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Improve Costs and Operational Performance in Oil and Gas Production

by | Sep 1, 2016 | Industrial IoT, Industry, Oil & Gas, Production

Jim Cahill

Jim Cahill

Chief Blogger, Social Marketing Leader

Emerson's Sudhir Jain

Emerson’s Sudhir Jain shared an interesting McKinsey & Company article, The next frontier for digital technologies in oil and gas, describing how this industry historically and today, embraces technologies to improve business performance. This was true even 30 years ago when I started in the Gulf of Mexico offshore oil & gas industry. Hurricane mode operations were already well established with production continuing when personnel were evacuated—as long as communications remained between the onshore office and offshore platforms.

Oil-Gas-Digital-TechIn the article, they note the current challenges oil and gas producers face:

…efforts are under way to contain costs by reducing head count, postponing projects, and cutting spending. Still, in the face of uncertain long-term forecasts, it is time to explore more drastic strategies to boost efficiency.

The author advises on how digital technologies can play a large role in a solution:

…oil executives should consider digital technologies with the potential to transform operations and create additional profits from existing capacity. Our research finds that the effective use of digital technologies in the oil and gas sector could reduce capital expenditures by up to 20 percent; it could cut operating costs in upstream by 3 to 5 percent and by about half that in downstream.

Sudhir noted that the oil & gas producers with whom he works are looking for operational excellence by proactively alerting field operator (pumper) abnormality in the field, so that pumper can address the issue in time.

Instead of finding issues during their visit on the route, they can go straight to where the problem is reported. This way, diagnostic and alerts/alarms from digital sensors and remote terminal units (RTUs)/SCADA help them to act in time and reduce windshield time (affecting safety performance). This is especially true in unconventional oil and gas operations.

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Click to enlarge

The digital technologies also require changes in work processes to get operational expenditure (OPEX) savings. Sudhir and the consultants see that many integrated oil companies are now looking to improve work processes integrated with technologies to improve OPEX in existing plants and new assets acquired during the recent downturn. The Emerson consulting team has developed audit/survey methodologies to recommend changes in work process to improve efficiency and hence profitability.

The article’s author view on improving operations:

…the latest technologies, such as drones and equipment sensors, are also revolutionizing monitoring and maintenance. The potential impact of using advanced analytics for predictive maintenance is a decrease in maintenance costs of up to 13 percent.

Similar to drone technology are wireless instruments, which can be installed and connected easily wherever required for additional measurements in brownfield sites and integrated into the system.

Predictive maintenance helps performance by fixing equipment before breakdowns and increasing reliability and uptime performance. In earlier posts such as Monitoring Compressors to Avoid Unplanned Downtime, Avoiding Rotating Machinery Downtime with PeakVue Diagnostics and Multi-parameter Condition Monitoring for Plant Asset Reliability we described some of the technologies and work practices that could be applied to achieve these levels of cost reductions and operational improvements.

From an energy management perspective, the McKinsey & Company team highlights:

Advanced analytics for energy and yield also has the potential to increase energy efficiency by as much as 10 percent.

In blog posts such as Optimize Energy Consumption with Additional Monitoring, Measure, Monitor and Improve Energy Efficiency and Reducing Plant Energy Consumption we highlight the roles of easily installed wireless instrumentation to provide the data to reduce and optimize energy consumption.

The article closes:

With the current oil and gas market, companies need to reinvent themselves to improve productivity. While capital expenditures or acquisitions might give executives pause, investing in digital technologies is a no-regrets move that could increase production from existing operations. Since these technologies are readily available and have proved their value in the form of reduced operating costs, increased efficiency, and revenue generation, oil companies should move quickly to embrace digital. It could be the difference between leading the next wave of industry innovation and being left behind.

You can connect and interact with other oil & gas, reliability and energy experts in the Oil & Gas, Reliability & Maintenance and Industrial Energy groups in the Emerson Exchange 365 community.

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The opinions expressed here are the personal opinions of the authors. Content published here is not read or approved by Emerson before it is posted and does not necessarily represent the views and opinions of Emerson.