Royal Dutch Shell Group .com

Financial Times: Digital dawn for black-gold diggers: “In a darkened room, a group of Royal Dutch/Shell technical experts don virtual reality goggles and reach for their keyboards to direct the drilling of an oilfield thousands of miles away. They are in the oil company's exploration and production headquarters in the Netherlands, but the oil lies beneath the Gulf of Mexico. ( 6 May 05


By James Boxell

Published: May 6 2005


In a darkened room, a group of Royal Dutch/Shell technical experts don virtual reality goggles and reach for their keyboards to direct the drilling of an oilfield thousands of miles away.


They are in the oil company's exploration and production headquarters in the Netherlands, but the oil lies beneath the Gulf of Mexico.


They call up a startlingly detailed three-dimensional image of the subterranean Na Kika field, 6,000 feet beneath the ocean surface.


The 3D simulation hovers in the centre of the room and is updated as geological data gathered by the drills is relayed back from the field in real time. The scientists and engineers slice and dice the picture and highlight the precious hydrocarbon reservoirs deep within the rock, enabling them to place the oil wells with a far greater degree of accuracy than was possible before.


"Working in a 3D suite gives me a better understanding of what oil does," says Toby Perry, a senior Shell geophysicist.


The use of digital oilfields is sporadic but growing fast. According to Bill Severns, a senior director at Cambridge Energy Research Associates (Cera), the influential industry consultancy group, it has huge and largely untapped potential.


"Companies could take 100 per cent of their fields, bring all that data back to one operation centre and bring in their best 300 technical people to run them."


Virtual reality may be a familiar technology in other industries, but in the conservative oil industry it represents a breakthrough.


Oil companies have traditionally taken 20 years longer to embrace new


technology than their consumer product counterparts, according to McKinsey, the consultancy firm. But the emergence of the digital oilfield - and Cera's choice of Steve Ballmer, Microsoft chief executive, as keynote speaker at its annual conference - shows this could be changing.


It needs to: faced with a poor exploration record, competition from state-owned Chinese and Indian rivals and the lack of access to the Middle East and Russia, the world's biggest listed oil companies must squeeze more from maturing fields. This is why the digital oilfield is assuming a central role in their planning.


They use the technology for remote-controlled drilling, monitoring the field's geological structure, advanced seismic (sound waves that create a picture of what is under the ground), and the 3D simulation of the field.


The technology will add at least 125bn barrels of oil to global reserves in the next 10 years, says Cera - more than Iraq's current estimated oil reserves.


Yvon Quillien, who co-ordinates Shell's "smart field" team at the exploration and production headquarters in Rijkswijk in the Netherlands, says: "Oil wells see only one-millionth of the subsurface. We want to see the bigger picture to get better production forecasts, lower field development costs and maximum recovery rates. The complexity of what is invisible is nearly always understated - we need to shift from inference to measurement."


Shell's need is greater than most given its reserves overbooking scandal last year. It claims that smart fields are helping. At the Iron-Duke field in Brunei, the technology has helped lift the amount of oil it expects to retrieve by 16 per cent. At Na Kika expected retrieval is up by one-quarter and daily production has risen 17 per cent.


According to Cera, average recovery from oil wells can be improved from 35 per cent to as much as 40 per cent through digital oilfields. Mr Severns says: "This may sound low, but in terms of global reserves it is a very big low."


The technology is not confined to central research departments. For example, Conoco Phillips, the US oil group, has built onshore drilling and production centres in Stavanger in Norway to extend the life of its ageing Ekofisk field in the North Sea. The Norwegian sector of the North Sea is where most use is made of digital oilfield technology, with its offshore platforms all connected by fibre-optic cable.


Mike Herbert, who leads Conoco's digital operations, says that recovery at Ekofisk has risen from 46 per cent to 50-60 per cent because of the centre, which paid for itself in seven months.


"An operational geologist in a 3D room can maybe place the well quicker and smarter," he says. "This is a real issue if it is a very old field." With the advent of multi-directional - rather than just vertical - drilling, the dozens of wells in an older field are spaghetti-like in their complexity and often several miles long.


While one aim is to avoid "blowouts", caused by the collision of two wells, companies want a "holistic view" of the entire field, says Hans-Erik Olsen, who runs real-time operations for Halliburton, the US oil services company, in Stavanger.


"You want a picture of what each of these wells is doing to your field as a whole," he says. "Before, the picture from individual wells was very discrete."


In addition to costing as much as $20m (£10.5m), a misplaced well can be catastrophic for productivity if it causes leaks. "The industry is focused on near-term production but you must be careful not to destroy your reservoir," says Mr Quillien.


The ability to use centralised teams to manage multiple wells is also welcome since the industry is facing a chronic staff shortage. Booz- Allen Hamilton, the consultancy firm, predicts that 50 per cent of the exploration and production workforce will retire in the next decade.


Halliburton manages its drilling of 12 North Sea wells from its Stavanger real-time centre and has halved its number of offshore staff. Such moves can lead to "some astonishing cost savings", says Mr Severns.


Advanced modelling techniques also increase the industry's attractiveness to graduates, says Hans Potters, head of Shell's reservoir surveillance team. But there is resistance from employees, who once relied on gut instinct when drilling and loved the freedom of offshore working. As one field manager admits: "We are a deeply conservative industry and there is huge resistance to such a change. It's why we are useless at attracting young people."


Many oil companies hope new technical know-how will win them better access to the Middle East's older assets, although one service company executive says Saudi Aramco, the state-owned Saudi oil group, is working on its own digital applications for use on fields that could produce for 100 years. Service companies also believe they can provide technology directly to state-owned oil groups.


Meanwhile, new alliances are being struck with technology companies. Shell recently established relationships with Microsoft, IBM and Invensys for its smart field project.


With high oil prices making the economics of recovery more compelling, the industry could, according to Schlumberger, the oil services group, be on the brink of a step change as important as 3D seismic and directional drilling were in the 1980s. The technology laggards could be about to play catch-up.


Click here for HOME PAGE

Click here to return to Royal Dutch Shell Group .com