PACE catches up with Craig Segers and David Turner from Rockwell Automation at the company’s recent TechEd on the Gold Coast to talk about the challenges that face the oil and gas sector in carrying out digital transformations.
With operations spanning multiple and often remote regions, with heavy capital investment and vast supply chains, the oil and gas industry is a sector that stands to benefit from the adoption of new digital technologies and advanced analytics. Increasing asset utilisation, for instance, is a critical area for the oil and gas industry, as it opens up significant opportunities to lower costs and drive efficiency.
Utilising the developments associated with the Industrial Internet of Things (IIoT) can provide the sector with ways of connecting assets to drive optimisation of processes. But the scope and size of oil and gas operations pose particular challenges for digital transformation in the sector. According to a 2018 McKinsey report, while the oil and gas industry, particularly in upstream operations, has embraced sophisticated analytics to reduce risk in exploration and production, the sector has been relatively slow to implement digital technologies.
According to Craig Segers, oil and gas executive account manager with Rockwell Automation, among the most important things that need to be considered when thinking about the move to IIoT in the oil and gas sector is that it is a journey: while not every company is at the same place, there is a long-term process involved in getting a site from having no IoT-related technology at all to having full implementation of a system and being able to operate and optimise a plant based upon the data that is received.
“For every single customer there is a journey that they have to take in preparation of getting to that point of full implementation of a system,” Segers said.
“If we look at the sector as a whole and where it is, and we ask, ‘Are they on the path?’ My answer is that they’re all doing something to get to the point where they have access to data. Are they all there yet? Absolutely not. Do they have heaps of data that they have access to? Absolutely.”
According to Segers, while the oil and gas industry has been moving slowly and cautiously in getting on board with IIoT technologies, there are companies are currently deeply involved in discussions about the next steps forward in realising the potential value of available data via implementation of digital systems.
“A lot of them have these data lakes of information available to make them; it is now about how they make sense of that data. Some might believe the sector is slow on the uptake when it comes to IIoT. I don’t think they are. I think, in fact, because of the size of the organisations and the number of the assets that they have, they have to take time to get their infrastructure in place to enable that implementation and that realisation of valuable data for optimisation later,” he said.
There are also challenges in the way that infrastructure in the sector is dispersed, especially in the upstream market where a company might have hundreds or thousands of wells that need to be connected to gather data.
“They are faced with some technical challenges that they are trying to overcome to confirm that the number of resources that they have actually get connectivity to a point where they can use the data,” said Segers.
The challenge here is not due purely to the size of oil and gas operations, but on the logistical and geographical issues that companies face, including in the implementation of robust security.
“It can be particularly challenging because, for the most part, we are talking about remote areas. There are challenges that a typical manufacturing facility wouldn’t have.”
A further challenge involves making the benefits of IIoT and cloud-based technologies concrete and tangible. Companies making decisions about costly, large-scale investments need to have a detailed view of how digitalisation will impact positively on their bottom line.
“It is an enormous task to get them to a situation where they have full visualisation of the operation with optimisation and everything,” explained Segers. “So, again, it is about how you take them on that journey to get them there. Like all industries, the oil and gas sector is heavily driven by return on investment. Unless you can actually prove to them that it will bring a return on investment, as opposed to just throwing out attractive buzzwords, you’re not going to get it across the line.”
Segers said he recently spoke to a potential client who indicated that the number one driver for implementation of new technology was the potential to reduce cost.
“They said, ‘If you can help us reduce that cost through implementation of analytics or some sort of IoT infrastructure, then we’ll look at it. There has got to be a cost benefit and a value proposition for us,’” said Segers.
“To me, you can’t go to them with this big picture and say, ‘This is what you need to do’. It is a journey of taking small pieces of the puzzle, seeing the value for those pieces and moving on to the next step. And, like the availability of data and infrastructure to get them to that point, you now need to start using that data effectively to show those returns go back into their business. Moreover, driving their cost down enables them to reinvest in the next portion of technology.”
