Will the Oil & Gas Industry Survive?

Will the Oil & Gas Industry Survive? The Automation is the answer.

Worldwide, total oil demand keeps growing. Low prices are fueling this trend. To remain competitive, oil companies need to reduce their production costs. Oil Industry needs electrification, compressors and rotating equipment, automation, and digitization along the entire production chain — from oil drilling to processing in refineries.

Oil prices have plummeted in the space of just a few months. In the summer of 2014 a barrel (159 liters) of “black gold” cost over $100. In January 2016 a barrel cost less than $40. So What exactly happened? On the one hand, more oil had reached the market; on the other, demand had decreased. It was not the first time oil prices took a hit.

The low price of oil is both a challenge and an opportunity for the industry. Well-run oil and gas (O&G) companies that are strong today are likely to emerge even stronger after prices rebound. While the availability of oil fields and the associated equipment is always paramount for them, during a slump they have every reason to also focus on cost-effective production. Often this means bringing in new technologies and further improving processes.

Lowering production costs is not just an imminent need of the industry. It is also a long-term trend. Most of the “easy oil” has already been extracted – oil that can be produced cheaply because it is onshore, close to the surface, and conveniently spilling out of the ground under high pressure when first tapped. In the future, oil will increasingly have to be extracted from deposits that are deep underground or offshore. Gas will have to be transported from remote locations via pipelines or as liquefied natural gas (LNG) by LNG tankers. That will be a much more tricky task for production engineers.

On the whole, it is becoming harder to produce oil and gas. But there is also good news: this needn’t make oil and gas more expensive, as long as production methods are being continuously improved. In the past, technological innovations and more efficient processes have made production cost-effective under increasingly challenging conditions.

A number of trends are already taking shape like, 

• In the future, existing fields will operate longer and their yield will be increased by injecting water or gas, such as CO2, which boost the pressure of the reserve.
• Unconventional extraction methods such as the hydraulic fracturing of stone formations containing oil or gas (fracking) are likely to spread beyond the U.S.
• The production of heavy oil from oil sands will become more environmentally friendly and less energy-intensive.
• The global market for liquefied natural gas (LNG) will continue to grow strongly. As a result, the gas that is being flared, and thus wasted, today can be used and marketed in the future.
• One day the vision of automated oil fields at the bottom of the sea, working maintenance-free over decades at depths of several thousand meters, may be realized.

At the same time, alternatives to oil and gas are becoming increasingly viable. Electric cars may become more commonplace in the future. And renewable energy sources such as wind power are becoming more economical and could partially crowd out fossil fuels. According to British Petroleum (BP), four-fifths of the current growth of worldwide energy consumption is taking place in emerging economies. But even these countries’ growing appetite for energy may subside at some point.

With less “easy oil” available and interesting alternatives to oil and gas becoming more viable, the way forward is clear: O&G companies need to reduce their production costs. Some are leading the way by bringing more automation to oil fields and using data analysis in smarter ways. Simply put, in the future more valves will be opened and closed by machines than by people. And it will more often be machined, not humans, that decide when to open or close the valves. Flying workers to offshore oil platforms in helicopters may one day be the exception rather than the rule.

The automated equipment produces a constant stream of data — measurement data that can be mined, aggregated into big data and transformed into smart data through intelligent analysis. And smart data helps us to understand production processes better.

For example, visualization Softwares are already making it possible for users to immerse themselves in a virtual 3D model of a drilling platform. For instance, the crew of an offshore oil processing platform in Africa was able to begin its training on a virtual model while its future workplace was still under construction. Virtual training sessions reduced the time needed for training sessions on board, and as a result, the oil platform entered service two months earlier than planned.

Another opportunity to reduce costs opens up when mechanical and electrical drives become smaller and lighter in response to the scarcity of space on oil platforms and pipeline stations.