A little more than a year ago in June 2014, oil prices were up to $115 a barrel and the industry was intoxicated with belief in a limitless energy future. But by the end of 2014, oil was at a stomach-churning $59 per barrel and budgets were being slashed across the board.
The good news: IT can be the hero in every oil company’s great “comeback” story.
We had a unique opportunity to sit down with Bret Wiener, CTO of Seven Lakes Technologies, to discuss the current state of the oil and gas industry and how IT can play a pivotal role in implementing technology to remove inefficiencies and create reliable operations in a volatile oil and gas market.
Q. How is it possible for an oil company to increase productivity and stage a “comeback” when prices remain so low?
A. Virtually every US oil company, no matter what the size, was able to achieve remarkable growth during the “boom times” of shale oil production right up through 2nd quarter 2014. But since prices have dropped so precipitously, a result of a world oil surplus, IT departments have a new mission: to cut waste. The priority now is to use the industry downturn to integrate data and tools of the trade to work better and smarter.
Q. How do you accomplish this?
A. By enabling IT to deliver 100% accurate data in real time. Pinpoint errors. Give management and field engineers the data they need to do on-the-fly well reviews, shaving cost on anything from administration and invoice errors to overspends on a per-asset, per-division level.
Q. How can IT deliver “clean” data when so many databases in oil and gas operations are now rigidly separated into “silos” (i.e., separate software for different regions, departments, and individual functions)?
A. First, IT needs to establish firm goals and identify the weak spots in organizational reporting, communication, and data aggregation and access. Your higher-level analysts, for example, could be working on a solution to integrate all corporate data and make it visible to users in both the central office and field locations. However, most IT managers are spending their time running around to collect data on an ad hoc basis.
Q. But don’t they have to do that? Virtually every organization has cumbersome legacy systems and problems making data accessible in real time. Here’s an example: A major oil company superintendent reported that before a centralized ERP and financial system was installed at the central office, he would manage his own operations “freestyle,” making the best calls he could based on whatever data he could access and on his first-hand observation. The superintendent did a “true up” with his boss on a cost and performance basis every six to eight months. But after the ERP system went live, his modus operandi, which actually worked pretty well, was shut down. Reports that existed before couldn’t be created the same way, and his data analysis tools were rendered useless. Moreover, access to the data he needed required a programming request which took too much time and money.
A. In those situations, engineers in the field often attempt to build their own data sets by managing individual spreadsheets and scraping together whatever data they can access. Generally everyone spends a ton of time reconciling facts and checking sources, with every meeting starting with a lengthy discussion about whose version of the data represents the “truth.”
Q. Doesn’t this have an effect on executive decision making?
A. Absolutely. Personnel spend hours updating each system only to have engineers require more data and drill downs to “hidden” data: invoices, well productivity, contractor supplies and costs. At the same time, executives may wait thirty days or longer to look at the most basic of summary well reviews. The “turkey” wells – the most unprofitable ones – may run for months without a proper assessment. And, of course, the company writes red ink.
Q. But if it’s so difficult to get clean data and the right management tools, who has time to do this?
A. Seven Lakes does. We’ve spent thousands of hours analyzing the flaws in legacy systems across petrochemical organizations. And we’ve developed visually intuitive, off-the-shelf software solutions that enable all corporate data to be bi-directionally synched in real time with core systems, including rig scheduling, ERP, land systems, production accounting, well management, field data, AFE and LOS systems, and economic forecasting.
Q. But aren’t these tools difficult to use?
A. Not at all. We offer easy-to-learn, highly visual dashboards – WBS, LOS, Production, and Downtime dashboards –AE allowing engineers, managers, and analysts to log in at will and drill down to whichever level of data they need. The dashboards enable real-time access to accurate figures for accountants, engineers, C-level, and operators. It allows your IT department to be the hero – creating ownership of productivity at every level through effective information distribution.
Q. Can you give an example of a productivity or cost savings?
A. The major oil company we spoke of reduced LOE by 8% over the past year using the dashboard system. They saw a 16% reduction in G&A and a 7% reduction in over-budget AFEs over the past year. Downtime was reduced 50% because the dashboards provided the data needed for engineers and pumpers to focus on the right wells at the right time.
One production engineer was able to catch a $40,000 error in duplicate invoices in just one month by having access to a dashboard that allowed him to drill down to the invoice level. If every engineer had only one such “find” throughout the year, IT could save an organization almost $1 million.
That’s the kind of “heroism” every organization could use right now.
To learn more, visit www.sevenlakes.com.