How Big Data, AI And Other Tech Trends Are Disrupting The Oil Industry
Crude oil prices hit record highs back in 2008, reaching upwards of $150 per barrel, boosting production and inspiring a gold rush amongst investors who banked on the trajectory of a perceivably promising industry. Yet, the reality plaguing global powerhouses like Exxon Mobil, Shell and BP proved the exact opposite.
While experiencing an influx of funding and increased cash flow from inflated prices, these massive industry leaders experienced nearly decade-long declines from 2005 to 2014. This downfall was primarily ignited by a rise in operational costs stemming from increased taxes, service costs and development fees. Consequently, more than 250,000 oil workers lost their jobs, over two-thirds of oil rigs were decommissioned and a long list of the top players found themselves filing for bankruptcy.
As the challenges to scale continued, big oil companies also suffered from extreme functional and structural inefficiencies. Using outdated technology and methods for measuring productivity delayed much needed internal growth. Losing billions annually, oil companies needed an immediate solution for working smarter, while gaining lost ground and revenue.
Today, in an era marked by progressive strides toward solar and green energy, fueled by conversations about climate change and shifts in the global economy — the oil and gas industry remains a massive market responsible for generating substantial portions of the world’s wealth.
Founded in 2009, Seven Lakes Technologies is an enterprise software company that provides smart solutions to upstream oil and gas companies. The startup builds custom data solutions and technology used to track key metrics and spot operational inefficiencies. Their goal is simple: cut production costs, increase productivity and establish an efficient workflow.
I spoke with Seven Lakes CEO Shiva Rajagopalan about emerging trends, adopting new technologies and how these shifts are shaping the future of big oil and gas companies in 2018.
Describe the current state of the oil industry and what makes now the perfect time for disruption in the space?
Shiva Rajagopalan: Oil and gas companies have survived turbulent markets, fine-tuned lean teams, and know exactly where to drill. In spite of all this transformation, meeting production targets remain a blindfolded, high-wire act. This must change. Raising an army of people to solve the problems just won’t cut it. We must now arm the entering workforce with easily adoptable predictive technologies that embrace disruption, like Artificial Intelligence.
How are emerging technologies like Artificial Intelligence shaping the future of the oil and gas industry?
Shiva Rajagopalan: AI technologies hold the promise of giving time back to the field so that they can shrink unplanned downtime. As with many other industries, AI automates the monotonous tasks. AI allows pumpers to focus on high-value problems, and not get bogged down with data finding missions. AI recognizes subtle patterns in well data and helps predict when each well will need servicing long before a problem occurs. AI oil and gas systems gradually understand each operational element better, allowing it to quickly identify patterns and, most importantly, generate better predictions, instantaneously and continually. With enough of the right data, we can look closely at well performance, identify potential stress points, and extrapolate. In the same manner, we can determine when a well needs an artificial lift and provide the necessary calculations to conduct that lift. With established AI systems, crews move past reacting quickly and begin working proactively, offering enormous reductions in well downtime.
What are the biggest blind spots or challenges plaguing the oil and gas industries and how are these new technologies solving for them?
Shiva Rajagopalan: The oil and gas industry is largely built on entrepreneurialism where businesses are created from nothing to billions. None of this is possible without advanced technologies, systems, and processes. Oil and gas IT Departments know this, but they are piecing together operations without actually understanding what the whole outfit looks like. There is no visibility into what is happening in the oil field in real-time. The prolonged low oil price and subsequent downswing in the market have led to numerous employee layoffs, dwindling investments, and increasingly tight margins. The oil and gas industry became lean, adapted and optimized performance in every way possible with existing resources, to maintain profitability and product targets. Now, every major oil and gas company is looking to increase production without increasing resources. At the same time, every vendor is looking to provide them the latest in production optimization software. Both parties have heard of AI’s promise to expedite processes and reduce costs, but they have only just begun to graze the surface of what this modern technology is capable of.
How will all of this directly impact the oil and gas markets globally?
Shiva Rajagopalan: The U.S. has been a leader when it comes to embracing disruptive technology in the oil and gas space. With the integration of AI in production planning and optimization, we will only see the adoption of such technologies spread. AI-powered optimization will lead to more efficient extraction and production of oil and gas reserves worldwide with game-changing implications for conserving natural resources and the environment while providing the world with the energy it needs.
Considering all of the changes and trends being adopted — How do you see the oil and gas industries evolving in the next 2-5 years?
Shiva Rajagopalan: There are three significant shifts we are beginning to see now, that will change the future of oil and gas operations as we know it.
1. Dynamically Routing Pumpers To Fix Highest Value Problem
By using AI, dynamic routing puts an E&P company in a proactive stance by focusing on those high producing assets that currently require attention, rather than devoting roughly equal time to all wells. For instance, if a lease operator is servicing 15 wells, 12 of which are running smoothly and three that are malfunctioning, it makes sense to prioritize servicing the poorly functioning wells first, to maximize overall production figures.
2. Real-Time Oil Hauling Run Tickets
Consider the inefficiencies that surround the traditional system of oil hauling receipts (run tickets) handwritten and manually entered into an Excel spreadsheet. Simple data entry mistakes are rife and can cause significant disruption, while manual double-checking wastes valuable time over the course of months and years. By developing an AI system that connects the field worker to the corner office, we can enable a complete and accurate view of production for oil and gas companies. While the majority of SaaS vendors are only just gaining the ability to take basic run ticket pictures, we have shown since 2012 that it is possible to achieve 99% accuracy on interpreting handwritten tickets using our mobile field data capture software, directly leading to a YoY production increase of 2-4%.
3. Bringing Wells Online At Exactly the Right Times
I often say that taking big risks is in the DNA of our industry. However, to fully squeeze the reward from these risks companies must evolve beyond the drill bit. We must stop struggling so unnecessarily to keep projects within budget, profitable, and on time. With current innovations in integrated workflow management, we are no longer held hostage to legacy systems that don’t talk to each effortlessly. This means better budget forecasting and workflow, which is crucial for oil and gas companies stretch capital budgets appropriately and keep projects on time.