Levels of Automation in Oil and Gas

One of the aspects of the 4th Industrial Revolution [LINK] is automation.

I am often asked if automation could ever add value to oil and gas? I contend that there is a good reason to think it will because benefits could come from:

  • accurate control and adjustment leading to higher throughput;
  • self-repairing (or self-scheduled repair) leading to higher uptime;
  • more accurate execution of plans by reducing manual error; and
  • less distracted management leading to higher-value decisions;

Many people are sceptical that we can ever “automate” an upstream oil and gas production facility.  I agree that “full” automation is unlikely, but I would argue that partial automation is already present. What we need then is a way to describe “levels of automation” so we can define what we are talking about and reach agreement about what to do.

Autonomous cars are in the news for good reason right now, and are making great progress. Perhaps we can create a common language for “level of automation”. The SAE introduces itself as:

SAE International is a global association of more than 128,000 engineers and related technical experts in the aerospace, automotive and commercial-vehicle industries

It has defined 5 levels of automation that has now been adopted by the US Department of Transport. Here’s an explanation from wired magazine [LINK].

What dimensions could be used to classify degrees of oil and gas production automation? My definition of the process of automating is: “Reducing the friction between sensing what is going on and taking the right action”. This can be used to underpin a maturity matrix.

If we can sense what’s happening, reduce the friction before acting to zero and be exactly right in the actions we take – then this achieves perfect automation. Of course this then leads to the need to define in more detail: sense, friction and right.

Some of the steps that can lead to more automation are:

  • Improved sensing of the environment;
  • Distribution of sensing data;
  • Transformation of data into information (e.g. production vs. target);
  • Exploring related information, history and context (e.g. maintenance records)
  • Understanding the consequences of the information presented (prediction);
  • Checking possible actions and their impact (simulation);
  • Delegating decisions to reduce management delay; and
  • Feeding back observed results to scientifically tune future predictions (learn)

Contact me for more information about how it is possible to incorporate the above into an assessment of your organisation’s automation maturity and readiness for change.

 

 

 

 

 

BA IT and my Eggs Florentine

So it happened again yesterday. This time BA cannot handle luggage. A bit of an issue for an airline. No word yet as to the cause [Link] but it did mean that checked baggage did not travel with BA passengers.

I took a risk and travelled BA this last weekend (I was using air-miles for a trip to Romania where I was helping out a friend with a project in the hinterlands there) and the experience was pretty reasonable but even I had problems. This time my probelms came from catering.

I flew in the business class cabin  (or as BA call it Club Class – hopefully not a reference to how they will quell any dissent).  In any case there was all this pomp and ceremony involving hot towels and a menu for breakfast as we took off. I was given the choice of Full English or Eggs Florentine. Printed on some stout card in a very grand font. Sounded lovely. There were only 8 passengers in the cabin. But they packed only 4 of each menu item. Zero redundancy. So as I was the last to be served, I didn’t have a choice. The menu should have read – you’ll get what’s left over out the two possibilities or go hungry, good luck. People only got a choice until 4 people had chosen one option, and then there is no longer a choice. So, as my Texan friends would say, that fancy menu was all “Hat and No Cattle”

It seems that catering, like IT, didn’t use risk management and uncertainty when designing their systems. This highlights the danger of over-assuming and the consequences of running at minimum cost with no redundancy. Redundancy, like insurance, can be seen in hind-sight as wasteful. Sometimes it’s called “over engineering” – but only if it wasn’t needed. If the laws of probability catch up with you, it is really a prudent investment.

Risk management has three elements:

  1. Identification of the Risk, what can cause them and what the consequences will be
  2. Taking prudent steps to reduce the probability that the risk will materialise
  3. Making preparations so that if the worst does happen the effects are mitigated

Giving BA the benefit of the doubt and assuming that they knew that their IT systems may fail, the baggage system may halt, and that they may run out of eggs florentine, then I have to assume that BA management now hate their passengers.

The consequence failure seems to be  inconveniencing passengers.

Probability of Failure: At no time did they take steps to reduce the likelihood of tripping their whole IT system by pulling out a plug [link] (perhaps they might have double ported UPS, or Duct Tape over the plug!) or running out of my choice of breakfast (by perhaps packing say 6 of each choice, rather than 4).

