06.09.2016

The Power of 1 Percent: Asset Profitability for Oil & Gas

Author: Peter Breunig
The Power of 1 Percent: Asset Profitability for Oil & Gas

When talking to Fortune 500 companies, the meaning of 1% takes on a whole new light.  In the oil and gas industry 1% can connote huge savings in cost reduction, increased productivity, uptime, or an increase in oil production, to name a few.  The challenge is how does an enterprise obtain that elusive “1%”?

With over 30 years at Chevron and as former GM of Technology Management and Architecture at Chevron IT, I’ve seen challenges that continue to increase as the industry matures and through technological advances, like the Industrial IoT, more and more data is accumulating in exponential proportions.   The industry is learning how to analyze all this big data to optimize assets for true business value.  Oil and gas is being transformed by the power of analytics and data.   Expectations are high that big data analytics will increase profit and give you a competitive advantage.

Seven or eight years ago when price of oil was around $100 per barrel. Oil companies did not have to worry as much about their cost.  Today, oil costs approximately $48 per barrel and in some cases it costs $60 per barrel just to get it out of the ground. This dramatic drop in oil prices is driving the need for efficiency and asset performance management.

Observing historical trends, during the past decade, offshore investments have increased from US$150 billion in 2005 to US$360 billion in 2014. The growth in offshore investments is a combination of higher activity and higher unit costs (i.e., rig rates). Similarly over the last 10 years, shale activity accelerated as horizontal hydraulic fracturing became proven and economical. As a result, investments increased from almost zero to ~ US$160 billion in 2014.

Offshore drilling has been prevalent since the 1960s and has a large accrual of declining legacy wells. Each year, operators must drill more wells just to offset the natural decline from historical wells.

Deep Water Finances

When drilling a well, it’s necessary to produce 150,000 barrels per day to have a lifetime reservoir production of at least .5 – 1 billion barrels.  Today, one out of every four wells drilled result in a successful producible well, which means it costs $1 billion to find one producing well.  That is why leveraging big data analytics to optimize well risk assessment is so crucial.  That’s where Maana comes in.

Maana’s advanced analytics platform helps dramatically improve well risk assessment. Risk assessment becomes invaluable in helping to identify prospective areas for multi-year leases, which can cost $1 million – upfront to lease – and can require a 10-year commitment.  Once you discover a producing well anything that prevents that production over a 10 – 20 year period like, equipment failure, is extremely costly.

Reduction in Equipment Downtime Impacts Offshore Production Efficiency

Maana enables large oil companies to leverage their siloed big data. It takes years of data from disparate sources whether it is drilling data, run & pull reports, downhole log data, rig surface parameters, or rig sensor files, and analyzes it to identify patterns. For example, when looking at historical data over the last five years specific patterns and characteristics can be detected that are common in all the wells that failed. In addition, this volume of data is too massive to be analyzed by individuals, but using Maana’s machine learning algorithms subject-matter experts can predict the likelihood of equipment failure.

Maana crawls and indexes multiple data sources, bringing all this data together, to provide an interactive exploration environment. By providing a holistic view of the asset (e.g. well), Maana gives experts a range of possibilities to validate various hypotheses related to failures and their causes and help those experts make better operational decisions.  That enables drilling and production engineers to predict weeks in advance which pumps are at risk for failure and perform timely predictive maintenance to reduce equipment downtime.  It seems quite simple, it’s not, but Maana’s software does all the heavy lifting allowing for the subject-matter experts to make intelligent informed decisions. You can never get rid of the risk, you just need to reduce the uncertainty and the more knowledge and intelligence you have about an asset the more you can reduce that uncertainty. Maana presents more relevant information—in a timely manner—to the person making the decision.  There is no time constraint.

So let’s do the math. One offshore platform produces 150 thousand barrels a day.  That’s equal to $2.6 billion per year at $48 per barrel.  A “1%” reduction in offshore downtime equates to $26 million—per year—per platform in additional revenue.  Multiply that by the number of rigs an oil company has and you are talking big bucks.  A 1% reduction in offshore equipment downtime worldwide is worth over $24.5 billion per year in additional production.

That’s a huge impact on production and revenue and one that can’t be ignored.  So if you are working in oil and gas and you are trying to optimize your assets.  I’d give Maana a call.

 

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