How North American Energy Can Compete – Enablement of a Digital Oilfield with a “Connected Field”

Did you know that accountants were hesitant to adopt spreadsheet programs like excel? Or that it took us decades to fully adopt trains, automobiles and computers? Do you think these things changed our lives? Of course! How could we conceive where we are today without them? But it took a while for them to gain “steam” (pun intended).

The situation with the Digital Oilfield in North America follows these familiar lines. It is a transformation that I cannot adequately explain since I only know how to build the enabling technology. How it’s going to be used is up to each person acting individually and resulting in a collective connected effect. Sure, I can give some examples or find people who have done this or that. But that’s the tip of the iceberg. The “killer example” is going to be different for every team in an energy company.

The enabling technology for the Digital Oilfield is called a “Connected Field”. It takes the Oilfield improvement areas listed below and binds them together. It’s the enablement of seamless intercommunication and coordination that truly leverages a Digital Oilfield. Without it, it’s an Oilfield that uses new Oilfield technology – not the exciting “Digital Oilfield” that truly propels the energy business to the next level.

There are so many ways to get a Connected Field wrong for a Digital Oilfield. Even with the right telecom vendors, it’s so easy to say “we don’t need QoS (Quality of Service)” – simply because the decision maker doesn’t know what it is. The fallacy is that there is a belief we already have a Digital Oilfield. There are already real world examples of a true Digital Oilfield using a Connected Field. And they are all in the Middle East; lowering their costs and increasing their supply. I cover a real world example later, so it will be easy to see the difference.

But let’s go back to the beginning. What is a “Digital Oilfield”?  The concept was first presented in the seminal study: “The Digital Oilfield of the Future: Enabling Next Generation Reservoir Performance”, IHS Cambridge Energy Research Associates, Inc., 2003.

A Digital Oilfield makes the following improvements to the Oil & Gas business – and a Connected Field enables most of them; that is, you need a connected field to truly leverage the benefit to the full extent.

DigitalOilfieldImprovements

So what is a “connected field”? It is a data communications system that has these characteristics:

  • Completely and seamlessly covers the area of interest (like cellular data might cover all of the downtown of a city). This allows users to just turn on a device (sensor, video, etc.) reducing or eliminating the need to involve IT to justify a business case to obtain capital to expand the network. It just works. Technicians are not required to tune antennas at the user level. A rig can just move itself and still have full connectivity to all its services while it is moving and when it reaches its destination.
  • It is a committed That is, it is not a “best effort” network, shared with other companies and people in the area (like cellular data).
  • It allows full control – that is, it has quality of service (QoS) capabilities to prioritize business critical applications or applications requiring better service to function correctly (voice, video).

Let’s examine what is not a connected field:

  • Cellular data from any major telco. The reason why it is not is that it has no QoS and is best effort (no committed bandwidth) and may not cover the entire field without boosters (which are technically illegal according to the Telecommunications Act).
  • MPLS networks – in themselves, they would help if the purchaser buys QoS. If the cost of buying the right networks with QoS was used to price the rent option, it is likely that the system could be built from scratch less expensively. That is, a Digital Oilfield should consider the “rent vs buy” options like any procurement decision.
  • Satellite – the price per Mbps with QoS and dedicated bandwidth is horrendously expensive. Unless the company (including all teams and phases that work in the area) only expects to operate in the area for 6 months or less, it’s frequently the case that it is cheaper to build.
  • SCADA (legacy 450 & 900Mhz) – really this is only for “tin can on a string” SCADA data – that is monitoring / telemetry. There are now new SCADA radios that can supply QoS and bandwidth rates at 18Mbps or above but most Oil & Gas companies, especially in North America are not using them. Most of the SCADA radios in use today use technology that was developed during World War II and they have not been updated. We’re talking punch card era technology.

And of course, I hear all the skeptics. So what does a Digital Oilfield do  in practice? Here’s an example:

Petroleum Development Oman (PDO)

  • Connected field coverage: 45,000 sq. km (17,000 sq. miles)
  • Increased a mature (brownfield) oilfield’s production by 100K barrels/day. At $90/barrel this is $3.2 Billion/year in additional revenue within one year. (Ok, yes, price of oil… but this was done in 2012 – even at $30 that’s $1 Billion)
  • Reduced drilling & completion days to online from 39 days to 14 days ($1M per drill saved). Including completions, saved $5M per well.
  • 10 month payback.

What does the Connected Field network look like for PDO?

As of the end of 2013, Petroleum Development Oman field has:

  • 6600 broadband connection points
  • 52 base stations
  • 13 Gbps total capacity, the equivalent of 500 connected homes or the bandwidth provided to a 4000 person office building
  • 130,000 end devices

Compare this to a field of that size in North America; there are maybe 10 cellular base stations covering the entire thing. Everything overloaded to the point that it does not work that well (e.g. “worse than dialup” is what I frequently hear).

Together the Connected Field collects 36 times more data enabling more accurate and improved decisions. It delivers 4 Mbps anywhere within the field of coverage (compared to less than 300kbps in some fields available today). You can drive around in a truck all day long and everything just works.