There is, then, currently, a high-level level of maturity being displayed by companies in the Australian oil and gas sector: they understand the scope of the challenges ahead and they understand that they need to start small. They also know they have the data, and they know they need to make changes, but in order to justify those changes they need to be showing the value to their business.
“The industry has been traditionally slow to adopt change; they’ve had their specifications, and they’ve stuck to these specifications for a long time. As mature end-users, they’ve also – because suppliers haven’t had that IoT infrastructure and the technology to take them along this path – had to develop their own. A lot of them have therefore had multiple packages, including home-grown packages, that they are maintaining and using to operate their business,” Segers said.
“This can be a challenge. But getting through that requires a change management process, where we go to a company with value proposition which might involve taking out some of those older technologies that are costing them money to maintain and bring in new technologies. Some of these larger users have a lot of that infrastructure in place, which might not be terribly efficient. But they have a long-term investment in those technologies that they are currently using. For us, it is about convincing them of the value proposition of newer technologies and how that value proposition, that cost of ownership of those technologies, reduces over time.”
David Turner, who works for Rockwell Automation as regional segment manager for oil and gas across the Asia-Pacific region, said the challenges are dependent on the particularities of the conditions in each country, which are all different. While there is a relatively mature market in Australia, other countries in Asia are not at that level, and have their own challenges, such as total lack of connectivity, or very little.
“Not all countries are equal,” Turner said. “For instance, look at China: onshore, there is a very low-cost environment, and they cannot justify spending the money. I know of one particular field, the largest in the world, that has 108,000 oil wells, and only around 50 of them are instrumented. In India, traditionally, the wells are often naturally-flowing, and are located in remote farmland. And they can’t instrument the wells because the local thieves take everything and sell it. So, there are many challenges. And each country has their own.”
According to Turner, the Australian market is quite buoyant, having developed the technology at the right time. While from 2014 to 2016 the oil price crash and the associated reduction in the sale price of gas led to a dearth of investment, things are starting to look up.
“And, on the upside, because we at Rockwell Automation continued to invest in technology during the downturn, it has meant that those who are now investing in the technology are going to be in a better position. We’ve taken some costs out, added a lot more features,” said Turner.
“And, for the companies that are wishing to invest in some kind of digital transformation, now is the right time to get on to that journey. And we are getting a lot of traction here in Australia. There is certainly a lot of interest.”
Segers concurred. Depending on the end user, he said, there are projects ranging from smaller solutions that are showing value back to the business, with a relatively quick return on investment, to others that are investing in a full implementation, which will be a cycle that is going to take multiple years to complete across their business.
“There is interest, but it will be a long journey – from beginning to digitise assets and enabling edge devices to then carrying out a wider implementation. It is not something that they are going to do in six months; it might take multiple years to complete,” Segers said.
Turner explained that they have worked with a particular end-user who already has a full digitalisation system for site visualisation, one which is partially home-grown and has been cobbled together over about 10 years. And it is now no longer fit for purpose.
“Some of the technology is obsolete; they don’t have licences; there is no technical support available, and they cannot scale it any further than they have currently without huge incremental costs. They now recognise that they can’t go forward with that existing system, and they are going to keep the parts that work and which are serviceable, and then put a completely new front end on to that system,” said Turner.
“And that is going to happen in the next two to three years. And, again, that comes with its own drivers and goals that will add value back to the business at every level. In this particular case there is a very real need at the executive level to get visibility into the operations anytime, anywhere.
“All companies are on some part of this journey. They might be going in different directions, but they generally have the same end-goals or objectives. How they are getting there will also be different: they each have a different budget, they each have different types of assets they are trying to connect. But, ultimately, they want these systems to drive early, fact-based decisions, which they are currently not able to do.”
Rockwell Automation has developed a platform for the oil and gas industry which is device agnostic and open protocol. Turner explained that this means the customer is not locked in – it can integrate with everything that they already have in place.
“Our opening conversation is about what they currently have in place, what is working for them, what isn’t working for them – where are they now and where do they want to be tomorrow – and how much of this infrastructure can we leverage because of their existing investment,” said Turner.
