trends and challenges in the upstream oil and gas industry
TRANSCRIPT
Trends and Challenges in the Upstream Oil and Gas Industry
IBM Rational Systems Engineering Symposium, Apr 2013
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Quiz
Q1: What industry developed anti-corrosive coating?
Q2: What industry has to send slender tools though long narrow tubes, using materials that are compatible with the environment, and where a mistake can cost millions of dollars or even get someone killed?
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Quiz
Q1: What industry developed anti-corrosive coating?
Q2: What industry has to send slender tools though long narrow tubes, using materials that are compatible with the environment, and where a mistake can cost millions of dollars or even get someone killed?
A1: NASA. This material is used in oil rigs and pipes to prevent salt water corrosion.
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Quiz
Q1: What industry developed anti-corrosive coating?
Q2: What industry has to send slender tools though long narrow tubes, using materials that are compatible with the environment, and where a mistake can cost millions of dollars or even get someone killed?
A1: NASA. This material is used in oil rigs and pipes to prevent salt water corrosion.
A2: Medical (Cardiovascular)
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Quiz
Q1: What industry developed anti-corrosive coating?
Q2: What industry has to send slender tools though long narrow tubes, using materials that are compatible with the environment, and where a mistake can cost millions of dollars or even get someone killed?
A1: NASA. This material is used in oil rigs and pipes to prevent salt water corrosion.
A2: Medical (Cardiovascular)
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Focus on Upstream
GAS/NGLs
OIL
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Industry Trends
• Worldwide demand for energy is increasing• But finding energy is hard. And getting harder.• Retiring staff, not enough new grads.• Unconventional Oil/Gas:
• E&P as manufacturing, marginal operators. • Drilling schedules are compressed.• Drilling complexity is increasing.
• Environmental regulations and intolerance.• Domain experts lack time to provide requirements
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Worldwide Energy Demand is Increasing.
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Increasing Demand Far into the Future
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Finding Energy is Getting Harder
• NOCs get to cherry pick the easier projects in their backyard.• IOCs are left with the most technically (or politically) challenging projects.• Unconventional Oil/Gas present new challenges.
Shell’s Perdido platform is 200 miles into the Gulf of Mexico.World’s deepest deep-water project.Arctic may hold 90 billion barrels.
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But Aging Workforce
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And Fewer Industry Professionals
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And Fewer Professors to Teach
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Drillinginfo Analytics – Unconventional Oil/Gas
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Drillinginfo Analytics – The Marginal Operator
Contour geology
data
Establish correlation between
production and geology
Predict production based on
contoured geology for entire play and bin the results A-J
• Divide the play into 1 sq-mi grid• Correlate geology from well logs with production from producing wells• Interpolate geologic model to predict production in any 1 sq-mi cell• Bin predicted production into letter grades. A … J• Test for statistical significance
We want to separate the effects of geology from operations (and operators)
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Drillinginfo Analytics – Eagle Ford Study
Well logs: resistivity,
gamma ray, bulk density, etc.
