glance:

OSEA2014 International Conference
Date:      2 - 5 December 2014, Tuesday - Friday
Venue:     Marina Bay Sands, Singapore, Level 3
Admission: Registered delegates only
Website:   http://osea-asia.com/index.php/conference/
Delegate registration:
 http://osea-asia.com/index.php/conference/#conf-fee-reg

OSEA2014 Exhibition

Date:          2 - 5 December 2014, Tuesday - Friday
Venue:         Marina Bay Sands, Singapore, Basement 2, Level 1 and 3
Opening hours: 10.30am - 6:00pm daily
Admission:     Business and trade professionals only
Website:       www.osea-asia.com
Visitor registration:
 http://osea-asia.com/index.php/to-visit/visitor-pre-registration
Media registration:
 http://osea-asia.com/index.php/media/press-registration/

Editorial contacts

Juliet Tseng
Senior PR Executive
Singapore Exhibition Services
Tel: +65 6233 6635
Email: Juliet@sesallworld.com

June Seah
PR Manager
Singapore Exhibition Services
Tel: +65 6233 6621
Email: june.seah@sesallworld.com

Source: OSEA
Sectors: Gas & Oil, Nuclear, Energy, Alternatives