Here are ways for oil and gas operators to recover from an unprecedented and major industry downturn by building a more efficient and sustainable production model, according to FourPhase’s COO and CTO.
There is no questioning it, 2020 has been a memorable year for the oil and gas industry, and in no shape or form could we have anticipated it. From limited capital due to economic uncertainty, to sparse resources in view of lockdown measures, the industry has suffered from multiple operational and human issues stemming from the pandemic. But as the industry shows steady signs of recovery, it is now more important than ever that we look at the learnings from these challenging times and the solutions, to bounce back stronger, with diligence and tenacity.
An unforeseen pandemic
March 2020 saw oil prices crash into a 17-year low of $20/bbl or lower, with the U.S. being hit particularly hard, sending the industry into a spiraling climate of uncertainty, affecting not only morale but also operations. The bubbling economic recession, further impacted by COVID-19 measures, only added to the industry’s torment, pushing operators to halt exploration activities and projects, and in many cases shut in wells.
On top of this, regional lockdowns caused great operational issues such as overflowing storage due to limited activities, forcing larger players, notably in the U.K. and Norway, to significantly reduce their production output. Similarly, social distancing measures, the reduction of offshore bedspace and limited personnel capacity added an additional strain to operations and further entrenched project delays.
From a production standpoint, our experts have seen significant changes to the way the oil and gas industry operates. One of the biggest impacts we have experienced is the change in mindsets. As an industry, we have become much more risk averse. Not only in our decisions, but also in our philosophy. Indeed, a prolonged period in a climate of deep uncertainty has changed people’s approach towards risk. In a way, the intangible consequences and scars marked by the pandemic, which despite not always being obvious, are nonetheless having a significant effect on the industry, and will continue to influence our way of thinking and reasoning for the foreseeable future.
We are seeing operators consider unforeseen events and circumstances which may affect activities, and considering safety and cost factor against investment decisions, more than ever before. It is hard to envisage return on investment (ROI) in such a climate of uncertainty and market volatility, and therefore hard to justify additional investment if the long term is so unpredictable. As a result of this, operators have taken drastic measures and decisions which have further impacted their business. An approach which is now weighing heavily on production activities and calls for a rapid and effective solution.
Indeed, mishaps happen, prices vary constantly, but eventually, the industry settled. We are now slowly reaching a point where we can recover some sort of normality, and we must now look at how we can navigate this new normal. It is in times of crisis that we typically see innovations come to the fore and industry mindsets shift.
Rising back stronger
Oil and gas operators can recover from an unprecedented and major industry downturn and build a more efficient and sustainable production model. Recent technological advances and digitalization methods are bringing light to new possibilities and outcomes. It all starts with smarter thinking, being more adaptable and looking at what the industry has at hand already and how we can make it work better.
Solids management—the often-forgotten fourth phase of oil production—focuses on enhancing production performance and well productivity to increase revenues and reduce non-productive time.
By evaluating reservoir conditions and solids production, operators can actively treat sand-producing wells and transform solids from a challenge into an opportunity. Solids management solutions are a relatively low-risk and considerably low-cost investments, especially when weighed next to drilling or intervention activities—or in the worst-case scenario, choking back wells. These are costly and sometimes irreversible measures, particularly in such an uncertain climate and unstable industry environment. Be that for the sake of saving a few dollars now, these actions wipe future revenue potential off the table.
Instead, operators should be looking at the solutions they have at hand to improve, optimize, and preserve those assets in the long-term. By enabling a continuous tuning of well performance, solids management technology has to potential to unlock production performance and significantly reduce production cost per barrel for a long-term ROI.
A digitally driven future
The benefits of technology have only been intensified by the COVID-19 crisis. Not only can such solutions help enhance and facilitate production performance, but technology can also help us adapt to the industry’s new way of working and navigate this new “normal”. Solids management technology can be controlled and operated remotely—allowing people to safely work from home and reducing the potential impact social distancing and lockdown restrictions could have on the smooth running of operations.
Another aspect of technology which is key to optimizing business performance is data—an often overlooked but crucial aspect of the oil and gas industry, particularly in a post-crisis climate. As we recover from the pandemic, oil and gas companies must learn to adapt, evolve, and strengthen. Now that the industry is recovering from the downturn, it is time we focus our attention on data and look at the learnings that can be taken, evaluate what has worked, and what we can do better. By regularly monitoring data, key industry players can achieve a more holistic view and productive approach to production operations. Indeed, overseeing activity is crucial to diagnosing or predicting potential issues and allows operators to solve these before they become a problem or irreversible—and do so with little resources and implications. Data learnings will be a crucial resource to making the more informed and strategic decisions and investments the industry is looking for, and continuously improving oil production performance.
With the ongoing pandemic, accelerating the shift to digitalization and automated solutions is the key to increasing remote efficiency. While the oil and gas industry has greatly changed and evolved considering difficult times, it is today armed with many innovative solutions to help surmount these challenges and arise stronger than ever before.
Jørgen Bruntveit – FourPhase CTO and COO