“So, we are not trying to displace anything – we are trying to put a visualisation layer on top
of what already exists and then help them fill in the gaps with the correct technologies. And we can supply the latter or we can recommend someone else. Or they can develop their own.”
There are lingering challenges. For instance, there are companies that are currently not ready for this transformation, Turners and Segers said. Nonetheless, they are the few. Most companies understand and realise that digital IIoT technology is the future, and that there are common objectives and goals across the industry.
“This is a difficult journey: this has to be a top-down driven solution to release the budget; it cannot be bottom up. It has got to come from the executive level and they need to understand why they need this business transformation: not because everyone else is doing it, but because it has a meaning for them,” said Turner.
Improvement across the whole operation
For Turner and Segers, effectively communicating the benefits of IIoT in oil and gas is necessary. But, again, it is also important, they explained, to address the particular circumstances and needs of each company, which will often be different. And within an organisation itself, the requirements for data vary between different departments.
“One of the ways we can address some of the concerns they may have is to start small and address something relatively simple,” said Turner.
For example, when speaking to a production engineer or a petroleum engineer, the focus will be on production optimisation. This can be achieved with the installation of an edge-based device with connectivity back to his desktop computer where he can see his operations in real-time with dashboards and can help determine production optimisation opportunities. Edge-based and server-based analytics can also give him a visualisation of his site’s current operating state and what it is trending towards.
And it could be trending towards failure. Among the chief benefits of the technology is to predict failures before they occur.
“And this can defer costs by helping to manage assets in terms of maintenance –they can repair pumps before they fail, and they can plan ahead and make sure they have inventory to replace the pumps. And, ultimately, what we are looking to do is provide operational expenditure savings: fewer personnel have to go to the well site as everything is visualised remotely,” said Turner.
“We can also have shortfall analysis on their production, meaning that if they are having a decline in production, recommendations can be made on how to reset production and get it back to where it should be.” Within an organisation, there are different goals and drivers for the implementation of digital technology depending on job role. Further up the hierarchy, those who are responsible for whole areas, and ultimately, for whole enterprises in a country or internationally, have different data needs than an engineer.
“We want to try and optimise operations at the individual well level, and then to try and balance that production to make the targets at the field level or the region level. And as you go further and further up the value chain, the CEO will be looking at his business KPIs on a dashboard, and he will get real-time updates and see what the problems are, tracking actual versus planned production for all of the assets, not based on the few that the engineer is looking at. There is greater visualisation further up the hierarchy,” said Turner.
It is also important that the transition to new technologies are managed in terms of cultural change.
“It is a long journey and it is not without problems. Internally, a company has to get organised. And there have to be changes in mindsets because there is a fear of these systems as well. People think that they will lose their jobs as more and more things become automated. But for the manager, the more and more jobs that are automated, the more high-value jobs you can create,” said Turner.
According to Segers a client looking to at full implementation of a new system needs a change management process to achieve effective adoption of that system.
“If they are not going through that change management, there is no system in the world – it doesn’t matter how good it is – that will be able to sustain a business that has not adopted that change,” said Segers.
“They need to go through this change management process with the workforce for them to understand what the vision is, what the drivers are of the business, why the technology is important and how it is going to change and impact the business moving forward, and how they are an integral part of that implementation.”
While the journey towards implementing digital IIoT systems across large, complex sites, and throughout organisations, is a long and difficult one, both Turner and Segers are impressed with the progress that has been made in the Australian oil and gas industry.
“In Australia, what is impressive to me is that, without exception, I have not visited a customer who has not started this journey. Everyone is at a different point on that journey, but absolutely everyone is doing it,” said Turner.
Segers said that he has been most impressed by willingness of companies to think outside of the box and their willingness to start doing things differently to effect change and reduce the cost of operation generally.
“It is not just about maximising production. It is also about how they are trying, on the one hand, to minimise cost, energy use and risk, and on the other hand, increase safety. It is not a singular focus. They are imaginative about the way they are going about their businesses and trying to look at it holistically. And to me, that has been the most refreshing thing I’ve seen.”