‘Netflix for oil’ setting stage for RM3.8 trillion data ownership battle
A BATTLE for big data is brewing in the oil patch.
The service companies that map underground pockets of oil, drill the wells and lift crude from miles below are generating vast new amounts of data they never before realised could be valuable. But their exploration customers are essentially saying hands off to anything coming out of their wells, including the streams of zeros and 1s.
“There’s no doubt to me, we are producing two resources: The oil and gas, and the data,” said Philippe Herve, a Schlumberger Ltd. veteran who now helps oil companies use artificial intelligence at SparkCognition. “The oil and gas is very clear: it belongs to the operator. But who owns the data?”
Answering that question will mean real money for a global industry climbing out of the worst crude crash in a generation. An industry that only uses about one per cent of the data it generates, according to Baker Hughes, is trying to harness it to see where to pump more oil faster for less money. Transforming to a digital oil field could add almost US$ 1 trillion to the world’s economy by 2025, according to a 2015 study by Oxford Economics and Cisco Consulting Services. To the service companies specifically, owning the data – enough to fill 20 million file cabinets since 2010 alone – would mean a whole new revenue stream, perhaps as they sell subscriptions to huge data libraries.
“It’s like Netflix for oil and gas,” said John Gibson, an advisor at Tudor Pickering Holt & Co. who previously ran the oilservices business for Halliburton Co. “Imagine that all data is like a movie that many different people want to watch, but they want to watch it at different times.”
To the producers, though, owning that data means one less check they’d have to write. And it would ensure competing producers couldn’t see their data while stealthily moving into a new field. EOG Resources Inc., dubbed by one of its analysts as the Apple of the oilfield, is widely considered a leader among explorers for bypassing oilfield service companies to generate its own in-house innovations.
“Data is king and one of our most valuable resources,” Sandeep Bhakhri, chief information and technology officer at EOG told investors on a conference call last year. “You have to own the data. You cannot outsource its collection, analysis or delivery.”
Oil companies have for years bought relatively straightforward data such as seismic files or drilling logs that contractors gather for their customers. The newer, larger batch yet to be harnessed is coming straight off the oilfield equipment itself – the rigs, pipes, pumps and vales.
“They also have value because they’re revealing properties of the reservoir that before you didn’t think about,” said Barry Zhang, CEO of the artificialintelligence provider Quantico Energy Solutions.
Estimated spending on digital technology amounts to less than 10 percent of the US$ 8 million average cost of an onshore well in the US, said James West, an analyst at Evercore ISI. But that’s expected to climb. More than seven out of 10 industry executives surveyed by Accenture and Microsoft said they plan to spend more or significantly more on digital over the next three to five years. Nearly 40 per cent said they’re worried about falling behind peers if they don’t continue to invest in digital.