With oil prices depressed, Greg Hale argues that automation could make a much needed difference in the offshore industry.
The scenario is set and it is time for everything to play out: automation can come to the rescue of the offshore oil and gas industry.
With crude prices at lows not seen for almost six years, there is a way to recoup costs and convert losses, or declining profits, into stronger gains and that is through a strong automation program. Through a relatively small investment and a strong and smart implementation across the board, an automation program will reap huge dividends.
Even the US Energy Information Administration (EIA) foreshadowed ominous issues confronting the industry in its Annual Energy Outlook AEO2014: “Among the most uncertain aspects are the potential effects of alternative resource and technology assumptions on the global market for liquid fuels, which is highly integrated. Regardless of how much the US reduces its reliance on imported liquids, consumer prices will not be insulated from global oil prices set in global markets for crude oil and petroleum products. Strategic choices made by leading oil-exporting countries could result in US price and quantity changes.”
As it turned out, oil exporting countries made their strategic choices and the end result to date has been lower prices and potentially declining profit margins.
Just look at the UK. In the UK, thousands of jobs in the offshore oil and gas industry are at risk with full-year output for the entire North Sea expected to decline to 840,000 b/d, its lowest level since 1977. Billions of dollars of investment will need to come into play to pull out the remaining reserves. Industry consultancy, Wood Mackenzie, said 32 potential European oilfield developments that could produce 4.9 billion bo may end up on the back burner if prices consistently stay below US$60 per barrel, which is where it is hovering right now. Along those lines, BP already cut $1 billion from its capital expenditure plans.
This is where automation comes into play. Yes, new-age technologies are seeing action on the platforms, but a more involved program from drilling to producing, compliance, regulations, safety and security will allow for a more enhanced and productive enterprise. It only makes sense. Whether the price for crude increases or declines, for producers to realize a highly successful operation, they need to integrate all their technologies into one interconnected portfolio.
Neil McCulloch, president North Sea, EnQuest, speaking at a production optimization event in Aberdeen in November buttressed that point when he said production in his neck of the woods is falling woefully short.
“We have to be simultaneously shocked, embarrassed and depressed that we [as an industry] are missing our production targets. We, as an industry miss targets by a third. We are only producing 66% of what we say or tell management we are going to produce (OE: December 2014).”
“We believe that high production efficiency is no accident,” McCulloch said. “Part of it is capital investment. We invest and see the results. It is also a relentless focus on things such as production efficiency and asset integrity.”
It ends up being about doing more with less. Through better visualization and control of processes and the integration of various subsystems and electrical, fire and gas and safety and subsea control, it allows operators to quickly make a change to solve a problem and keep everything running full steam ahead.
Through an interconnected set of systems, it is possible to see what is truly going on with all aspects of the operation.
It can not only provide essential business information, it can allow for total asset optimization to ensure smarter business decisions to create a stronger profit stream.
It is no secret, the industry needs to stop talking and start doing something different. Automation will be a difference maker.
Gregory Hale is the editor and founder of Industrial Safety and Security Source (ISSSoure.com) and is the contributing automation editor at Offshore E
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