ARC has been blogging over the last several years about how IIoT-enabled solutions are providing material improvements and business value to owner-operators and independent E&P forms in the upstream oil & gas segment. Companies in the oilfield have the greatest opportunity to benefit from investments in automation and IIoT-enabled solutions that can help them realize operational excellence in their oilfield operations management.
Oilfield operations management systems are critical tools of survival
The global upstream oil and gas segment has been recovering from an unprecedented downturn that lasted almost three years and which had seen CapEx reduced by over $700 billion since the summer of 2014 and the number of bankruptcies exceed well over 100 companies. Layoffs exceeded 400,000, and a growing wave of consolidation in the upstream segment has also created an environment in which companies are being forced into embracing automation and new technologies, such as oilfield operations management systems (OOMS) in order to survive.
Oilfield operations management systems enable digital transformations
As more owner-operators, independent E&P firms, and related stakeholders embrace the new “lower for longer” margin-compressed environment, an increasing number are expected to resume their investment in OOMS solutions as oil prices begin to slowly recover and the supply-demand equilibrium regains its balance. They realize that OOMS can help them lower costs, enhance production, improve and/or enhance recovery, and ensure more efficient operations with fewer experienced personnel are a vital investment that translates into material ROI and continued competitive survival.
Recent ARC Advisory Group research indicates that investment in oilfield operations management systems (OOMS) can provide significant operational value and ROI. Major applications for OOMS include:
- Artificial lift optimization
- Automated workflow management
- Downhole control/well monitoring
- Flow assurance
- Multiphase flow simulation
- Predictive analytics & production simulation
- Production optimization & allocation
- Reservoir management/monitoring
OOMS are typically comprised of one or more applications or modules that are integrated with other applications to create a more comprehensive solution.
Oilfield operations management systems boosted by AI and IIoT provide real ROI
ARC forecasts more robust demand from applications that can leverage the power of IIoT-enabled solutions, such as advanced analytics and simulation tools to help lower costs and increase production. IIoT-enabled OOMS solutions that can help automate workflows and increase productivity are also expected to be in greater demand as companies struggle to increase production with fewer employees, especially those who are more experienced and possess deep domain expertise.
Suppliers may want to consider leveraging IIoT technologies, where and when it is appropriate, to harness the power of connectivity as a means of ensuring real-time operational capabilities and extend the reach of a respective operations management system solution to cover the disparate and distributed assets with which many upstream oil & gas projects operate.
Digital oilfields are the ‘Holy Grail’ of oilfield operations management systems initiatives
OOMS solutions are always being updated with new features to fulfill many market demands and increase their value proposition, such as the growing demand for Digital Oilfields based on in part, for example, the IIoT. Digital Oilfields provide opportunities to increase operational efficiency from the wellhead through the entire supply chain by optimizing data, information, and analytics ranging. Continuing innovations in sensor instrumentation, embedded advanced control algorithms, and predictive condition monitoring on critical rotating equipment are all critical to the future of the smarter Digital Oilfield that will become integrated within the emerging IIoT infrastructure.
More and more suppliers are expected to provide IIoT-enabled solutions, such as enhanced communications, advanced analytics, and machine learning as more operators and end user realize, and embrace, the real business value. These solutions and other remote monitoring functional enhancements will optimize the performance of the customer’s operations and help ensure lower costs by increasing production and employee productivity and improving collaboration across operations groups and external ecosystems. Improved profitability is the end goal.
The upstream oil and gas industry comprises many disparate and distributed assets that form one critical part of the entire oil and gas value chain, which runs from the wellhead to the gasoline pump or the gas heater. The emergence of IIoT and its promise of leveraging smart sensors to create smart machines, or assets, that can be monitored, measured, and controlled more efficiently, more timely, and in such a manner as to increase ROA and/or reduce costs will no doubt play a material role in the future growth in adoption of oilfield operations management systems.
Benefits of oilfield operations management systems are many and material
Oilfield operations management systems (OOMS) are designed to empower owner-operators and independent E&P companies to lower costs per BOE, enhance operational efficiency, optimize production, enhance profitability and provide real-time operational visibility, agility, and flexibility. These systems can help lower operational costs, maximize production, improve recovery rates in new wells, enhance oil recovery in more mature wells, and open up production on a broader array of well types and application locations including subsea, offshore, and onshore. Depending on the production level of an individual well (or field), the financial benefit of increasing operational performance by even 2% to 3% can translate into millions of dollars per year for very large projects.
ARC strongly recommends that operators, independent E&P firms, and related stakeholders consider investing in, and/or upgrading existing, IIoT-enabled OOMS that can help lower cost per BOE, increase production and improve recovery rates, increase employee productivity, improve collaboration, and improve profitability. The investment will no doubt provide meaningful ROI and help companies to operate in these challenging times. You can participate in ARC's Oil & Gas Digital Transformation Assessment survey and discover how you are doing compared with your peers.