Insight: Oil majors experiment with technology to weather crisis

Nexen

16/10/2016 10:00

* Drones, drill design, data software, robot cleaners 
    * Among technologies oil majors using to make savings 
    * More cost cuts to come as companies shield dividends 
    * Graphic on industry investment: http://tmsnrt.rs/2cG4Dj9 
 
    By Karolin Schaps and Jessica Jaganathan 
    LONDON/OSLO, Oct 16 (Reuters) - Oil majors including 
Statoil, Shell and Chevron are experimenting with various 
technologies, from drones and drill design to data management, 
to drive down costs and weather a deep downturn.  
    Crude prices have more than halved since mid-2014, forcing 
companies to cut billions of dollars in costs. Determined to 
shield dividends and preserve the infrastructure that will allow 
them to compete and grow if the market recovers, they are 
increasingly looking to smarter tech and design to make savings. 
    French oil and gas major Total  TOTF.PA  said it was now 
using drones to carry out detailed inspections on some of its 
oil fields following a trial at one of its Elgin/Franklin 
platforms in the North Sea.  
    Cyberhawk, the drone company that led the trial, said this 
kind of work was previously carried out by engineers who 
suspended themselves from ropes at dizzying heights. It said the 
manned inspection used to take seven separate two-week trips 
with a 12-man team that had to be flown in and accommodated on 
site. 
    The drones do the work in two days and at about a tenth of 
the cost, according to the Britain-based firm's founder Malcolm 
Connolly, who said it had also worked with ExxonMobil  XOM.N , 
Shell  RDSa.L , ConocoPhillips  COP.N  and BP  BP.L .  
    Total declined to comment on how long the manned or drone 
inspections took, or specify how much money was saved. 
    Statoil's  STL.OL  giant Johan Sverdrup field, the largest 
North Sea oil find in three decades which is due to start 
production in 2019, is a leading industry case study for cutting 
costs in the era of cheap oil. 
    The Norwegian company has cut its development costs for the 
first stage of the project by a fifth compared with estimates 
given in early 2015, to 99 billion crowns ($12.2 billion).  
    The savings have largely been made by focusing on the most 
efficient technology and designs from the beginning, Statoil's 
head of technology Margareth Oevrum told Reuters in an 
interview.  
    Executives say the growing attention on technologies that 
have been around for some time shows how wasteful the global 
industry had been in the years before the downturn when - with 
crude at above $100 a barrel delivering bumper profits - oil 
companies' had little incentive to develop fields efficiently. 
    For example, simply finding a more efficient route for the 
oil pipeline that would carry the crude from the Sverdrup field 
to the onshore refinery cut 1 billion crowns, Statoil said. 
     
    ROBOTS, FOAM 
    Statoil has also developed a drilling "template" that is 
acting as a guide for the first eight wells to be drilled at the 
field. It said it had reduced the overall drilling time by more 
than 50 days, saving about 150 million crowns per production 
well compared with what it would have cost with 2013 techniques. 
    "By far the biggest driver (of savings) has been 
simplification," said Oevrum. "To think much simpler and start 
from the bottom, or the bare bone, and then rather add to that, 
instead of starting very big." 
    The company could not give a figure for its group savings 
made from improved technology and design. But it said that, 
partly because of such innovations, projects set to start 
production by 2022 would be able to make a profit with an oil 
price at $41 a barrel, down from $70 in 2013.  
    Global upstream - exploration and production - oil and gas 
spending has fallen by more than $300 billion across the 
industry in 2015-16, according to the International Energy 
Agency (IEA), roughly equivalent to the annual GDP of South 
Africa. Around two-thirds comes from cost cuts, rather than 
cancelling or shelving projects, it said.  
    Shell, for example, has developed a new type of pipe, called 
a steel lazy wave riser, to carry oil and gas from its deepwater 
Stones field in the Gulf of Mexico for processing. It bends to 
absorb the motion of the sea and the floating platform, which 
the company says boosts production at extreme depths.  
    The Anglo-Dutch major could not say how much the pipes 
contributed to increased efficiency, but said innovations at 
Stones had played a significant part in cost savings of $1.8 
billion in its projects and technology division last year - 
equivalent to the 2015 core profits in its upstream division. 
    The fall in oil prices has led to the introduction of other 
new engineering and maintenance techniques.   
    Chevron is using a robotic device to clean and check the 
inside of pipelines on their Erskine field in the North Sea more 
quickly. The improvement has helped raise the field's daily 
production rate to the highest in two years.   
    Oil services firm Amec Foster Wheeler  AMFW.L , working for 
BG Group which is now part of Shell, has applied a new technique 
to remove the pillars of an old platform, a procedure that is 
often dangerous because corroded elements can slip off.  
    It pumped in expanding foam to hold the pillar's elements 
together, allowing workers to safely cut the metal away. This 
work took just over seven weeks instead of the 22 weeks 
typically needed using traditional methods. 
    Alex Brooks, oil and gas equity analyst at Canaccord 
Genuity, said tech innovation in the industry was about "100 
tiny things", adding: "The bottom line is you end up with a much 
lower cost." 
    The downturn has presented opportunities for some services 
firms that can offer cost-saving innovations. Inspection drone 
firm Cyberhawk, for instance, said its revenue from oil and gas 
had doubled from mid-2014 to mid-2016, while the wider 
inspection market had shrunk.  
     
    VAST DATA 
    Another way oil companies are looking to cut costs is by 
using their vast amounts of data to better predict their needs. 
    Since the price slump, companies including Shell, ExxonMobil 
and Statoil have started using software that can better manage 
their data to cut wastage in the ordering of construction 
materials.  
    Stuck with excess material, some companies suffered huge 
losses because the resale value was much lower and in some cases 
they even took to burying unwanted material, according to 
Intergraph, a unit of Swedish tech firm Hexagon  HEXAb.ST  that 
develops such systems for oil industry clients. 
    "Previously, it was industry standard to order 3-5 percent 
more materials than needed, which in a billion-dollar project is 
a lot of money," said Patrick Holcomb, executive vice president 
at Intergraph.  
    Better managing data has helped oil firms understand exactly 
how much material is needed and when it will be delivered, 
cutting excess to one or two tenths of a percent, he added.  
    Gunnar Presthus, Nordic energy lead at consultancy 
Accenture, who advises oil majors and national oil companies, 
said the downturn had led to the industry waking up to the 
potential of the data they store.         
    "The oil industry, to some extent, is one of the most 
digitalised industries," he said. "Companies are now able to use 
this wealth of data to make changes that will save money." 
    ($1 = 8.0919 Norwegian crowns) 
 
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GRAPHIC-Oil slump and fall in upstream investment     http://tmsnrt.rs/2cG4Dj9 
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 (Additional reporting by Stine Jacobsen and Gwladys Fouche in 
Oslo; Writing by Karolin Schaps and Gwladys Fouche; Editing by 
Pravin Char) 
 ((karolin.schaps@thomsonreuters.com; +44)(0)(207 542 6622; 
Reuters Messaging:  karolin.schaps.reuters.com@reuters.net)) 
 
Keywords: OIL COMPANIES/COSTS