Digitalization Can Save Upstream Business $73 Bln a Year

Energy firms could save an annual $73 billion within five years in oil and gas exploration and production by making better use of existing computing technology, energy consultancy Wood Mackenzie said.

Exploration and production, known as the upstream industry, requires energy firms to analyze huge amounts of seismic and geological data and to monitor and maintain offshore platforms and other complex assets, often in high-risk environments.

In a report on how technology can be used for these tasks and potential savings, Wood Mackenzie (Woodmac) said many firms could spend less by buying technology and know-how from outside of the industry.

"Start-ups that merge Silicon Valley roots and domain knowledge ... may bring benefits to companies much more quickly than in-house approaches," it said.

The consultancy saw big savings from using technology that would make drilling faster, more accurate and less likely to end up with a dry well, and by using applications to predict when maintenance would be needed.

Woodmac estimated the industry could save up to $12 billion a year on drilling, mostly in onshore and shallow waters.

It said big savings were also available from the use of cloud computing services, particularly for smaller firms that did not have enough in-house computing power.

The U.S. shale industry, which uses a cocktail of high-pressure water and chemicals to coax crude from rock deep underground, known as hydraulic fracturing or fracking, could also offer insights to conventional drillers, the report said.

In offshore drilling, where rig rates tend to drive costs, the industry overall might be able to use rigs for 2,000 fewer days through more digitalization and automation, Woodmac said.

It said average annual exploration spending of $50 billion could be cut to about $35 billion, while still boosting the discovery success rate to 45 percent from about 35 percent now.

In addition, it estimated the industry could save as much as $24 billion a year on operating oil producing assets through better use of technology.

Citing examples of firms that have effectively employed new technology, it said Norway's Equinor estimated more automation would drill wells 15 to 20 percent faster by 2020.

Norwegian firm Aker BP had bought software engineer Cognite to digitize its assets, and was now selling software to rivals and sharing data, it said.

The report also said Aker had shifted from rigid maintenance schedules to a more flexible system, while BP was using robots and drones to inspect a platform in the Gulf of Mexico.

(Reporting by Shadia Nasralla; Editing by Edmund Blair)

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