Consequence of Failure: Let’s just inconvenience everyone – was not mitigated either, it was just accepted with a shrug. Though to be fair baggage was re-routed and couriered and people were re-booked on flights. I got an extra Bloody Mary. But still feel that it would have been better to reduce the likelihood of failure, as the mitigation seemed to be the minimum anyone could expect – and may be a legal requirement (except the bloody Mary of course, which probably the EU would not mandate)

Good luck with preserving the premium pricing for your Brand BA.

In a future post, I’m going to argue that as operations now rely on IT to deliver (and even more so in the 4th Industrial Revolution) it’s quite wrong that much of IT comes under the purview of the CIO rather it should now be part of the remit of the COO. Risk management of operational IT should focus on putting barriers in place to interrupt the cause and consequence routes, using an operational function lens, not an IT one. I Bet that is going to cause some organisational “team work” issues when it comes to budget time.

 

 

4th Wave Value – Upstream Oil and Gas

I’ve been engaged in several discussions recently on the benefits (or otherwise) of the 4th Industrial revolution [link] applied to oil and gas. I’ve decided to write a couple of pieces on this topic so I can refer to them with clients.

Technologies driving the revolution

I accept the WEF identification of the following general technologies that underpin the revolution:

  1. Wide-spread sensing of information
  2. Increased computing power, predictive models leading to increased understanding
  3. Artificial Intelligence leading to:
    1. Automation of actions
    2. Optimisation of whole systems
  4. Distributed, additive manufacturing

Benefits from the revolution

What will be the outcome of the 4th Industrial Revolution for upstream if we are successful?  Well there can only be three fundamental differences that can be made – I think we’ll get a combination of these:

  1. Per unit cost reduction in produced barrels
  2. Increased safety for the people involved in operations
  3. Decreased impact on the environment from activities

Items 2 & 3 tend to be driven on a compliance basis and form the requirements for permission to operate granted to companies by society using various methods of regulation, consumer pressure and protest. For my purposes I’ll assume that these are utilities [link] and that we always want more when there is no increase in cost, and that we’re unlikely to cut spending or trade down. Therefore, any cost-neutral improvement will be adopted and spending will only increase when it is mandated.

Driving down production costs

I am going to concentrate on the cost per unit production. This comes from the cost of capital used to find and develop a field, the cost to operate facilities, and provisions for decommissioning at end of life. As the owner-operator of an oil field there are distinct supply chains for each of four phases of life:

  1. Exploring, Finding and Appraising deposits of oil;
  2. Planning, Designing, Building and commissioning facilities to extract and transport it to market;
  3. Operating the facilities; and
  4. End of life decommissioning, facility disposal and restoration of the environment

Benefits for exploration

In the initial phase of oil field life I would say that we’ve already captured many of the benefits. Wide spread sensing and large computing power would be a great description of what happens with Seismic data, Geoscience earth-modelling and directional drilling.  I am sure that if I looked at the number of people employed and unit-cost of discovery of a deposit I would see a much more efficient scenario than we did in 1980. The figures are somewhat distorted on a cost-per-barrel basis as we have been finding smaller deposits (a feature of geology rather than our abilities).

Benefits for Development and Projects

In the field development phase, we have seen some ingress of new technologies – ROV, Subsea completions, dynamic positioning of FPSO’s and such has led to economically possible concepts for some small or hard-to-reach fields that we’ve found. Field and facility performance is more accurately understood through simulations and we’ve seen some benefits to designers from the use of CAD systems. There is still scope for development to reduce the cost and errors associated with Engineering, Procurement, Construction and Commissioning. There are few real-time feed-back loops here, or analysis of project simulations. The management of large capital projects is still a mine-field of risk, change orders, document control, cost-overruns and schedule blow-out. These are caused by fluctuations in the real-world vs. plan with late in-flight adjustments. More accurate planning, contingency, dependency management, construction order, logistics, pre-commissioning maintenance, start-up etc. would provide benefits.

Benefits for Operations

The revolution should be able to affect operational optimisation the most, this is an area almost untouched by the revolution so far. An OIM on a field from 1980 would recognise a lot of the technology (if not the work-practices) used today. The exception to this is the wide-scale adoption of communication meaning that the split between on-shore and off-shore is far less.

