07 Nov How to Uberize Oil and Gas Field Services Using Digital Technology
Is there a way to apply digital tools to improve supply chain collaboration in oil and gas field services? Absolutely, and here’s how.
If you’ve been a frequent follower of my time in Australia living amongst the LNG projects, you will recall my ongoing interest (cough obsession cough) with the need for oil and gas upstream players to think more like factory managers and less like big game hunters.
Now that I’m back in Canada, I’m hearing more and more how the Canadian oil and gas sector needs to reset its cost structures to survive in a low oil price future. Producers here have concluded that we’re in for low prices for the foreseeable future and that every aspect of the existing business model needs a rethink. The short term cost reduction tactics have run their course and now more substantial changes are going to be necessary.
One senior IT leader told me that for the first time in his career (think 25 years), the “business” (ie, operations) was calling and asking for help with digital. Normally, operations tend to view corporate IT as not relevant to the day to day task of producing barrels, but perhaps no longer. Oil and gas is finally concluding that it will be digitally impacted, maybe not in dramatic ways like financial services, and not with urgency. It’s more like a long fuse followed by a series of small bangs.
THE CURRENT APPROACH TO FIELD SERVICE MANAGEMENT
If you were able to get a tour of an oil and gas field operator’s control room (I’ve been through a few in my time), you’d see tons of technology devoted to monitoring the wells and associated kit (that is, it’s all about managing the asset). Good operators can even turn on and turn off wells from a central location. But the interface with a service company to deliver a service to the wells is still a manual exercise that hasn’t materially changed in decades, reflecting when labor was cheap, services were inconsequential, and mobilization costs irrelevant.
Suppliers today are quick to point out the shortcomings of the conventional approach to field field management. Labor is very costly now, relative to hydrocarbon prices. Mobilization costs are substantial, and services are pricey. There’s little to no true coordination between the operators and their assets, with the service companies and their assets, to optimize overall service. It’s overly reliant on lightweight tools (Excel, telephones) to coordinate service delivery. It doesn’t scale well, which is a problem particularly with the steady growth of unconventional fields.
Operators can’t keep tight track of the performance of suppliers so poor performance isn’t corrected quickly enough. Suppliers charge what they can get away with because they’re not subjected to the kind of scrutiny in performance that the automotive industry applies to its suppliers (should that job take 2 hours or 8 hours?).
Suppliers also have lots of horror stories about showing up at site only to have to demobilize because the previous service provider wasn’t done yet. The manual approach doesn’t have any true ability to optimise the match of services to wells needing services, which drives high cost.
Contracting models are traditional in comparison to other sectors, and do not permit reverse auctions, swaps, and other clever contracting methods. Even building up the service order is a significant manual effort to assemble all the required data about the well, the service need, the land owner, and so on. There’s little of the kinds of collaboration tools you’d encounter in manufacturing.
DIGITISING FIELD SERVICES
There are several powerful digital changes that are making sector reinventions, even in obscure areas like field services, possible and within reach.
- The internet is at critical mass, and all the stakeholders involved (operators, land owners, regulators, service companies) are now on the digital grid.
- Computing horsepower is abundant and cheap. Smart phones have the capabilities of the original super computers.
- Storage is cheap too, and available in the cloud at ridiculous prices. My personal available storage on cloud services is in the gigabytes and it’s effectively free.
- Mathematics has developed sufficiently that solving complex problems like scheduling and optimal routing are now routine.
- Sensors have fallen in price which is giving rise to the Internet of Things. Vehicles, equipment, tools, wells and even people can be tracked in real time.
- Best of all, we’ve learned that if we can make something digital, including services, it hops onto Moore’s Law and starts evolving at light speed.
WHAT WOULD BE “GOOD” FIELD SERVICE MANAGEMENT
If you were to rethink oil and gas field services management in today’s low commodity price environment, what would you seek by way of capability?
- Provide good visibility to the aggregate demand for services across the full asset base, to help identify immediate optimization needs, bottlenecks and problem areas. Identify changes over time to improve management decision about the assets (wells, facilities), and their designs
- Integrate geographic data (maps) to help managers visualise the business. Capture data accurately about service delivery to improve overall quality
- Coordinate service calls to manage the impact on landowners. Tightly align operations with contracted maintenance to reduce well down time
- Scale up over time without scaling up the resources involved in coordination to keep costs in line. Minimise impact on existing investment in systems to reduce implementation costs. Enable a mobile workforce to eliminate off line data exchanges.
- Change the site service skill requirement to lower the unit costs for services. Improve the productivity of suppliers to lower per well costs. Sharper selection of suppliers for jobs to align the best suppliers on the most important facilities. Coordinate service calls across service companies to eliminate wait times at the wells between services
I’m sure there’s many more characteristics, but these are the main ones.
Is there a need that the business model or solution be purpose built for the oil and gas sector? Probably not. Knowing what services are required is a core competence, but frankly the coordination aspect is not.
A BETTER SOLUTION
What if the oil and gas industry turned this field services problem over to their own digital natives (their young engineering talent)? What would they come up with? More Excel? A bespoke custom build? Probably not. They’d draw inspiration from Uber, AirBnB, iTunes and Slack.
They’d suggest a collaborative and innovative solution with the following features:
- Sits in the cloud so no one has to pay for new hardware and can scale up quickly. Is accessed by web browsers so that anyone can use it. Is modern and works with any device so that no one needs to invest in new hardware. Rolls out using app stores because it’s quick and cheap.
- Is in wide use so that the skills to operate and maintain it are low cost and do not lock everyone into something proprietary and closed (i.e., it might not be an oil and gas solution). Is off the shelf so that it implements quickly (ie, it’s configured, not coded)
- Is completely open so that it integrates with all the existing software investments. Provides one source of truth for all the participants (service providers, land owners, operators). Has potential to become a platform for whole of industry, not just single company (the benefits to whole of industry are dramatically better)
- Is able to meet the scale needs of oil and gas fields (that is, thousands of wells and pieces of equipment). Has low up front costs consistent with the low commodity price environment
- Is real time, like Uber is for taxi services, but for service orders, wells, equipment, service companies. Provides visibility to detect bottlenecks, slack, errors, and overall capacity
- Provides benefits to everyone including service providers (better asset utilization), operators (wells returned to service quicker), land owners (better coordinated site visits), schedulers (automation of routine work), dispatchers (automatic dispatch), engineers (insight into designs), IT (lower maintenance cost), procurement (better supplier management, lower prices)
The next generation of oil and gas workers won’t want to work for long in field services and operations unless this area is modernised using today’s technologies.
SHOW ME THE MONEY
I’ve been working on an innovative solution that delivers on the challenges of service delivery in oil and gas fields, and meets all of the characteristics outlined above. At the center is a rather clever technology from California that is in wide use in oil and gas already, but not in this area of the business.
ServiceNow solves the problems of managing high volumes of service requests and responding to those requests. It’s a surprisingly common problem – think about all the service desks and service centers out there, fielding calls and enquiries, handling problems, diagnosing what to do, dispatching repairs or new kit, making sure focus is on the highest priority items, handling surges of problems.
My vision is to enable collaboration between players in a service chain like a manufacturer, without having to replace all the existing ERP systems, inventory control, GIS, HSE, permitting, land or other systems. Even the small service companies should be able to play.
ARE YOU KEEN TO LEARN MORE?
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