Companies are now racing to implement more advanced and reliable Digital Oilfield Technology to help them survive the LNG Oversupply crisis. Learn why the time of innovation starts right now.
The game is no longer about maximising production. Companies need to significantly reduce production costs and optimise their field product mix in order to maximise profits. A better understanding and confidence in system deliverability proves to be more crucial than ever as companies struggle to survive the LNG oversupply crisis.
Oil & Gas companies need to take a new approach in increasing production, streamlining their supply change, reducing engineering time, and addressing project cost overruns and delays. The answer lies in embracing innovation, starting new partnerships, and integrated digital oilfield tools that specialise in Market Demand-Driven Production Optimisation.
Changing human behaviour and implementing new processes into long-standing workflows will always be a difficult task, especially when such processes are 30+ years old and are accepted as the “industry standard”. A common response heard far too often is, ‘well if the big companies haven’t adopted these new processes – why should we?”
Because to evolve, means to survive. Continuing to do things the same way simply because that’s how things have always been done is a flaky resolution that won’t survive oil price volatility.
The oil and gas industry is currently going through a slow, digital transformation; tipped for a decade-long investment boom. Now is the time to address common problems like cost overruns and scheduling delays with offshore projects. Now is the time for a cultural shift in companies, a time for organisation reinvention.
A Digital Transformation Will Give Stability and Sustainability
While the industry has been cautiously slow in embracing new and exciting digital technology, attitudes are changing fast thanks to next generation integrated digital tools that can minimise operating costs. This production shift is supported by Upstream Intelligence’s recent article “Digital oilfield technologies are tipped for decade-long investment boom”:
“It’s a hot market. Production has been done the same way for 50 years and there’s a lot of room to improve efficiency by using better data to make decisions… surface operations, including drilling, completions and production, will see the most significant investment… some 80% of companies expect to invest more in digital technology over the next 3 to 5 years”.
A 2015 Ernst & Young report, “Driving Operational Performance in Oil and Gas” also states the oil and gas industry expand-and-contract model (in which spending increases in times of prosperity, and drastic cuts are made during downturns) creates great instability in the industry, both within individual organizations and on-site operations. E&Y further commented that when operators decide to build long-term stability and sustainability into their operational strategies will they be equipped to weather the downturns and capitalize on upswings in a measured and profitable way.
The best way to achieve stability is through operational excellence programs focused on continued, measured improvement that systematically addresses recurrent business issues, and the use of digital oilfield tools. This will add value to your company by helping engineers make better decisions through data visualization and uncertainty minimization.
LNG Oversupply Issue Will Force Change (Whether You Like it Or Not)
The market is facing a sharp LNG oversupply, and it’s a serious issue we should be looking at. Australia currently contributes about a third of that excess in what will become a buyers’ paradise, as stated in the Business News article, “LNG Oversupply could lead to ‘blood on the battlefield”. Spot prices for liquefied natural gas could dramatically fall over the next 2 to 3 years as a 100 million tonnes a year oversupply washes over the market.
This means traditional planning methodologies and forecasting tools like Spreadsheets and other bespoke systems simply cannot handle sporadic and fluctuating market conditions. Even during CERAWeek 2016, this was a main message that came out of presentations by leaders of major global gas corporations; gas is fast becoming the primary fuel product of the hydrocarbon industry and its accompanied by looming gas over-supply.
So what do companies need to do to tackle the complications arising from this LNG oversupply? The implementation of a digital oilfield integrated platform that manages long term contracts and deliverability.
According to Dr Andrew Wadsley, Chief Technology Officer at Stochastic Simulation (and reservoir engineering expert with over 37 years’ experience in oil & gas), the LNG industry’s production forecasting and planning needs to be done on the fly with robust demand-driven workflows. This will serve to help team departments truly understand why they should change their process to meet this issue.
Dr Wadsley comments:
“Engineers and geologists are increasingly regarding the algorithms for the interpretation of seismic data, the algorithms for the generation of geostatistical models of monumental size and, above all, the solutions provided by traditional industry standard software as some more real, more valid, than the actual performance of the reservoir itself”
This will undoubtedly force management to quickly shift from a supply-side focus, (achieving maximum production, being the industry’s main commercial driver) to a demand-side focus. This means effectively and efficiently managing gas production driven by demand-side product distribution instead of maximising infrastructure flow-rate capacity as is currently done.
Being able to manage hydrocarbon product supply and product mix in response to volatile markets constraints and increasingly strict customer requirements is going be the high paying point of the future. Industry leaders clearly recognised this as critical to not only gas producer’s corporate success but future survival.
While there are a variety of tools available, GasAssure by Dr Andrew Wadsley’s team at Stochastic Simulation is one that is most suited. GasAssure has a unique demand-site optimisation engine to support this change of focus in the industry.
Why Has Digital Oilfield Tool Technology Adoption Been So Slow?
Let’s start with an analogy.
Tree loppers use axes to cut down trees and have very large quotas to meet. They are working so fast with such strict deadlines and supplier pressure, that they are unable to spend 5 minutes to learn how to use a new invention called the chainsaw. Their hesitance to give this new innovation a try is based on not having the time nor the resources. If they only stopped briefly to learn more about the chainsaw, would they learn that this new tool has the potential to increase their efficiency, drive production and promote stability.