It is possible to argue that the 4th wave has enabled the shale revolution and that the operating practices from this type of development are fundamentally different to conventional offshore and on-shore fields. The operating margins are smaller, decline curves more dramatic and the constant drill-complete-operate cycle has forced change.

I may be controversial but I’d say a lot of the operational work-practice changes seen in the North Sea have majored on reducing manning offshore and increasing the safety of operations. I believe that, despite the vast increases in potential data, the fundamental way that information is gathered and acted upon has not changed much.

When I walk into a remote operations centre I see a lot of people collaborating with each other, lots of excel spreadsheets, cameras and discussion. Integrated planning and turn around planning are still being done off-line and I don’t see visibility of supply, logistics or automatic optimisation of these functions.

There is a conundrum here of course. The facilities that are in operation (and those still being commissioned) are not designed to harness 4th wave opportunities so we have (at least) two problems. Firstly we must retro-fit new concepts into facilities that will be with us for the next 30 years, and secondly we need to influence design and development so that this retro-fitting is no longer needed in the future.

Benefits for de-commissioning

It’s early days on the decommissioning front. I suspect that for operators the benefits will show up through normal procurement cycles. The smart profits are likely to accrue to those that can operate quickly and safely. Examples of clever automated technology are emerging – such as the self-levelling rams that lift whole top-sides fitted to the Pioneering Spirit [Link]

Next steps

With the current climate in Oil and Gas we’re seeing an increased interest in how to transform the operational environment and supply chain to drive out OPEX cost (development and exploration are of course now sunk [link)

Now I’ve set the context I’ll start to explore how an operator, or service company, can start to participate in these changes – what an operations business case will look like, what skills and approaches will be needed, what approaches are stopping innovation and what the risks are.

(Image source : http://ohioline.osu.edu/factsheet/cdfs-sed-2 )

BA – Blinking Awful?

I haven’t posted for a while as I’ve been very busy working with clients on industry 4 projects, but the recent IT outage for British Airways (BA) requires a response. (for more information on the BA IT outage follow this [link])

In August 2016, I examined the cost of the IT outage to DELTA airlines [link]. I calculated that this must have cost DELTA at least $60m [correction:  with related costs the post says it would be $100m]. In the wake of the BA story the FT published an article over the weekend [link] looking at the top 5 IT outages. They tell us that DELTA believed that it cost them at least $100m.

We’ll wait and see what effect that BA outage has on their revenues – but IAG (the owner for BA) declared a profit of about £2Bln for 2016, so there is a chance that this will have the possibility to knock 10% off the earnings for 2017.

Now – in an eerily similar set of circumstances to Delta – the company had recently outsourced their IT and they experienced a “power surge” and the back-up system didn’t work.

The following seem likely to me:

  1. The digitisation of business has happened and is accelerating, IT systems are not peripheral to operations they are now crucial.
  2. The creation, management and care of these systems are critical, but it appears that there is no-one on the senior leadership team who is on the case.
  3. The focus on “business cases” for IT investment don’t consider the transformation of current business operations, nor the risk of “not investing”

This posts talks about the need to prepare non-linear business cases [link].

The Oil and Gas industry (and others) are becoming rapidly digitised and will require different investment decisions around IT. It is no longer appropriate to concentrate on cutting costs, driving standardisation and outsourcing the activities. In operations “IT” is now critical to business success. This means good investment decisions drive competitive advantage and loss of IT capability can cripple the business.

You heard it here first folks…

I’m not normally known for left-leaning political judgement but – just in case you missed it the Scottish Government is being asked to consider a motion to fund public investment in the infrastructure of the North Sea.

“UK OIL would work with the Oil and Gas Authority to identify strategic assets that are potentially profitable. That would help to prevent platforms and pipelines being lost earlier than planned, and potentially help fund new ones for the future.

“We urgently need imaginative thinking like this now – otherwise the oil and gas sector could continue to decline due to lack of investment.”