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Drillinginfo Analytics – Resulting Graded Acreage
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Max IP Correlates with Grades
Grade
Max
IP B
OE
/D (2
0:1)
2,000
1,800
1,600
1,400
1,200
1,000
800
600
400
200
0
A B C D E F G H I J71 187 565 756 1426 841 225 125 27 13
1056.06 862.947 601.895 407.865 347.27 228.938 171.526 95.9408 40.5263 37.24675 17 9 21 19 30 6 6 3 3
CountMedianOutliers
Color byGrade
ABCDEFGHIJ
Reference points:
Median
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Operator Performance Relative to Group Average, by Grade (A-E)
Deviation From Average Max IP By Grade (Boe/D)
Grad
e
-100 % -80 % -60 % -40 % -20 % 0 % 20 % 40 % 60 % 80 % 100 %
A
B
C
D
E
EOGMARATHON
SM ENERGY
ANADARKO
CONOCO
PETROHAWK
PETROHAWK
CHESAPEAKE
CONOCO
PIONEER
CONOCO
PETROHAWK
MURPHY
PIONEER
EOG
PLAINS E&P
MURPHY
RILEY EXPLORATION, LLC
MARATHON
PIONEER
PENN-VIRGINIA ROSETTA
CHESAPEAKE PLAINS E&P
TALISMAN
EOG
PETROHAWK
PIONEERCONOCO
PLAINS E&P
EOGTALISMAN
MARATHON
Color by% Deviation From Avg
100 %0 %-100 %
Size byWell Count
≥ 100
≤ 2
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Operator Performance Relative to Group Average, by Grade (A-E)
Deviation From Average Max IP By Grade (Boe/D)
Grad
e
-100 % -80 % -60 % -40 % -20 % 0 % 20 % 40 % 60 % 80 % 100 %
A
B
C
D
E
EOGMARATHON
SM ENERGY
ANADARKO
CONOCO
PETROHAWK
PETROHAWK
CHESAPEAKE
CONOCO
PIONEER
CONOCO
PETROHAWK
MURPHY
PIONEER
EOG
PLAINS E&P
MURPHY
RILEY EXPLORATION, LLC
MARATHON
PIONEER
PENN-VIRGINIA ROSETTA
CHESAPEAKE PLAINS E&P
TALISMAN
EOG
PETROHAWK
PIONEERCONOCO
PLAINS E&P
EOGTALISMAN
MARATHON
Color by% Deviation From Avg
100 %0 %-100 %
Size byWell Count
≥ 100
≤ 2
Best operators can produce +50% more
Compared to inferior operators
In the same acreage
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Pad Drilling. More wells faster
Teams are so busy that they cannot update their models or focus on the long term.
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Increased Drilling Density Suggests Manufacturing Model
Year
Acre
Spa
cing
Jan Sep MayJan Sep MayJan Sep MayJan Sep MayJan Sep MayJan Sep MayJan Sep2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
320
280
240
200
160
120
80
BarnettYear
Acre
Spa
cing
Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct Jan Apr Jul Oct2008 2009 2010 2011 2012
1,400
1,200
1,000
800
600
400
200
Eagle Ford
Year
Acre
Spa
cing
Jul Nov Mar Jul Nov Mar Jul Nov Mar Jul Nov Mar Jul Nov Mar Jul Nov2007 2008 2009 2010 2011 2012
1,3001,200
1,100
1,000900
800
700600
500400
300
HaynesvilleYear
Acre
Spa
cing
Nov MayNov MayNov May Nov May Nov May Nov MayNov May Nov May Nov2004 2005 2006 2007 2008 2009 2010 2011 2012
1,400
1,200
1,000
800
600
400
Bakken
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Unconventionals: Operational Excellence is Critical
• Finding (or acquiring) oil is only one core competency.• Drilling and completion engineering is critical.
• Complex fracs, 30+ stages• Water source, disposal, reuse is economic and political issue• Regulatory requirements are changing
• Operational silos cause problems.• Operational geologist has to work with drilling department• Frac engineers now working with microseismic
• New systems to support volume and complexity of drilling• Create repeatable, traceable, automated processes
• Cost controls in the face of commodity price pressure ($3 per MCF)
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Environmental Concerns and Politics
• No room for mistakes in current political climate. • Verifiable traceability is needed at many levels:
• Pretesting of ground water• Contract administration• Remediation plans
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Intolerance for Accidents
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Domain Experts Too Busy to Focus Long Term
26
Asset Design and Operation Life Cycle
Business Goals20% cheaper15% more oil 35% better water reuseProducing in in ½ the usual time
Physical Assets Supporting Business Goals
Too often…. projects are delivered late or miss expectations
Domain experts usually too busy to define requirements adequately
Underutilization of systems and technology to communicate requirements and collaborate across the globe
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Putting it Together
Fewer and more inexperienced professionals will have less time to complete more technically challenging projects in the face of a tougher regulatory and risk environment and facing unpredictable commodity prices.
And the world needs them to be successful as energy demand grows.
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Final Thoughts: Meeting the Challenge• Leverage IT systems better.
• Insist on better integration from vendors.• Understand requirements up front. Processes are not
enough.• Leverage younger, IT savvy staff.
• Leverage the people, experience in other industries.• Aerospace has dealt with mission critical projects.• Medical industry operates under strict regulatory compliance.
Pumps & Pipes, Houston TXMars Curiosity