Digital Oilfields: A Sea Change in the Upstream Oil and Gas Sector

A few years ago, remote-controlled oilfields may have sounded like a scene from a sci-fi movie. Today, digital oilfields make old-fashioned methods of taking a chance to strike oil and gas a thing of the past. As such, digital oilfields rely on IT, automation and communication to improve all aspects of operations of the upstream oil and gas sector, from production and drilling to completion and safety. For example, oil services firms, such as Schlumberger, are able to seamlessly link remote drilling operations to command centers of its customers. Real-time monitoring of onshore and offshore drilling is available to geologists and engineers in the company’s multiple operation locations in different countries. According to John Brantley of IBM, incorporation of intelligence and automation into energy operations allows the companies to detect and preempt equipment malfunctions, automatically make changes, and reduce the risk of equipment failure. The petroleum industry can cut the costs of both onshore and offshore operations by 10% to 20% and increase the production of oil by an additional 125 billion barrels of oil, if the potential of digital oilfields is realized.  

Although the oil and gas industry still resists a shift to digitization, the market share of the digital oilfield technology is growing, particularly with the increased complexity of petroleum operations in geologically challenging environments and remote locations. While digital oilfields are currently most active in Western Europe and North America, the Middle East anticipates rapid growth in integrating remote monitoring and control of upstream oil and gas operations in the next ten years. According the oil and gas division of the New York-based International Quality and Productivity Center (IQPC), a web-based oil and gas information portal, “by 2015 the value of digital oilfield services is projected to exceed $200 billion, an increase of more than 405 from the 2012 market size.” At this juncture, there is no point of return to old, uneconomical and precarious methods of petroleum exploration and production.  

Current capabilities and best practices in digital oilfields, information and knowledge sharing, challenges of implementing IT platforms and solutions will be the fulcrum of IQPC's upcoming Digital Oilfields USA Summit in Houston, Texas, on December 10-11, 2013. It is a unique opportunity to learn from industry practitioners on how to capitalize on digital oilfield investments, how to leverage IT, and how reduce operating costs and maximize oil and gas production. Common challenges in implementing IT platforms and protecting information and operations from cyber threats will be also covered in the summit. Speakers at the summit represent market leaders in IT and the oil and gas sector.

Iraqi Oil Production and Exports to Continue Declining Without Infrastructure Overhaul

The escalating conflict in Syria and OPEC crude oil supply disruptions appear to have sent a mild panic to the oil markets. While Syria may not be a defining factor of price jumps, oil production cuts from Iraq and Libya by 170,000 barrels per day (bpd), in spite of increased output in Saudi Arabia, play a larger role. Worker protests in Libya brought the production down to 400,000 bpd in early August. Meantime, the second largest oil producer in OPEC with oil output exceeding 3 million bpd (mbpd) in 2012 and 2.4 mbpd going to exports, Iraq’s oil sales in 2013 have fallen below last year’s average, with July 2013 exports hovering at 2.25 million bpd. With Iraq’s increasingly important role as an oil exporter in the years to come, it is worth examining why its oil exports are on the decline and are unlikely to make a big jump without fixing the security and infrastructure problems.

This year’s decline in Iraq’s oil exports was largely due to the repeated insurgent attacks on the Kirkuk-Ceyhan (Iraq-Turkey) oil pipeline as well as other infrastructure failures. According to Iraqi officials, production disruptions due to repairs of de-gassing stations at the country’s oldest and largest Rumaila oilfield contributed to the recent cutbacks. Iraq plans to increase production by 360,000 bpd by the end of 2013 or early next year from new oil fields Majnoon, West Qurna-2 and Garraf and install three new single point mooring platforms in the Persian Gulf for additional export capacity.

But it is unlikely that the exports will increase further with a planned maintenance of Iraq’s major export terminal in the south – al-Basra Oil Terminal and Khor al-Amaya Oil terminal – which could cut output by 500,000 bpd for four to six months from September, despite assurances of Iraqi oil officials that disruptions would be minimal. Besides, the increase in export capacity is subject to tanker traffic in the Gulf, weather challenges, and the current export infrastructure taking turns between a shut-down and slow re-starts. At the end of the day, Iraq’s antiquated and neglected energy infrastructure is a critical obstacle to oil production and exports. This August, Iraqi officials chided Royal Dutch Shell for delayed start-up and for the inability to meet production goals of 175,000 bpd from the giant Majoon oilfield in the south. The row points to the infrastructure challenges confronting international oil firms operating in Iraq. Shell attributed delays to health and safety concerns, stressing that additional work was required to safeguard existing facilities. Similar problems exist in every part of the country’s energy value chain. Thus, Iraq’s new ambitious production figures of 9 mbpd by 2020 and exports of 4.5 mbpd in 2014 will be further curtailed with recurring infrastructure failures that beg for a complete renewal of the infrastructure, and inevitably cause disruptions while renovations take place. Constant terrorist attacks on the Kirkuk-Ceyhan export pipeline will not help the increase of exports either.