Getting MER N. Sea savings: New IHS Energy report shows how IT can increase oil and gas recovery and reduce OPEX costs by up to 70%

Increased automation and remote-operating can reduce N. Sea operating costs
Increased automation and remote-operating can reduce N. Sea operating costs

As the crude oil price slump takes its toll on both industry profits and spending projections, oil and gas operators are turning, in part, to technology and innovation to reduce costs and increase capital efficiency in the short-term, while aiming to meet increased future energy demand in a low carbon environment – according to new analysis a global market analyst.

Paul Markwell, vice-president of upstream oil and gas consulting and research at IHS Energy, commented: “Rapid changes in price – such as the halving of the oil benchmark between 2014 and 2015 – naturally bring into focus the need for oil companies and their suppliers to reduce costs to maintain viable returns. (see video, below)

“Technology helps on two fronts. The first is in raising short-term production, the key denominator in the cost-per-barrel equation.

“The other involves attacking capital costs and operating expenses head on. Both place an emphasis on efficiency.”

Oil companies, Markwell added, must commit to ‘unwavering innovation’ through the oil and gas price cycles if they are to meet demand safely and at competitive costs through to 2050 and beyond.

Markwell, along with Judson Jacobs, director of upstream oil and gas research at IHS Energy, was a contributor to the recently published BP Technology Outlook, which features their report, entitled, “Prioritising Technologies Through the Oil and Gas Price Cycles.” 

To meet demand and remain competitive, the IHS authors said in the BP report, operators are pursuing a range of cost-cutting and efficiency initiatives – including automation and mechanisation of high-cost, repetitive oil and gas activities, such as drilling.

They’re also looking to apply data-driven analytics to draw key insights from high-volume data streams, such as detecting when a piece of equipment is going to fail or identifying ‘sweet spots’ in unconventional oil and gas plays.

In still other instances, operators are increasing their use of mobility technologies to improve the efficiency and effectiveness of their field workforces.

These same operators are adapting technologies developed in the defence and manufacturing sectors to address oil and gas requirements, IHS said.

Applications include deploying robots to inspect difficult-to-access elements such as offshore risers, and piloting unmanned aerial vehicles (ie drones) into areas that are dangerous for human intervention.

See also: Getting MER from the UK North Sea: The 2016 Oil & Gas Collaboration Conference, Aberdeen


Another area is process control optimisation, which applies sophisticated modelling and simulation tools to increase production regularity and run equipment and facilities closer to their designed capacities.

IHS has also identified several “pockets of technological excellence” that it believes offer the greatest potential to impact near-term oil and gas industry costs. One such pocket has been the exploitation of shale gas and tight oil resources.


See also: MER Collaboration to become a legal requirement for N. Sea industry in new Energy Act

The phenomenal growth of these resources since the late 2000s can be attributed largely to manufacturing-style continuous improvement technologies and techniques applied to drilling and well completion activities. 

For example, drilling efficiency in the Eagle Ford shale field in the US increased nearly 150% from 2010 to 2014 as an increasing number of wells drilled provided an opportunity to apply these principles.

Jacobs commented: “We believe that elements of these same manufacturing concepts can be applied in more conventional oil and gas settings. The keys for producers are to target repetitive tasks associated with well construction and other field development and operational activities with these forms of  ”high-iteration learning,” and to deploy the technology (e.g., real-data systems, advanced analytical tools) that can enable it.”

Another pocket of technological excellence IHS identified involves realising substantial CAPEX and OPEX reductions through ‘extreme de-manning’, or operating oil and gas facilities with far fewer staff than previously. 

By leveraging both higher levels of automation with robust communication networks to remotely operate their facilities instead, oil companies can reduce OPEX by up to 70% and can reduce CAPEX by 3-15% by designing facilities upfront to reflect lower staffing levels.

IHS has documented examples of oil companies shifting toward this ‘minimum manning’ operating philosophy in their oil and gas assets, and sees an opportunity to apply this approach more broadly.

A common thread running through all these areas, IHS said, is the increasingly critical and enabling role of digital technologies. IHS analysis during the past decade confirms that digital technologies applied in practice can improve oilfield performance on several fronts, including:-

  • Increasing oil and gas production by 2-8%
  • Reducing facility capital costs by 1-3% and
  • Lowering operating costs by 5-25%

Beyond these digital efforts, the IHS analysis notes a host of upstream technology innovations in the areas of seismic imaging, drilling, and enhanced oil recovery that will help to unlock additional oil and gas resources.For operators that get it right, the rewards can be substantial.

For deepwater oil projects, technology innovations yielded a 2-7% reduction in lifecycle costs, or a savings of $1 to $3 per barrel, IHS said.

 Jacobs added: “These standout results are generating high levels of interest as companies look to dramatically reduce lifecycle costs to allow their projects to move forward,”

 “Our analysis, coupled with actual industry case studies, demonstrates that real value is associated with technology enabled cost-management strategies.

“These cost savings are impressive numbers at a time when the pressure is on to dramatically lower costs in order to allow a range of upstream oil and gas projects to move forward.”

“But, the challenge now is for operators to apply these techniques more widely across their portfolios, to drive learning and to leverage economies of scale.”

To see an external perspective on technology’s impact on oil and gas resources from Paul Markwell, VP of Upstream Oil and Gas Consulting and Research, IHS Energy – see:




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