Transforming Energy With a Digital Strategy
GFT US
And while regulatory and policy changes increasingly favor these emerging industries, some of the biggest efforts to reduce carbon output are focused on making fossil fuel production more efficient.
Oil and natural gas producers have been using technology to improve drilling techniques and pinpoint reserves, which can reduce the number of “dry holes” — wells that are drilled but fail to produce hydrocarbons in commercial quantities. Less drilling means less carbon produced from the diesel generators that power drilling equipment.
What’s more, technology has improved the speed and flexibility of drilling rigs themselves, meaning that a single rig can be moved from one well site to another more quickly. This reduces the need for more rigs and, in turn, lowers the carbon emitted while transporting and setting up equipment.
To better understand the role that technology plays in this process, GFT brought together a group of digital leaders from a range of companies across the energy industry for a dinner and roundtable discussion in Houston.
We began the evening by asking our participants to discuss how technology can help to power the energy transition and create more-energy-efficient practices to reduce environmental impact.
Using and sharing data more effectively
Across the energy sector, artificial intelligence (AI), cloud computing, data collection, and predictive maintenance are playing a critical role in speeding the transition to a cleaner energy function.
Participants said that digital technology has already transformed oil and gas production activities on the surface. AI has reduced equipment costs through predictive maintenance algorithms that improve maintenance cycle planning, eliminate unscheduled downtime, and extend the life of drilling equipment.
“How do I maximize my transportation [of materials] to make sure all deliveries are not arriving at the same time?” one commenter asked, to illustrate the challenge. Data can improve scheduling to ensure “they’re not sitting there for eight hours at a time.” An optimized schedule reduces costs by conserving the number of tools a company needs.
Improving delivery and work schedules involves sharing data among service providers, well operators, and logistics companies. The biggest challenge to integrating the data across all operations is that some companies are reluctant to share information they consider proprietary. Systems compatibility also can be an issue, especially for companies that have multiple legacy systems from acquisitions.
The next challenge will happen underground. Sensors will be better able to determine where to drill and where to fracture, which will increase production from each well and reduce the need for additional drilling sites. Data collected from inside the wellbore can enhance financial forecasting and other activities.
Rigs, equipment, and supplies used in the drilling process, such as deliveries of sand and water, can be coordinated to reduce the amount of time rigs sit idle. That, in turn, allows rigs to be moved from one drill site to another more quickly, meaning that fewer rigs can drill more wells.
Natural gas as a transition fuel
Natural gas will continue to serve as a bridge to renewables, especially in electricity generation. Maintaining its abundance while reducing the greenhouse gases associated with its extraction will be essential.
Advances in AI and data technology will boost production from existing natural gas wells, which is an essential step in the transition to cleaner energy sources. With hydraulic fracturing, wells typically produce only about 15 percent of the available resource. But better data, such as pinpointing where to make factures, can help boost that production. Just boosting the production average to 20 percent of the available resource would have significant implications for U.S. energy security and continuity of supply for electricity generation and other uses.
“It’s a huge deal,” one participant said. “And it needs to be a collaboration in all the digital technology, automation, and everything together to raise it that 5 percent. I believe we will solve that equation but have to collaborate, and it has to be the best of all the things we talked about tonight.”
One participant, an executive at a company that provides services to oil and gas producers, said his organization has spent at least $350 million converting its well site operations to run on cleaner-burning natural gas. Sixty-five percent of its fleet now burns natural gas. In 2023, the company aims to replace at least $50 million in diesel consumption with natural gas.
Such savings can help offset the increasing pressure that the rising cost of capital puts on renewables. The growth of renewables may slow as financing dries up, putting more pressure on fossil fuel producers to reduce their carbon footprints.
A Heightened Need for Cybersecurity
Unlike some other industries, national security interests factor into energy production, which means energy companies often have broader concerns than simply protecting their own operations from cyberattacks. One participant noted that energy companies must determine whether an attack is someone trying to grab financial data or a hostile nation-state trying to disrupt U.S. oil production.
