Digital oilfield 2.0 uses smart technology to boost production efficiency

Jen Johnson

Stock image. Oil companies are using digital technology to boost efficiency (Credit: Shutterstock)
Stock image. Oil companies are using digital technology to boost efficiency (Credit: Shutterstock)

When historians are assembling the narrative of the 21st century, the year 2020 could very well be singled out as a critical turning point for oil and gas firms.

The sector that powered the development of the modern world has struggled under the acute weight of a global pandemic, while contending with increasing pressure to improve its environmental profile. In April, as global lockdowns sent demand plummeting, the price of US oil turned negative for the first time in history.  

Has it come time, then, to sound the death knell for one of the most profitable industries of all time? While oil’s outlook is far from rosy, there are plenty of signs that point to its continued importance to the global economy. BP told its shareholders in June that it expected to write down as much as $17.5bn of its oil and gas holdings in the wake of the coronavirus crisis. However, most analysts view this not as an admission of the company’s approaching demise, but the harbinger of a sector-wide rebrand from “big oil” to “big energy”.

Strategic shift

“In the longer term, this is about BP’s strategic shift away from oil and gas,” said Luke Parker, vice-president at energy consultancy Wood Mackenzie. “While that will be a multi-decade affair, BP is already getting to grips with the idea that its upstream assets are worth less than it believed as recently as six months ago. Indeed, some of them are worth nothing.”

Price shocks have, of course, plagued the industry in the past. Its response to each crisis has been to try to find new ways to cut production costs. As the Internet of Things has evolved, advanced sensors and automation software have allowed operators to realise new operational efficiencies. The concept of a “digital oilfield” became popularised over the past decade or so as companies turned to technology to help them streamline operations. It may yet see a renewed wave of enthusiasm from oil companies looking to bounce back from the pandemic.

Shell claims to be one of the first companies to have deployed digital oilfield technologies across its production infrastructure. Back in 2004, the Anglo-Dutch firm partnered with oilfield services group Schlumberger to develop what it called “realtime workflows”, which would connect its people, processes and technology. It’s now become commonplace for Shell’s equipment in the field to be embedded with thousands of sensors, which send information about valve pressure, temperature and other field conditions to operators on land. In 2010, the company said the value of its Smart Fields initiatives was $5bn.

Not to be outdone, BP has also widely installed sensors and fibre-optic networks on its assets in the Gulf of Mexico and the North Sea. According to a 2015 report from Accenture, the company estimated that its digital push added 3,000 barrels per day to production at the Schiehallion field in the North Sea and 10,000 barrels per day to the Thunder Horse field in the Gulf of Mexico. 

Figures from the consultancy IHS CERA suggest that the implementation of digital oilfield technologies has resulted in production increases of 2% to 8% and operating expense reductions of 5% to 25%. Now, faced with the prospect of persistently low oil prices, operators may be forced to abandon their most expensive operations and focus on maximising production where it’s most cost effective. 

Amid this landscape of uncertainty, a handful of oil majors have made significant promises to reduce the carbon emissions associated with production. Shell, Total and Equinor have set targets of reducing the carbon intensity of the oil and gas they sell by 50% to 65% by 2050. BP and Repsol have promised to be carbon-neutral by mid-century. The world will be watching to ensure the oil industry is as good as its word. It will have to act quickly to cut emissions from its operations.

Detecting leaks

Total indirect emissions from oil and gas operations today are around 5,200m tonnes of carbon-dioxide equivalent, or 15% of total energy sector emissions. Methane makes up the lion’s share of this figure, according to the International Energy Agency. In June, BP announced it had invested $5m in Satelytics, a cloud-based geospatial analytics software firm that uses machine learning to monitor environmental shifts, such as methane leaks from oil and gas infrastructure. 

As the oil industry turns to face the low-carbon future, cutting-edge technologies will need to be deployed not just to enhance oil recovery, but to reduce the environmental impact of extraction. It’s high time that the sector optimised itself for the energy transition. 

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Content published by Professional Engineering does not necessarily represent the views of the Institution of Mechanical Engineers.


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