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INSIGHT-Oil majors experiment with technology to weather crisis

Sun, 16th Oct 2016 09:00

* Drones, drill design, data software, robot cleaners

* Among technologies oil majors using to make savings

* More cost cuts to come as companies shield dividends

* Graphic on industry investment: http://tmsnrt.rs/2cG4Dj9

By Karolin Schaps and Jessica Jaganathan

LONDON/OSLO, Oct 16 (Reuters) - Oil majors includingStatoil, Shell and Chevron are experimenting with varioustechnologies, from drones and drill design to data management,to drive down costs and weather a deep downturn.

Crude prices have more than halved since mid-2014, forcingcompanies to cut billions of dollars in costs. Determined toshield dividends and preserve the infrastructure that will allowthem to compete and grow if the market recovers, they areincreasingly looking to smarter tech and design to make savings.

French oil and gas major Total said it was nowusing drones to carry out detailed inspections on some of itsoil fields following a trial at one of its Elgin/Franklinplatforms in the North Sea.

Cyberhawk, the drone company that led the trial, said thiskind of work was previously carried out by engineers whosuspended themselves from ropes at dizzying heights. It said themanned inspection used to take seven separate two-week tripswith a 12-man team that had to be flown in and accommodated onsite.

The drones do the work in two days and at about a tenth ofthe cost, according to the Britain-based firm's founder MalcolmConnolly, who said it had also worked with ExxonMobil,Shell, ConocoPhillips and BP.

Total declined to comment on how long the manned or droneinspections took, or specify how much money was saved.

Statoil's giant Johan Sverdrup field, the largestNorth Sea oil find in three decades which is due to startproduction in 2019, is a leading industry case study for cuttingcosts in the era of cheap oil.

The Norwegian company has cut its development costs for thefirst stage of the project by a fifth compared with estimatesgiven in early 2015, to 99 billion crowns ($12.2 billion).

The savings have largely been made by focusing on the mostefficient technology and designs from the beginning, Statoil'shead of technology Margareth Oevrum told Reuters in aninterview.

Executives say the growing attention on technologies thathave been around for some time shows how wasteful the globalindustry had been in the years before the downturn when - withcrude at above $100 a barrel delivering bumper profits - oilcompanies' had little incentive to develop fields efficiently.

For example, simply finding a more efficient route for theoil pipeline that would carry the crude from the Sverdrup fieldto the onshore refinery cut 1 billion crowns, Statoil said.

ROBOTS, FOAM

Statoil has also developed a drilling "template" that isacting as a guide for the first eight wells to be drilled at thefield. It said it had reduced the overall drilling time by morethan 50 days, saving about 150 million crowns per productionwell compared with what it would have cost with 2013 techniques.

"By far the biggest driver (of savings) has beensimplification," said Oevrum. "To think much simpler and startfrom the bottom, or the bare bone, and then rather add to that,instead of starting very big."

The company could not give a figure for its group savingsmade from improved technology and design. But it said that,partly because of such innovations, projects set to startproduction by 2022 would be able to make a profit with an oilprice at $41 a barrel, down from $70 in 2013.

Global upstream - exploration and production - oil and gasspending has fallen by more than $300 billion across theindustry in 2015-16, according to the International EnergyAgency (IEA), roughly equivalent to the annual GDP of SouthAfrica. Around two-thirds comes from cost cuts, rather thancancelling or shelving projects, it said.

Shell, for example, has developed a new type of pipe, calleda steel lazy wave riser, to carry oil and gas from its deepwaterStones field in the Gulf of Mexico for processing. It bends toabsorb the motion of the sea and the floating platform, whichthe company says boosts production at extreme depths.

The Anglo-Dutch major could not say how much the pipescontributed to increased efficiency, but said innovations atStones had played a significant part in cost savings of $1.8billion in its projects and technology division last year -equivalent to the 2015 core profits in its upstream division.

The fall in oil prices has led to the introduction of othernew engineering and maintenance techniques.

Chevron is using a robotic device to clean and check theinside of pipelines on their Erskine field in the North Sea morequickly. The improvement has helped raise the field's dailyproduction rate to the highest in two years.

Oil services firm Amec Foster Wheeler, working forBG Group which is now part of Shell, has applied a new techniqueto remove the pillars of an old platform, a procedure that isoften dangerous because corroded elements can slip off.

It pumped in expanding foam to hold the pillar's elementstogether, allowing workers to safely cut the metal away. Thiswork took just over seven weeks instead of the 22 weekstypically needed using traditional methods.

Alex Brooks, oil and gas equity analyst at CanaccordGenuity, said tech innovation in the industry was about "100tiny things", adding: "The bottom line is you end up with a muchlower cost."

The downturn has presented opportunities for some servicesfirms that can offer cost-saving innovations. Inspection dronefirm Cyberhawk, for instance, said its revenue from oil and gashad doubled from mid-2014 to mid-2016, while the widerinspection market had shrunk.

VAST DATA

Another way oil companies are looking to cut costs is byusing their vast amounts of data to better predict their needs.

Since the price slump, companies including Shell, ExxonMobiland Statoil have started using software that can better managetheir data to cut wastage in the ordering of constructionmaterials.

Stuck with excess material, some companies suffered hugelosses because the resale value was much lower and in some casesthey even took to burying unwanted material, according toIntergraph, a unit of Swedish tech firm Hexagon thatdevelops such systems for oil industry clients.

"Previously, it was industry standard to order 3-5 percentmore materials than needed, which in a billion-dollar project isa lot of money," said Patrick Holcomb, executive vice presidentat Intergraph.

Better managing data has helped oil firms understand exactlyhow much material is needed and when it will be delivered,cutting excess to one or two tenths of a percent, he added.

Gunnar Presthus, Nordic energy lead at consultancyAccenture, who advises oil majors and national oil companies,said the downturn had led to the industry waking up to thepotential of the data they store.

"The oil industry, to some extent, is one of the mostdigitalised industries," he said. "Companies are now able to usethis wealth of data to make changes that will save money."

($1 = 8.0919 Norwegian crowns)

(Additional reporting by Stine Jacobsen and Gwladys Fouche inOslo; Writing by Karolin Schaps and Gwladys Fouche; Editing byPravin Char)

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