A Winning Play For Oil And Gas
Profits under pressure
In 2014, Canada’s oil and gas (O&G) industry was at the top of its game. At the centre of the action sat Fort McMurray, a boom town built on bitumen. Like a modern-day Klondike, money flowed as fast as the crude, and times were good.
Then, the bottom dropped out of crude oil prices.
Countries that had been ravenously consuming oil since 2008 began experiencing a rapid slowdown in growth. A worldwide oil glut ensued. By February 2016, the price of Western Canadian Select—the Alberta benchmark heavy crude oil—was US$14.10 a barrel – the cheapest oil in the world. Today, oil prices are half of what they were in at their peak in 2014, and are expected to remain that way for the foreseeable future.
For Canada, a country where O&G extraction accounts for more than seven percent of our total GDP, that’s a tough pill to swallow. Because Canada exports more oil than it buys, the price of oil affects our trade and the value of our dollar, central bank interest rates, and employment numbers.
Hopeful signs of a turnaround in Canada’s oil fortunes are on the horizon. Canada is ranked third by the EIA in world oil reserves at around 175 billion barrels. By 2025, this could put Canada near the top among the world’s oil exporting nations.
In the meantime, with O&G capital spending projected to drop even further, every ounce of profit must be squeezed from the oil that is extracted.
A new way forward for O&G
Leaders in the O&G industry are clearly facing a fundamental shift in upstream operations. When the price of crude was high, reducing operating costs wasn’t a top priority, but wasting time or money in upstream operations is no longer an option.
In a downturn, O&G companies are consumed by budget constraints and desperately seeking more efficient processes. Field workers do daily battle with inefficient or paper-based processes and disparate systems that provide no visibility into the real-time status of work orders. They have no way to integrate vendor resources into systems, which results in soaring vendor costs.
With enormous pressure on operations, organizations are looking to digitize their workforce and automate routine activity to streamline operations and improve productivity.
Data analytics and the art of winning
In his book Moneyball: The Art of Winning an Unfair Game, author Michael Lewis tells the story of how the Oakland Athletics under general manager Billy Beane used an analytical, evidence-based approach to field a highly competitive team during the 2002 season – in spite of a very limited payroll. A key theme of the book is the relentless drive for efficiency that capitalism demands.
The Moneyball theory demonstrates that budget constraints often unleash creative new ways to more out of the corporate dollar – and that becoming an organization that makes data-fueled decisions requires an integrated approach that is felt across the board.
In O&G, innovative technologies and data-driven decision-making promise to reduce waste and streamline operations, both upstream and downstream. According to World Economic Forum predictions, connecting workers to mobile technology and optimizing workflows has the potential to increase productivity in upstream operations by more than 15% by 2025.
Reducing cost through automation
It’s not difficult to see how the Moneyball model applies to an oil industry urgently seeking efficiencies and competitive advantage in a tough market.
Like the 2002 Oakland Athletics, Canadian O&G companies face the kind of budget constraints that are unleashing creative new approaches to operational efficiency. A case in point is an IBM solution called Field Worker Insights (FWI). This integrated suite of applications connects and synthesizes the moving parts of the field work ecosystem – from workers on the front lines to decision-makers at head office.
FWI could revolutionize O&G operations, and here’s why.
Traditionally, the well site is in an isolated location, often with poor connectivity. Operators at the site normally don’t have the tools to efficiently schedule, manage and monitor vendors, so manual work orders must be created in the field. This gives schedulers zero visibility into vendor work activities and the performance of tradespeople, and ultimately, puts the business at risk because fundamental questions can’t be answered about vendor costs, performance or completion dates.
FWI helps the operators in the field address these inefficiencies by identifying which processes need improvement, then automating them with technology.
Through work order automation, the quality of service is monitored and analyzed, follow-up is built in, payment is timely, and optimal vendor contracts can be negotiated.
Best of all, money is saved.
Strength in numbers
With FWI, front line users steer by the numbers, not by intuition. Each player understands their role in improving those numbers, no matter where they sit. Through a single log-in via FWI on their mobile devices, users get one view of every aspect of their work. They interact with real-time, relevant information through pre-built offerings that include Well Interventions, Well Servicing, Fluid Dispatch, Fluid Management Run Sheet, Well Management, Sand management, Vent Gas Monitoring, Rigless Servicing, Work Order Management, Electronic Logbook, Small Project Cost Tracking, and Service Rig Management.
Designed to pay for itself using the savings from ROI, FWI helps upstream operations extract new cost savings and efficiencies by automating and digitizing paper-based operational processes. Improved regulatory compliance, optimal scheduling, vendor monitoring, and better data quality and integrity equal better business workflow and informed decision-making.
A top five player in the Canadian O&G industry recently adopted FWI to standardize business processes and increase operational efficiency and safety in the field.
With 1,000 people using FWI across 11 initiatives, the company is already experiencing a 17-fold return on investment and a significant reduction in operating costs.
Firsthand, they are seeing how trustworthy data can be turned into relevant insights to make money-saving decisions.
Teamwork drives home the win
For large corporations with a huge volume of work orders, even a 20 percent improvement in efficiency can translate into big cost savings. Now that this top Canadian O&G company has tasted success with FWI, there’s no going back to outdated, manual processes.
A results-oriented team makes decisions based on hard data – but to win, every team member must be engaged and willing to make an impact. That’s why FWI is built on a culture of integrity, trust, and team spirit. Everyone makes weekly commitments, reports on what they are doing to meet common goals and sees areas where they can contribute.
Trust and confidence come from the numbers, but it’s team spirit that makes it fun to drive home the winning play. Just ask the Oakland A’s.
For more information see www.ibm.com/industries/oil-gas.
To watch the on demand webinar “Empowering the digital workforce with IBM Field Worker Insights” visit http://ibm.biz/fwiwebinar.
About IBM Canada
IBM Canada is headquartered in Markham, Ontario and is one of Canada’s top ten private R&D investors. IBM has a unique approach to collaboration that provides academic researchers, small and large business, start-ups and developers with business strategies and computing tools they need to innovate. IBM is the leader in open-source blockchain solutions built for the enterprise. As an early member of Hyperledger and active contributor to the Hyperledger Fabric and Stellar blockchain projects, IBM is dedicated to advance cross-industry blockchain technologies supporting the development of openly-governed transactional business networks.
For more information, please visit www.ibm.com/ca