No messing with devices, changing networks, etc. Need to talk to the engineer in head office and start a video chat about a valve to show him/her the valve? Done! No problems. Want to implement an intelligent video system to monitor the flare stack, look for pipeline leaks, identify personnel not wearing PPE, etc.? Want a “mobile worker”? (Please do not confuse it with a “mobile OS” which is simply an operating system built to enable mobile workers that have a network.) With a Connected Field, you just do it! No need to price in a brand new network to enable the business case.

The cost of all this? Less than 1% of the total injected capital into a greenfield area. And if a true connected field is implemented that is multi-use and multi-team capable, the expenditure is less than what they spend today.

Despite the impressive track record how many Digital Oilfields are there in North America? None. Some are close with partial implementations but it’s localised and not well championed at the executive and board levels. How many in the Middle East? Quite a few. Middle East operations have the direct support of the board of directors/families and executives. Would this situation have any bearing on the current supply / demand and geopolitical climate? Hmm….

Oil & Gas Cost Reduction Projects With 50% IRR Go Undone

Even in today’s poor commodity climate – many cost savings projects with a 2-3 year payback (50% IRR) period go undone. If you don’t recall what the payback period or IRR is, please see my post:

“Who likes making money? Payback, RoI, IRR explained…” https://www.textor.ca/2016/03/who-likes-making-money-payback-roi-irr-explained/

iStock_000013530407SmallThere are two things to note about cost savings projects. They typically:

  • Reduce periodic General and Administrative (G&A) costs – so the savings that impact periodic payments do not “end” and could go on indefinitely.
  • Are beneficial in a good or bad commodity environment. There is no commodity price dependency!

Based on this, a company should always do periodic cost reduction projects – in a good or bad commodity environment since it increases the profit margin in good times and allows a company to survive longer than its competitors in bad times (and survivors always do the best in the long run).

pumpjackI have been in Oil & Gas for over 17 years. And during that time I’ve been aware of more rural connectivity projects that have these characteristics than I could possibly handle… if only they would be approved and added to the queue. To add to the malaise, network costs are a top IT cost. See my article “Top Ongoing IT Costs – Data Centres and… Networks” https://www.linkedin.com/pulse/top-ongoing-costs-data-centres-networks-trevor-textor

Correct me if I’m wrong… but from what I recall from what Oil and Gas executives have told me, any Oil & Gas project with over a 30% IRR is always approved. However, it’s been entirely up-hill trying to convince Oil & Gas to approve these projects.

I’m going out on a limb here though…. Maybe the reason why is that they are connectivity (telecommunications) projects for rural areas? Connectivity usually falls within the IT department and from my interviews with CIOs, there is little focus on connectivity costs. That is, they feel that connectivity is not really an IT role but it gets lumped into IT so they suffer through it. I agree with them – IT is getting dumped on due to poor understanding of connectivity at the leadership levels. After over a decade doing rural connectivity, I believe that connectivity should be an engineering role and connectivity commissioning and operations should be in IT. This arrangement makes the basic procurement management build (engineering) vs rent (off the shelf) calculation possible. Let’s face it, IT is not engineering. IT is only going to rent. But most of the time, it is more effective to build in rural Oil & Gas locations.

The final nail in the coffin for this whole scenario is that connectivity is critical infrastructure (like water, electricity). This basically means you can’t do things that are expected of a company operating in the current economic environment without it. I have had to deliver the bad news to hundreds of promising Oil & Gas projects because the current network they have cannot support anything but the basics (e.g. kilobit per second SCADA – or what I call “tin can on a string” data). The cost of this one fact alone is colossal. I explain more about this in my presentation “Understanding the Remote Field Data Communications Challenge”

http://www.slideshare.net/TrevorTextor/understanding-the-remote-field-data-communications-challenge

Anyone care to chime in? Anybody have an Oil and Gas producer or midstream company (operates rurally with large footprint) who does not focus on connectivity and would love to save money?

Many Protests Are NOT Evidence Based

protestThis very articulate oil industry worker explains why anti-oil protests do not make sense in a surprisingly matter of fact and well delivered way.

https://youtu.be/qwCZB97E45M

Personally, I have trouble with being pure black and white / “anti-anything” these days; there is so much misinformation, especially from protest groups. In my youth I got keyed up by all the rhetoric like everyone else but then I learned that most of these people are so widely misinformed that it’s just dangerous to believe them. A film that highlighted this for me was the documentary “Pandora’s Promise”; in it, many key environmentalist figures question some environmental stances as non-evidence based.

https://en.wikipedia.org/wiki/Pandora%27s_Promise

IEEE Southern Alberta Speaking Engagement – Calgary February 4, 2016

Spectrum IllustrationI’m delighted to be delivering two presentations again but for the first time, in tandem:

“Broadband Internet – The “Railroad” of Our Era”, a general view of broadband internet, followed by:

“Understanding the Remote Field Data Communications Challenge”, rural telecom for Oil & Gas “in a nutshell”.

Non-IEEE members are welcome. Registration opens at 5:15pm, presentations start at 6pm.