Here’s the [link]

13 month’s ago this blog published an article which, amongst other points said:

To address this will require restructuring the way that the industry operates. If not outright nationalisation of parts of the network, this – at least – requires more control and probably limited subsidies. For goodness sake – we subsidise the tracks that our trains run on, I can’t see any argument for the creation of economic value there that does not apply to our North Sea processing and export network.

Here’s that [link]

 

 

Business-case for non-linear world

I wrote recently about the Delta data meltdown and how the investment in technology had not been made sensibly. I’ve seen this in a number of organisations – where status-quo seems cheaper than updating. It’s an argument that would not be made for safety or passenger comforts but appears to be OK for back-office IT systems.

The world has moved on and it now relies on data as a core asset and capability. With the 4th industrial revolution this is only going to become more reliant on data and understanding how to make risk-based investment decisions will be key.

InfoWorld report that Cloud technologies could have made even a traditional business-case work [Link]

Here is my post about DELTA [Link]

This is what Delta’s CEO had to say [Link]:

“it’s not clear the priorities in our investment have been in the right place. It has caused us to ask a lot of questions which candidly we don’t have a lot of answers for.”

 

It’s just an analogy

I’ve recently been working on analogies designed to let me talk about Industry 4.0 concepts. In short I’ve been trying to find ways to explain what’s almost unexplainable, and often to a sceptical audience. This is my current favourite:

Here’s what happened lasttime

In 1993 the Internet was explained in terms of bits, bytes, modems and tunnels. Most people had no idea why this geeky stuff would be important or what it could possibly be used for in everyday life. By 2003 it was explained in terms of Amazon and Facebook. Now my mum can order shopping on-line but has no idea how the Internet works. That’s how it should be, invisible to the application. My niece uses Facebook, WhatsApp and ASOS and can’t really imagine not using them – it’s woven into the fabric of how she does things, she’s never done it any other way. Why would she? In the mean-time those that had no idea what the geeky stuff could do ignored Amazon and are now closing their retail space [link]

Here’s what’s happening now

Industry 4.0 is now explained in terms like sensors, internet-of-things, and security. There is little understanding of how to retrofit this into existing ways of working, or why all this geeky stuff is relevant. In short people think this is a nice to have but really changes nothing. In ten years I will be explaining this in terms of its application and not how it is implemented. Industry 4.0 will be a forgotten concept and we’ll be talking about its various applications – like operating and maintaining according to equipment condition. In 20 years time a maintenance engineer (like my niece does with Facebook) will have no concept of why you would (or even could) operate equipment without on-line condition monitoring, system level surveillance, and connected “helper applications” that learn from global failure modes. Why would she?

But surely we’ve already been here?

I normally get an objection at this point along the lines of this:

“We’ve had digital oilfield for years, and it’s promised a lot, cost a lot and not delivered much – why will this be different, why should I think there will be a change.”

In my view, things no longer change incrementally when platforms become ubiquitous and costs tumble 1,000 times. They “take off”. That’s what’s occurring now. Add to these exponential technologies such as machine learning (which self-improve with time and experience) and t the stage is set for big breakthroughs.

Four companies: Facebook, Google (Maps +Waze), Uber, Amazon would be impossible without the widespread adoption of horizontal general technologies. They’re interdependent and co-ordinated rollouts enabled cross-platform co-innovation at the application level.

By the way – If you think these companies are just fluff : Google is worth 356Bln, Facebook 350Bln, Uber 62Bln and Amazon 250Bln. In total over a trillion dollars. For comparison Exxon is valued at 360 Bln.

Adoption Curve is reversed

Here’s another thought – In the 1960’s Military and Space applications were modified for business use before finding their way into the hands of rich consumers a couple of decades later. Facebook-like platforms and messaging applications such as Skype emerged first in the consumer space before being adapted for corporate deployment.

I think this mode of adoption is now true for application level innovation generally. If this is so for our next wave application innovation for industry 4.0, I expect to see it emerge first in the consumer space, deploy rapidly at scale and be ready to find ways to adapt and deploy in industry. It will be people like my niece that will know how to leverage these applications with no need to have any knowledge of how the underlying infrastructure works.

Keep your millennials close at hand; you’ll need their insights.

Image Credit http://parterre.com/2011/12/01/interrrupted-analogy/