The Digital Oilfield is here!

Canadian companies, including oil and gas firms, will increase spending on IoT technologies. PHOTO: THINKSTOCK

Brad Bechtold is highly enthused by the Digital Oilfield, the internet-enabled technology that’s gaining traction among global oil and gas producers.

He has, after all, dedicated more than 20 years of his career to assisting in the development of oil and gas computing and software technologies with the likes of oilfield services giant Halliburton. Now he’s the director of oil and gas transformation at the Canadian arm of IT-giant Cisco, a company that’s led the adoption of the phenomenon known as the Internet of Things (IoT).

“Connectivity is exploding,” says Bechtold. “LTE networks have come a long way, and they’re connecting people in more efficient ways, including industry. That’s imperative because at $100 a barrel, we didn’t need to worry about costs as much, but at $50 a barrel, oil and gas producers need to look at ways they can fundamentally change their operations. The digital oilfield is going to make that happen.”

Much like their manufacturing brethren to the east, energy producers in Canada’s natural resource sector are navigating a technology renaissance in the pursuit of greater efficiency to increase productivity, improve worker safety and lower costs.
It’s a good time for oil and gas companies to get connected.

“The oil and gas sector is very willing to embrace technology, and the changing business climate will require better and fast decision making,” says Steve Reece, manager of business and information services at EnerPlus, a Calgary-based energy producer.
“Oil and gas can learn from manufacturing on technology repeatability.”

Energy is also feeling the impact of plunging prices, which began in mid-2014. The Conference Board of Canada estimates weaker oil prices will cut total sector capital investments from $30 billion last year to $25 billion this year – a 20% drop. And Enform, the Calgary-based safety association for Canada’s oil and gas industry, estimates the impact could be 185,000 energy-related jobs lost, with about a third of those outside of Alberta, mainly in BC and Ontario.

A recovery will require the development of the Digital Oilfield, a cloud-based computing model that will drive oil sands technology development, says Whitney Rockley, managing director at McRock Capital, a Toronto-based venture capital firm that focuses on Industrial Internet of Things (IIoT) projects.

The data it captures will develop predictive models that enable process design and optimization, such as infield mobile technologies that identify maintenance needs, thus avoiding downtime.

Cisco, Rockley adds, estimates IIoT will bypass non-industrial IoT by 2017, with 76,000 new devices being connected every week.
But there’s a problem, says Ian Gates, head of chemical and petroleum engineering at the University of Calgary’s Schulich School of Engineering.

“There are data analytics technologies that provide us with ways to interpret data, but no one’s analyzing it.”
In fact, a 2012 Canadian Digital Media Network survey found 63% of respondents identified difficulties in data integration as their company’s biggest challenge. The same survey found Canadian energy companies spent $850 million on research and development that year.

Waves of technology
However, the technological support producers need is changing.

Getting all the machinery and equipment to communicate with each other in real time is the real challenge.

Many current technologies are focused on fixed facilities, both field and head office, with proprietary applications and emphasis on data flow between them. That focus must change if the Digital Oilfield is to move forward. Field enablement focuses on taking the expert to the field without leaving the office.

Early incarnations of the Digital Oilfield, dating back to 1999, focused on monitoring offshore rigs mainly because of safety issues. The technology has trickled into the oil sands because of its ability to integrate entire operations infield and remotely.

“We’re not talking just having the ability to monitor operations, but actually being able to take action,” says Bechtold. “Oil and gas is certainly high-tech, but soon enough, more operations are going to look like NASA control rooms.”

The major benefit is that Digital Oilfield technologies have the ability to make very-vertical operations more horizontal – a convergence that will enhance efficiency by migrating IP-based process control systems at a fraction of the cost to deploy and maintain.

That’s a big advantage, especially considering most vertical technologies such as hydraulic fracturing or steam-assisted gravity drainage (SAGD) are incredibly expensive and “fit for purpose,” with little or no economies of scale. Plus the infrastructure requires significant support and cost to maintain. Bechtold estimates oil sands projects have a 20- to 30-year return on investment, which is up to 10 times those of Saudi Arabia.

Oil and gas producers could enhance operations such as man down safety or be able to track where workers are within a plant or facility to identify if they are where they shouldn’t be. And ING Robotic Aviation, an Ottawa-based unmanned aerial vehicle manufacturer, is touting the abilities of its drones to remove the human equation from flare stack monitoring and inspection, as well as site mapping applications.

Visual Spection, based in Winnipeg, is providing wearable technologies such as Google Glasses to field workers to inspect and assess oil production sites and voice-driven workflow, thus eliminating pen and paper and even mobile technologies such as tablets. The company is also looking at using wearables to gauge a field workers’ health by collecting data about his or her vitals in real time.

A skills shortage is also an immediate challenge that operators, pipeline and oilfield services companies are facing. It’s the next phase to be addressed by the Digital Oilfield.

According to a white paper authored by Bechtold for Cisco Canada, more than half (54%) of Canadian oil and gas employers cite skills shortages as a significant issue, and yet 73% expect to increase hiring, according to a 2013 report by the Petroleum Human Resources Council of Canada.

He estimates the industry will need to hire and develop 125,000 to 150,000 people in the next nine years. Of greater concern is 45,000 of those new hires will replace experienced industry professionals who are retiring. This puts pressure on labour costs.

“The labour resources are going to make a lot of these operations unfeasible,” says Bechtold. “We’re not graduating more petroleum engineers – the trend has reversed.”

The labour shortage means producers will need to do more with fewer people, and look for alternative ways to connect the limited expertise available to field operations to meet the growth demands of the industry.

There are significant productivity gains when companies collaborate beyond the field and the head office, Bechtold adds.
“By enabling remote field workers with collaboration beyond the field office, we are enabling the field engineer or maintenance person and increasing their productivity.”

Investment takes off
Global market intelligence firm IDC Canada expects Canadian companies to invest up to $21 billion on IoT projects in 2018, up from $5.6 billion in 2013 for a 375% increase.

Its market survey reveals that only 13% of Canadian businesses had deployed an IoT solution by the end of 2014. That number is expected to surge, with an additional 30% coming online over the next two years.

Meanwhile, San Jose, Calif.-based Cisco is working with its industry partners, including Rockwell Automation, General Electric, Emerson Industrial and Honeywell, to migrate IP-based process control systems, a technology convergence that Bechtold believes will be critical to the mass adoption and implementation of Digital Oilfield technologies.

Canadian telecommunications giant Telus Corp., based in Calgary, has committed to investing $2.6 billion across Alberta through 2016 to build infrastructure, and expand urban and rural internet connectivity and capacity, including installing dozens of wireless sites along transportation routes.

It has also launched an IoT marketplace that includes connected solutions such as fleet management to improve driver safety and reduce fuel costs, and solutions for oil and gas producers to monitor and improve pipeline safety.

“There’s going to be a massive upswing in technology convergence over the next five-years, and that’s going to be a big change, but those collaborations and system standardization will enable the Digital Oilfield to continue growing,” says Bechtold.
“This is a journey: there’s no end to the Digital Oilfield because there’s no end to the capabilities of the internet.”

This article appears in the May/June 2015 issue of PLANT West.