More about the presentation here:

https://meetings.vtools.ieee.org/m/36884

Who says satellite is the only option for offshore?

Tampnet owns the largest offshore 4G network (which is its deployment in the UK’s North Sea – a significant Oil & Gas area similar to the Gulf of Mexico).

Tampnet just acquired Broadpoint (July 21, 2015) who owned 50 2G base stations in the GoM – and has plans to upgrade them to 4G.
http://www.tampnet.com/tampnet-to-acquire-telecom-infrastructure-in-the-gulf-of-mexico-from-broadpoint-and-enter-into-partnership-with-a-leading-telecom-carrier/

North Sea Coverage map:
http://www.tampnet.com/north-sea/

GoM Coverage map:
http://www.tampnet.com/gulf-of-mexico/

What Sensors & Big Data Can Lead To

This planet money follows a UPS truck where sensors & big data lead to small changes that make large bottom line impacts: 1 minute per driver per day over the course of a year adds up to $14.5M. One keystroke per driver costs $100K/year. 1 minute of idle per driver per day is worth $500K in additional fuel costs at the end of the year. Shaving all this time via efficiencies worked for the workers too. In the last decade, their wages & benefits have doubled.

http://www.npr.org/blogs/money/2014/05/02/308640135/episode-536-the-future-of-work-looks-like-a-ups-truck

The Oil & Gas industry needs to embrace new IP-based infrastructure for its fields

Brad Bechtold (@bradbechtold2) of Cisco via @CiscoCanada explains why the Oil & Gas industry needs to embrace new IP-based infrastructure not currently in oilfields. The concept he references is a “connected field” in which multiple IP communications technologies work together as a system. These technologies include UHF, VHF, LMRS, microwave, WiFi, fiber and satellite which are all today hotly debated as to “what works best” (answer: none, it depends on what you need to do).

http://canadablog.cisco.com/2015/02/12/why-the-canadian-oil-and-gas-industry-must-embrace-new-technologies/

Speaking in Calgary April 23, 2015 at the ISA Show

I am very excited to be speaking locally in Calgary at the Instrumentation, Systems & Automation (ISA) Calgary Show April 22-23, 2015. The presentation is entitled “Understanding the Remote Field Data Communications Challenge” and it scheduled for Thursday, April 23 @ 9:30am.

Hope to see folks there!

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Conference Schedule: http://isacalgary.com/conference-schedule/

Session information: http://isacalgary.com/sessions/understanding-the-remote-field-data-communications-challenge/

Remote field data communications is challenging. There are often multiple teams and vendors involved and no-one seems to have the big picture! Automation systems require different wireless systems than traditional broadband internet systems further confusing what should be used. This talk by Trevor Textor will help unravel the complexities and highlight:

  • The differences between automation traffic and traditional broadband traffic and how that might change the radios installed based on the circumstances.
  • Understanding wireless frequencies and the reasons different wireless frequencies are not better/worse than the other.
  • How video changes traditional approaches to communications (telecom as a utility).
  • How traditional IT merging into the automation world necessitates a different model between IT and engineering.
  • Financial impacts of a digital oilfield and how a “connected field” can deliver the dream of “just turn it on anywhere”.
  • What is telecom passive infrastructure? Why should we care?
    • How telecom passive infrastructure engineering determines your bandwidth availability.
    • When should a business think about passive telecom infrastructure?
  • How much does rural data communications outages actually cost?

Trevor Textor is a rural data communications expert with over a decade of experience. Trevor has participated in wireless system design, control system segregation projects, radio equipment evaluations and facility drawing reviews (to name just a few).

Please note: Trevor adheres to the CTCA code of ethics, has no agency relationships with equipment vendors and will attempt to provide fact and generic experience based advice.

http://www.ctca.ca/code-of-ethics

Oil Companies don’t make that much money

Here you have it, straight from Forbes on the 5 facts everyone should know about Oil Exploration:

“Oil companies don’t really make that much money…. This is an incredibly capital-intensive industry….Frankly, it’s a miracle anyone wants to be in this business at all. I truly think the major oil companies are underpaid. The risk-adjusted returns are crap compared to most sectors.”

Sounds to me like an industry that could really leverage better real time communications to de-risk the business & access technical know-how anywhere it is in the world.

http://www.forbes.com/sites/quora/2013/04/03/what-are-the-top-five-facts-everyone-should-know-about-oil-exploration/

Why Oil and Gas companies should consider a different strategy for their telecommunications.

An article of mine was published in Tait Connection magazine.  In it I argue that treating communications as a utility can translate to better business efficiency and big savings.

Magazine version:

http://magazine.taitconnection.com/taitconnection/issue_5#pg42

Web version:

http://blog.taitradio.com/2014/11/04/why-oil-and-gas-companies-should-consider-a-different-strategy-for-their-telecommunications/

“Tait Communications is a multinational radio communications company with headquarters based in Christchurch, New Zealand. The company has offices in 17 countries and employs 869 staff (2011).”
http://en.wikipedia.org/wiki/Tait_Communications

http://www.taitradio.com/