The new age of data management and analysis in the oil and gas industry
Optimizing oil and gas operations will involve connectivity and the Industrial Internet of Things (IIoT).
If oil is black gold, then overlooked data from the oilfield is a diamond in the rough.
"Informational value is the most important commodity throughout the oil and gas industry," a recently released white paper from Quorum Business Solutions concluded. "Newly embedded devices and sensors make it easier to collect data at an ever-increasing rate, while cloud storage technologies make it simpler to store the data. However, real value is created from data when informational context and associations are made inside and outside of an organization."
The move to cloud data is changing the way oil and gas operators are analyzing operations. Those analyses, Quorum concluded, will help out producers at every level of the supply chain, even in uncertain times. "Current market volatility provides proof that optimization is needed across the oil and gas value chain," the white paper stated. "Companies that leverage data to optimize business processes will not only thrive, but survive during market downturns and dominate the industry on the next upswing."
Shawn Cutter, a vice president at Quorum specializing in field production optimization, operations, measurement, and SCADA, discussed the implications of this new age of data management and analysis with Oil & Gas Engineering:
OGE: The white paper talks about the importance of seeing the Industrial Internet of Things (IIoT) and cloud computing as one system. Why is that important?
Shawn Cutter: The only way to manage the rapid advancement of IIoT is to treat it as one would any other resource requiring massive scale to harness. Cloud computing systems are designed to meet the challenges of data ingestion, storage, and analytics on larger and larger volumes of data.
Another inarguable fact is the massive amount of capital required to build the infrastructure demanded for scale that effectively replaces itself every few years. Oil and gas companies should stick focus on their core business.
OGE: How should oil and gas companies take advantage of such a system?
Cutter: Since there is no single vendor that can deliver IIoT, it is not a single box that can be checked. Rather, IIoT will be layered in, quarter over quarter and year over year. As such, for companies to start taking advantage, they first have to start with defining their strategy and determining what questions need answering where insufficient operations data and information exists. The journey of successful companies in this space will be very iterative.
OGE: Oil and gas companies are notoriously slow adopters of technology, and deploying IIoT is a big adoption. What do you see as the major benefits for the industry?
Cutter: While it is true that the oil and gas industry has traditionally been slow to adopt, I do not think that will be the case in certain areas of the industry and particular units within an organization. Initially, IIoT will augment legacy devices and facilities with additional devices because:
- The cost of all forms of computing continues to decrease.
- Hardware vendors will force the introduction in their quest for growth.
- The younger generation has an appetite for and an expectation of information.
The benefits will touch every area of the business. IIoT enables an organization to move away from manual, reactionary methods of managing their operations to a proactive and continually adaptive style that functions in a mode of continuous improvement. A few examples of immediate benefit include:
- Elimination of all unnecessary field travel reducing overhead and liability
- Elimination of all unplanned downtime caused by equipment failures
- Maximized production output and longevity of wells through proper pressure, rate, and artificial lift optimization.
OGE: In the same vein, what are some of the short-term challenges that companies need to address when moving to IIoT?
Cutter: In the short-term, for companies to get started in IIoT, they need to close a few gaps in their infrastructure, knowledge, and security. A gap in one or more of these areas will lead to uncertainty, high probably of failures, and resistance to future change.
OGE: You mention an important concept in the white paper: that it's not just about producing more oil and gas, but producing it in an optimized way. Can you expand on that idea, and why it's more important today at $40 bbl oil than it was 2 years ago at $100 bbl oil?
Cutter: This concept is actually a lot easier to explain at $40 oil when the breakeven price is $50; as we are seeing, companies are struggling to weather the storm, cutting as many costs as possible, sometimes with no regard to future implications. Cuts in personnel and preventative maintenance overhead without providing alternatives will yield more expense or decreased output later.
When oil is $100, bad decisions are hidden by easy profit. Any company that can streamline operations now, nurturing a culture of data-driven decisions, can achieve profitability even in the current macro-environment. The companies that do will accelerate out of the next market recovery.
OGE: Connected systems seem to hold great promise in an industry where price volatility still exists. What should be the strategy for upstream and midstream companies looking to manage such volatility?
Cutter: The strategy should be one of continuous improvement where every process can be incrementally analyzed and adjusted widening the gap between red and black. This agile approach is not a new concept to upstream and midstream companies; however, applying it in the form of 1's and 0's is vastly different from drill collars and pipe wrenches.