The latest technology in the world has allowed the renewable energy sector to achieve a level of competitiveness that has put pressure on fossil fuels. Over 20% of the world’s energy consumption is now accounted for by renewables, with solar, wind, hydro, geothermal and biomass the most significant sources. The latest technology developments have led to gradual cost efficiencies in the manufacturing of the ‘hardware’ used to generate renewable energy as well as how much can actually be reliably produced.
Now the traditional fossil fuels-centric energy groups are also using the latest technology in the fight back. However, while it would be inaccurate to say there hasn’t been developments in exploration, drilling, extraction, transportation and storage technology used in the oil and gas industry, this is not the kind of latest technology expected to have the greatest impact on cost efficiencies. Rather, engineers are harnessing the latest technology in the world of big data analytics.
The big data techniques pioneered by tech giants such as Google, Facebook and Amazon and have so disrupted consumer-facing business models by revolutionising behavioural pattern insights and process efficiencies are now being turned to the oil industry. Research is focused on processes such as rock analysis to optimise well positioning and reservoir models that will maximise lifetime oilfield production as well as operations automation.
It is thought that the traditional oil industry forecasters lack the skill sets to grasp just how much big data technology can improve efficiency and so are underestimating the scale of the impending change. McKinsey consultant Matt Rodgers recently commented to the Financial Times:
“I don’t think we’ve built into our supply-side models just how much more oil this will provide. The world in 10 years will feel very different . . . It’s going to feel like we’re in Star Wars compared to where we are now.”
Not everyone, however, is likely to see the positive sides of the changes big data technology will bring and job losses are likely. The oil industry being at the forefront of information technology is, though, nothing new despite its roughneck image. The leading private sector owners of the most powerful supercomputers include strong representation by oil groups and oil and gas industry services companies.
However, it is the rise of cloud computing that has facilitated the pace of development in the application of big data by the industry through hugely reducing the cost of data storage and analysis. The cost of sensors that capture structured data like temperature and pressure readings and unstructured data such as video footage is coming down quickly while their sophistication is rising. This means more and more aspects to oil extraction are and can be monitored in minute detail. Data volumes are doubling every 12-18 months but most of it is still not used.
Strategic alliances between big IT and oil companies are also cropping up. Microsoft last year signed deals with Halliburton and Chevron. Chip-maker Nvidia, whose microchips are most associated with the gaming industry has also been working with oil company partners to develop technology that will be used to view and model seismic data. The company also announced a partnership last year with Baker Hughes to explore the use of AI in the extraction and processing of oil and gas.
The Energy Information Agency estimates that these new technology applications will cut oil and gas production costs by 10% to 20%. However, those directly involved in the pilot projects currently being carried out believe that the reality will be much more.
A BP pilot project working with a Silicon Valley start-up to develop an optimization model designed to raise well production has seen production increased by 20% across the 180 wells in the pilot. And that’s initial results from a pilot project meaning the potential could be expected to be significantly higher given further research, optimization and ongoing technology advancements. Automation starting to be implemented also means that in the future it can be expected that the average of 26 people it currently takes to man a shale rig could be reduced to around 5.
The new renewables technologies have challenged the oil and gas industry but it is also not standing still. Binu Mathew, Global Head of Product Management and Product Development at Baker Hughes GE Digital comments:
“We are just scratching the surface of what can be done with artificial intelligence. This is one of those uses that will change the world.”