“It’s the No. 1 priority, and I don’t think companies are comfortable outsourcing that to anyone else,” one participant, who works in cloud services, said. “They’re trying to develop in-house expertise. They may rely on preferred vendors to help them develop that expertise, but they want to keep it internal as much as possible."
Another participant noted that there are three factors to consider when it comes to cyber threats — external risks, internal vulnerabilities, and the value of the data. Companies invest heavily in data collection, and size of that investment figures into many cyberattacks. In fact, some companies are actively looking to monetize the data they collect. But first, they must safeguard it.
“It’s about protecting the investment that you made into the core data,” one participant said.
In addition, new U.S. Securities and Exchange Commission rules will soon require publicly traded companies to disclose cybersecurity breaches as a material event. Prevention of cyber threats should be at the forefront of the conversation, participants agreed. “Prevention is the only solution,” one said. “That’s not always possible, but it needs to be the first priority.”
“Meeting these challenges requires an approach that uses technology to make all energy production more efficient and less carbon intensive.”
Monitoring remote operations
By its nature, the energy business is spread out. Production activities occur at well sites over an area of hundreds of square miles. Unlike other industries, however, the oil and gas industry can’t centralize all of its operations. While maintenance data and other information can be monitored and stored centrally, operations must be conducted on-site.
The participants cited several reasons for this:
- Latency: Rigs can’t be operated in real time from a remote location. It might take only a few seconds for well data to be transmitted, received, and a shutdown order sent and executed, but those few seconds could mean the difference between a successful shutdown and a disaster.
- Remoteness: Oil wells are often in locations far removed from fiber networks, cell towers, and other infrastructure. Consistent connectivity can often be a challenge.
- Multiple avenues of risk: In addition to the risks of the drilling process, there’s risk with supplies, maintenance, site security, and other issues that must be dealt with at the location. In other words, the centralized operations support work at the remote locations, rather than the other way around.
Well site data plays an increasingly important role in improving safety on the rig. Changing equipment such as drill pipes remains a largely manual task, yet one that’s dangerous. Automating tasks such as switching tools, adding drill pipes, and other work done near equipment in which fluid is under high pressure and extreme heat can reduce the risk of worker injury.
“We’re able to remove somebody from a dangerous situation,” one participant said.
By collecting data from other well sites, AI can compare that information with real-time well data at a particular site and spot potential hazards such as rising pressure levels. This can avert accidents, potentially saving lives and reducing injuries.
The role of affordable energy in fighting poverty
In the climate change debate over fossil fuels and renewables, one concept is often overlooked: justice. In the drive to reduce carbon emissions, developing countries’ needs too often are brushed aside. Billions of people around the world need affordable energy to bring them out of poverty.
Understanding the hidden values and costs of energy, and the role fossil fuels will continue to play for decades to come, is essential in navigating the transition to renewables, clean hydrogen, and other fuels of the future.
“Developing countries still need some sort of energy to move [people and goods] from point A to point B, and that energy cannot be a bicycle because they are never going to catch up with the rest of the world,” said one of our participants, who helps lead digital change at a major refiner. For these countries, oil and gas are essential resources to heat their homes and fuel their transportation.
The problem is complex. Ensuring that energy remains cheap, clean, and abundant involves trade-offs. Technology plays an important role by making energy production more efficient — cheaper and cleaner. Participants discussed the importance of making improvements in fossil fuel production even as we embrace the rise of renewables, nuclear power, and climate-friendly innovations such as carbon capture and storage.
Even so, there are no easy answers. Switching to electric cars, for example, may reduce gasoline consumption, but the electricity that powers them may be generated by burning natural gas and coal. The fossil fuel burned to extract the rare earth minerals used to make lithium-ion batteries, and then to ship those minerals and the batteries, may undercut the carbon-cutting benefits of electric vehicles.
