The oil price crash of 2014 and the global ‘digitalization and disruption’ drive coincided in a rather bizarre way to push the oil industry to seek cost cuts through innovation and new technologies.
Big Tech was only too pleased to help Big Oil, seeing a new revenue stream in an industry long thought to be of the ‘dinosaur’ type that was too slow to embrace new ways of doing things.
Not anymore. Many oil and gas firms, especially the world’s biggest, are already using data analytics, cloud computing, digital oil fields, digital twins, robotics, automation, predictive maintenance, machine learning, and even AI.
The technology giants have seized the opportunity to sell such services to Big Oil, and top managers at Amazon Web Services, Microsoft Azure, and ABB Group, to name a few, flocked to this week’s top energy industry event CERAWeek by IHS Markit in Houston to pitch their solutions to a wider audience.
“A great wave of innovation and technology is transforming the industry and reshaping the energy future,” said Daniel Yergin, conference chair and vice chairman of IHS Markit. “What happens in tech matters to energy, and what happens to energy matters to tech.”
“The cloud so perfectly fits their boom-and-bust cycles,” Bill Vass, vice president of engineering at Amazon Web Services, told CNBC in an interview, referring to the oil industry.
Amazon’s thinking is oil companies still spend money on their own data centers and on those centers’ operations, even if all prices are low and firms seek savings.
“All that cap ex, you can’t throw it out the window and sell it overnight if the price of oil goes down,” Vass told CNBC, noting that most of Amazon’s customers reach 22-45 percent savings with the cloud.
BP, Shell, and Hess are some of Amazon’s customers. Related: The Billionaires Battling It Out Over Biofuel
The other of the Big Tech pack—Microsoft and Google—are also signing clients from the oil industry for cloud services, big data analytics, and digital-solutions partnerships aimed at boosting oil production while cutting costs.
Oilfield services provider Schlumberger works with Google Cloud on big data, software platforms, high-performance computing (HPC), and on AI to help it interpret seismic and wellbore data.
Google Cloud and services are at the core of an Industrial Internet of Things (IIoT) platform for oil firm Aker BP developed by Norway’s Cognite.
Last year, France’s supermajor Total signed an agreement with Google Cloud to jointly develop AI solutions to be applied in subsurface data analysis for oil and gas exploration and production. Also last year, Anadarko Petroleum Corporation signed a collaboration agreement with Google Cloud to scale data science models and boost real-time surveillance and monitoring of ongoing drilling, completion, and production operations.
The U.S. supermajors Chevron and ExxonMobil work with Microsoft to boost efficiencies and profits.
Related: The EIA Cuts U.S. Oil Output Projections
Chevron signed in 2017 a seven-year partnership with Microsoft, under which the tech giant is Chevron’s primary cloud provider and the companies are working on speeding up the application of analytics and the Internet of Things (IoT).
ADVERTISEMENT
Last month, Exxon forged a digital partnership with Microsoft to use cloud technology to increase oil production and profitability in its key growth area in the U.S., the Permian. According to Exxon, the partnership will make its Permian operations the largest-ever oil and gas acreage to use cloud technology. The application of the cloud technology is expected to generate billions of U.S. dollars in net cash flow for Exxon over the next decade, as data analysis and operational efficiencies improve. The partnership also has the potential to increase Exxon’s production in the Permian by 50,000 oil-equivalent barrels a day by 2025, the U.S. supermajor says.
The tech giants are tapping more and more oil industry customers as a growing number of oil and gas firms realize that their future will be increasingly linked with digitalization and new technologies.
By Tsvetana Paraskova for Oilprice.com
More Top Reads From Oilprice.com:
- Pakistan Aims To Become A Natural Gas Hotspot
- The Small Asian Nation With Big LNG Plans
- The Oil Industry Faces A ‘Crisis Of Confidence’
If so, then it is fair to aspire that this new innovative technology will also help oil companies pinpoint new reserves and also improve the recovery factor (R/F) in oil wells from the current global average of 35%. By raising the R/F by even by 1% to 36% would add the equivalent of 48 billion barrels to the existing global proven reserves without even drilling for new reserves. It will also enable oil companies to revisit oil wells which were deemed depleted or unprofitable.
In its Winter 1995 issue, the OPEC Review published a research paper of mine under the title of ”Can Technology provide the Answer to Future Oil Crises?” in which I concluded that without greater advances in technology leading to a much reduction in production costs, the global oil industry could become split between the low-cost reserves in the Middle East and the more expensive reserves elsewhere, leading to a more pronounced dependence on the Middle East. I also concluded that technological advances could eliminate the possibility of any future oil crises in the next decade and beyond.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London