This analogy is a classic case of busy blindness, needing to take a step back in order to take two steps forwards, and it perfectly reflects the oil and gas industry’s mindset when it comes to embracing new change.
The same amount of work needs to be done where everyone’s having to produce more in a scheduled timespan, but people are reluctant to stop the process to improve efficiency – it’s why the industry is always so risk-adverse, everything requires time, effort and resources.
Oil & gas operators have deployed computerised systems since the 1970s, and it has only been since the turn of this century that these technologies have started to develop from simple excel spreadsheets to workflows which sufficiently integrate across systems and functional groups to provide useful decision support in real-time.
Yet would you believe, despite this, a vast number of large operators in the industry are known to be using outdated legacy systems and are hesitant to system change?
Bespoke in-house developed tools (that are poorly maintained and most often than not, just simple spreadsheets for their complex planning), as well as competing IT projects and organisational reluctance to put in the effort required to learn a new process all make a company’s resistance to adopting new systems even slower.
Faster Reservoir Simulation Needed to Boost Production & Save Time
Brand new fields are getting increasingly hard to find, especially on a larger scale, and there are a number of large mature fields and unconventional prospects where known petroleum reserves do exist. The problem is, companies are uncertain how to economically extract these reserves in place while staying environmentally conscious, and in addition, meet market-driven demands in a volatile economic and political climate.
It’s this sort of commercial climate with low prices and reduced margins that is perfect to start aggressively pursuing transformational change in your company, because implementation costs can be minimized which allows for allowing enhanced optimised performance when prices do recover.
The new generation of market-demand and advanced-analytics programs are able to execute a massive analysis of all field data, normalise them, and identify opportunities for cost savings that can be leveraged across future operations.
The last few years has seen a dramatic increase in the development of new tools and techniques that allow for better-than-human levels of statistical analysis and model building, like Stochastic Simulation’s speed-revolutionary ResAssure, also nicknamed as the “fastest reservoir simulator in the world”. ResAssure marks a significant milestone in the history of reservoir simulation and can provide 100-1000 times faster reservoir simulation speeds for companies.
Tools like GasAssure and ResAssure have been embraced with much curiosity by the industry for their computational ability to assemble incredibly large data sets and the layering of different analytical techniques at faster speeds. What these digital oilfield tools do in minutes and hours is currently what takes the “industry-standards” weeks and months.
Using Digital Oilfield Tools Effectively
Digital Oilfield Tools used for modelling and planning are effective when supported by a robust business process and good quality, well-managed data. Individual engineers and their respective teams tend to want to use their own tools or spreadsheets. This inconsistency creates conflict, more than just your “my spreadsheet is better than your spreadsheet” type of conflict.
Effective results are found in digital oilfield tools where there is a single production model that integrates all the individual models (i.e. reservoir, wells, flowlines, compressor, etc.) to each having an owner, and then using their own tools with a common set of assumptions.
What more companies need is more people using a fewer number of different tools – and rather, investing in one model as complex as it needs to be to drive the right outcome (which can change in various planning timescales).
The oil and gas industry is unpredictable, and companies need to turn to digital analytics to add value to their projects. The problem is, most of the conventional software are outdated, slow and causing more uncertainty than they are worth. Tech-companies like Stochastic Simulation has taken advantage of this challenging environment and created innovative solutions that are robust, reliable and fast. You can now move from acknowledging how something happened to why it happened and what are the possible solutions to prevent in future.
Ensure your projects have access to the best technology, best practice systems and relationships as necessary to drive efficiency in delivery:
- Replace Legacy System with Digital Oilfield Tools
- Portfolio Thinking – Launch several pilots.
- High Performance Teams – Aim for minimal personality conflicts, where teams can manage risk and disruption and properly exploit machine-learning capabilities.
Frequent Reporting – Fortunately a main benefit of digital oilfield tools is that they make reporting faster and easier than before, encouraging creative problem solving.
About Stochastic Simulation, a leader in NextGen Market-Driven Digital Oilfield Technology
Join in on the digital revolution before you get left behind, start investing into next generation digital oilfield tools. Sorry to those who loyally advocate older, traditional “industry-standard” products, but the truth is, whether you like it or not – your planning software needs a legacy upgrade.
Stochastic Simulation build predictability software & fully integrated management platforms at any scalable level for the upstream Oil & Gas industry. Their uncertainty-analysis software enables companies to tackle any problematic risk faster than ever before, making decision-making easier. Their integrated suite maximises your reservoir asset management and production forecasting. Led by Chief Technology Officer, Dr Andrew Wadsley, Stochastic Simulation’s case studies and results are based off 35+ years of industry research and experience.
As the Oil & Gas industry becomes more uncertain and complex, Stochastic Simulation believes innovation and technology are key enablers to solve common challenges. Their core innovation uses unique proprietary technology able to undertake intensive data-mining of both geological and production data, quantifying reservoir and production uncertainty with respect to oil and gas field development, with the unique capability of being able to rigorously quantify the impact of sub-surface uncertainty on project profitability.
The price of oil will always change, but a determinant of true success is a company’s ability to adapt and develop new ways of working that are well suited too current conditions. In today’s low-price environment, the implementation of technology-enabled, highly efficient processes will distinguish which companies will survive.