Pandemic speeds up rise of tech in oil
Transformation to boost efficiency means fewer jobs, new industry skills
On a late afternoon in April, Nabil Lamia, an engineer working from home because of the coronavirus, walked onto a balcony in France, wearing jeans, a Tshirt and hard hat equipped with a video camera, microphone and earpiece.
In another part of Paris, his boss, Eric Duchesne, senior vice president at the French oil major Total, watched images of the Paris skyline on his computer and interacted with Lamia through the videoconferencing platform Microsoft Teams. Duchesne was so impressed that three days later, the smart helmets arrived at Total’s petrochemical plant in La Porte, where workers could transmit video to Paris and solve problems that once required flying in engineers.
Total is distributing the helmets, developed by the Washington state tech firm RealWear, across its operations from North America to Europe to Asia to Africa.
“It’s not a solution for just the lockdown period,” Duchesne said. “It’s definitely an enabler to improve performance and speed. It’s all about being faster.”
The coronavirus pandemic and the oil crash it spurred are accelerating a digital transformation that was already underway as oil and gas companies drove to boost efficiency, cut costs and make money at lower commodity prices. Now, with restrictions on travel and social interaction, tools such as drones, cloud computing, artificial intelligence, 5G-enabled sensors and fiber-optic networks are allowing energy companies to run field operations from
offices in Houston, Paris or London, instead of putting boots on the ground.
The technologies are helping companies not only to adapt to the pandemic but also to become more efficient over the long term as they face an extended period of low oil prices. As with the oil bust that ran roughly from 2014 to 2016, many of the 100,000 jobs lost in this year’s crude price collapse are unlikely to ever return.
The Houston area had recovered only about onethird of the tens of thousands of jobs lost in the previous bust before the coronavirus hit. Analysts say employment will permanently shrink again when the industry emerges from this downturn as technology does more of the work.
“With automation and the rise of digital, you’re not going to need as many people as you needed in the past to run a rig,” said Rachel Everaard, an oil industry expert with the Houston office of the consulting firm Ernst & Young. “You’re going to be doing things differently and doing business differently. Remote operations are going to become the new normal.”
The types of jobs and skills also will change as technicians and software developers replace roughnecks and roustabouts. In oil field services, the hardest hit by financial losses, developing new equipment and digital tools is viewed as vital to the survival of the sector and broader oil and gas industry. Shifting energy consumption, forecasts of “lower forever” oil prices and the urgency of climate change are forcing the industry to adopt more efficient and cleaner practices that lower greenhouse gas emissions.
“The oil field services sector is where a lot of the technology for the entire industry comes from,” said Leslie Beyer, president of the Peyears troleum Equipment and Services Association, a trade group in Houston. “The digitalization piece is no different. We drive a lot of innovation.”
Allure of remote drilling
Houston oil field service company Baker Hughes embraced high-tech tools such as smart helmets, 3D printing to make parts on demand, drones to detect leaks and artificial intelligence to identify patterns in oil field data before the pandemic. But interest in the company’s remote drilling capabilities has grown rapidly since the outbreak of the novel coronavirus.
Paul Madero, the company’s vice president of global drilling services, said Baker Hughes rolled out its earliest versions of remote drilling for offshore customers in the North Sea more than 20 years ago. The technology, he said, took time to gain wider acceptance because most customers preferred to have a physical presence onsite.
Onshore interest started to grow faster one to two ago as technological advances drove down costs and improved well performance, at a time when many shale producers were struggling to remain profitable. Interest in the technology, he said, accelerated after COVID-19 because of social distancing measures that limited travel to and from rigs.
“There are wells that were drilled and completed only because we had this technology — that’s a fact,” Madero said. “With borders locked down and the COVID exposure that was taking place, we were able to drill and complete these wells because we had this remote capability. It’s a tremendous enabler.”
Baker Hughes typically kept four employees at drilling sites that use the company’s equipment and software, but that may become less common after COVID. Using remote technologies, employees that otherwise would have been deployed to the field can monitor and control drilling equipment from another location. In addition to saving on travel time and costs, Madero said, remote drilling also allows engineers to consult with other experts not on-site.
Remote drilling was used at 50 percent of the company’s sites last year. That number rose to 60 percent in the first quarter and grew to 72 percent in the second quarter.
“We see this as a complete structural acceleration that’s not temporary — this is long-term and permanent,” Madero said. “What you’re seeing is that these capabilities that existed and the business-as-usual infrastructure has been completely changed. This is a real step-change.”
‘Opportunity to evolve’
Baker Hughes’ competitors Halliburton and TechnipFMC entered a joint venture in July to provide lightning-fast fiber-optic technology to oil and gas wells on the sea floor. Their Odassea equipment uses fiber-optic cables that double as acoustic sensors to improve the speed and quality of data received from underwater wells, allowing engineers at the surface to improve a well’s productivity.
Davis Larssen, CEO of the Scottish oil field services company Proserv Controls, said the downturn has offshore producers seeking to expand or improve efficiency at existing wells rather than drill new ones. Proserv makes advanced electronics that operate on the sea floor to help control production of offshore wells.
Given the high costs and uncertainties of developing subsea oil and gas fields, Larssen said, it is cheaper and less risky to add wells to proven, active oil fields. Replacing failing electronics can boost efficiency and production margins for operators.
“These are challenging times, no doubt,” Larssen said, “but equally they offer firms an opportunity to evolve and readjust some of their core activities and ways of doing things.”
Companies also are increasing investments in cloud computing and artificial intelligence, platforms that store and analyze massive amounts of data to discern and reveal patterns that engineers can use to improve the productivity of a well.
Baker Hughes, Microsoft and the Silicon Valley tech firm C3.ai entered into a three-way deal in November to increase oil field adoption of artificial intelligence while Halliburton, the consulting firm Accenture and Microsoft entered into a fiveyear deal in July to expand Halliburton’s remote drilling and hydraulic fracturing operations using the Microsoft Azure cloud computing platform.
Houston oil field services company Ambyint uses artificial intelligence to automate tasks such as deciding how many strokes pumps should make to pull crude to the surface. The company’s technology can adjust a well’s production up or down remotely, reducing man hours and travel to isolated sites. “People are asking themselves, how can I do more with less,” Ambyint CEO Blake McLean said. “They’re asking themselves how can we get more hydrocarbons out of our existing wells at a lower cost.”
The Norwegian company Cognite, which develops software to improve the efficiency of oil wells and offshore wind projects, has expanded its Houston and Austin offices, hiring more than a dozen people at time when tens of thousands of oil and gas workers have lost jobs. The company’s North American president, François Laborie, said that growth demonstrates the greater role that technology will play in the industry after the pandemic.
“By adopting new technology and new tools — what people call digitalization — that’s something that benefits from a crisis like the one we’re going through,” Laborie said. “You have to become more efficient. You have to allow people to operate from wherever they’re at because you can’t fly people around like you used to.”