By Mark Hill
The upstream industry loves a good dust-up. From crashing oil prices to Saudi over-production, the past two years have tested that tenacity like never before.
The scraps have come thick and fast. But where the boom years saw a frenzied battle to see who could out-drill and out-spend rivals, the days of luxury camps feeding lobster to roughnecks while Learjets circled overhead are over.
Today’s shale producers are thinking leaner and longer. The new watchword is frugality–and it’s energizing a very different kind of shale revolution.
From mechanical to digital, innovation is shale’s DNA
It’s almost 10-years since advances in hydraulic fracturing technology kicked off the first shale boom. Gas from shale rocks went from almost zero to current levels of around 50bn cubic ft/day . It killed off coal-burning power and gave American businesses a huge advantage in operating costs. Extending fracking to unconventional oil plays, lifted U.S. production by 3 million barrels a day and compelled the Saudis to try to flood the market in an attempt to drive American producers out of business.
That, combined with weakening global demand crashed oil prices and has kept crude hovering at around $50 per barrel. Yet the fall and flood haven’t had the expected outcomes. Of course some production has been trimmed back but the real story is how unintended consequences have pushed the U.S. shale industry to embrace new data gathering, analytical and mobile technologies. More producers are using tech to get more from their wells. A digital oilfield revolution is now underway.
Necessity: the mother of invention
Development of digital oilfield technology has been happening for at least 15 years, but it’s only in the past few that E&P companies focused on unconventionals have started to trust and apply it.
The industry’s financials when oil prices began to fall left it exposed. Output surged between 2012 and 2014 in part because of heavy spending. Producers borrowed heavily, bid-up land rights and drilled, drilled and drilled. Investors pushed the envelope when making valuations, while derivative bets taken when prices were high, threatened to hurt future cash flow. So when prices crashed, learning to do more with less became a rule of survival.
There was nothing to stop that happening across the upstream sector, but the unique challenges of data management in unconventional operations made digital adoption something close to business critical. The high-decline rates and higher number of wells that typically need to be managed in shale fields also have a direct practical impact on the life cycle of any field data collected, and that affects data quality, availability, integration, analytics, and regulatory compliance—in other words, how effectively that data can be put to work to improve profitability.
Some industry watchers have noted that shale production is different from traditional E&P, with the high levels of repeatability you might associate with a factory. As that lends itself over time to ever-increasing efficiency through the cascading effect of small, ongoing improvements, it also suits the modern management philosophy of ‘continuous improvement’, which is closely aligned these days with advances in software and mobile tech.
How shale is leading the way in digital
Digital oilfield tech has manifested itself most visibly in the mobile devices shale engineers use for capturing well data in the field, and communicating it back to head office for analysis. The adoption of SCADA (supervisory control and data acquisition) systems has made it possible to monitor wells around the clock and alert engineers to possible signs of failure.
With so many wells under management, however, it can still be hard for staff in the field and in the office to constantly monitor every single one. So those tedious and time-consuming tasks have become perfect candidates for predictive monitoring and automation. That’s thrown up some compelling benefits.
For one, shale producers have been able to move from preventative to predictive maintenance. Production and HSE incidents are being averted before a failure to minimise expensive downtime for rigs. These systems can also monitor production targets on a well-by-well basis and alert in advance if a well is unlikely to hit its expected production target. Course adjustments or fixes can now be made before a well’s output has been seriously diminished.
The impact on industry-wide production and bottom lines have been impressive, but it doesn’t mean digital haav arrived in the shale industry without facing challenges. Whether in the field on a mobile device or automatically via SCADA systems, massive volumes of information are now being captured at the well head that must be processed and turned into actionable information for surveillance, operational accounting, and HSEQ compliance.
It’s a flood of data that can hide critical knowledge, so the data management systems being adopted have had to get better at surveillance by exception, with functionality to identify problems and events automatically. Such large volume of automation data also can’t be stored indefinitely. So filtering and data-reduction techniques have had to adapt to improve archiving, and decide what information should stay and what should go.
The oil patch is optimistic by nature, but a dose of well-earned realism now permeates the industry. Sensible folks can see that prices may never return to the heady days of 2014, and that without profound change the industry faces an even harder landing, with more job losses, rig closures, company defaults, and asset selloffs. It’s good news that shale producers are leading the way in E&P innovation, drilling through data in order to emerge leaner, meaner and more productive than before.