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TRANSCRIPT: "Go Digital Or Go Obsolete" - Why It's Digital Oilfields Or Extinction For Oil & Gas

Posted: 10/16/2013
Tim Haidar
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In this edition of The Boardroom, Tim Haðdar, Editor-in-Chief of Oil & Gas IQ speaks with Hatem Nasr, Senior Advisor, Digital Oilfields and Technology Strategy for Kuwait Oil Company dispels some of the mythsabout the challenges associated with moving to a digital oilfield framework.

Hello and welcome. This is Tim Haðdar. Today, I'm going to be speaking to Hatem Nasr who is the Senior Adviser for Digital Oilfields and Technology Strategy for the Kuwait oil company KOC. Hatem, thank you so much for joining us today.

HN You're welcome.

TH Right. KOC are one of the world-leading companies with regards to everything digital oilfields. I'm going to start by asking you where people start when considering moving towards a digital oilfield.

HN You know, this type of question has obviously many different answers, but you have to start first of all with any company has to set objectives and goals; what are they trying to do. Are they trying to maximise production? Are they trying to deal with problems that they have with respect to production decline, severe problems with respect to water production? Do they have operational cost issues where they need to reduce the number of people that go to the field? Or many companies could have an even bigger objective which is to maximise the reservoir recovery.

Sometimes, companies want to deal with all of these issues. In this particular case that we have in Kuwait, we were trying to deal with production increase issues, dealing with increased water production problems. Operational issues were less of a concern, but obviously, the reservoir recovery, the ultimate reservoir recovery is very important. So you have to define your goals. Sometimes we try to take on much more than we can handle. But those are the typical objectives that you have to set for yourself and try to prioritise. And different objectives have different approaches and they require different strategies, so those are the kinds of things that companies would be looking at.

TH Okay. Now one of the frequent concerns that people have is ROI of your digital oilfield projects with regards to your upstream activities. A lot of people would say that this is intangible. What do you say to that?

HN That’s absolutely not true. We have seen in the case of Kuwait Oil Company clear ROI on the projects. To give you a specific idea without getting into specific numbers, because KOC is very sensitive about these numbers, we have ongoing three projects in Kuwait and we're just starting a fourth one. So in total, we have four projects. So these are at advanced pilot stage. These are very large projects. Some companies may not even consider them to be pilot. But at least on two of the projects, we already have significant ROI. I would say the projects have more than paid for themselves in less than a year.

So this is clearly in measurable terms in barrels per day, which translates into dollars, and if you take the cost of the project and you see the return on investment, it is very clear.

I understand the concerns of many people but at the end of the day, it is very clear how you do a return on investment. Are you getting more oil? Are you getting more gas? You take those numbers. You do some clear benchmarking. And you have to be very honest with yourself. Sometimes a lot of people try to massage the numbers or they don't do proper benchmarking. But we have seen a clear return on investment.

So for those who doubt that, they have to talk to people that have experience through digital oilfield deployments in a real sense, and there is clear value there. There is no question about it.

TH Great. Now we recently did a survey here at Oil and Gas IQ of our members who are working in digital oilfield, everything from data management to upstream IT, architecture, etc., and 39% said that their biggest challenge relating to the digital oilfield was integration with existing systems and legacy data. Where do we even start in a legacy environment? This is clearly one of the biggest concerns for everybody involved.

HN No question that dealing with legacy environment is an issue but let me say this: this is not a show-stopper by any means. Anybody who will tell you that basically is either trying to find an excuse or trying to find a way to doubt the technology. There are many, many, many issues obviously, but most of these issues can be overcome today with availability of a lot of advanced technologies, with respect to data management, and a lot of software makes it easier for you to integrate data. Some of the big software companies and data management companies in the world are making good tools and good software to allow you to integrate. Still there are some customisable solutions.

So there is no question. In some cases where you are challenged with integration to legacy systems or data, my advice to people is just scrap it and do it all over again. If you cannot talk to it, just do something to re-do it.

So, yes, it's not trivial. I'm not trying to diminish it. It is a challenge. But it is not something that I would consider to be a serious obstacle in the implementation.

TH It's a true statement but yet a bold statement for most people to go back to square one on the drawing board with decades of data there. It's going to be difficult for people to kind of have that mindset.

HN I'm not saying that you have to go and re-do everything from scratch, but okay, you have a data repository or a database system that has all your WELLCAST data that you have to integrate. Most of these are reputable companies. They are all making software or new releases of the software. You may have to upgrade or update your systems to newer versions in order to allow you to communicate to it. So unless you're using something really archaic, there is no reason why you cannot do it. It's not trivial. I'm not diminishing the complexity of it. But it is done and can be done, and we're doing it on a daily basis. I mean, KOC also has a lot of legacy systems. Let's differentiate between the two.

When complexity arises in digital oilfields, through digital oilfields, there are a lot of different systems that you need to integrate to. There are a lot of different data repositories or applications that you need to interface to. And the amount of time it takes and the amount of investment, the amount of effort it takes to integrate to all of them, if you're doing proper workflows and proper optimisation schemes that require access to a lot of data, it's not trivial. It takes time. And it takes money and it takes a lot of people to do it.

So to do that's a different thing, to say that, yes, I need money, I need people, I need investment, and I need time. That's different to say, oh, this is impossible to do. So it is painful but it can be done, and it is getting done.

TH Now when we started the conversation, you said that it's very important to delineate what your objectives are.

HN Yes.

TH From the survey that we carried, 11% of people said that optimising hydrocarbon production was what they wanted to do. 45% of those people surveyed said that improving operational efficiency and safety was actually their main focus. How is digital oilfield integration going to help in the HSE aspect?

HN It is fundamental. It's a natural outcome of digital oilfield. If you start at the most basic level of digital oilfield, the ability to bring data, to automate, to be able to do remote surveillance, to be able to put sensors and instrumentation at the well side or the facilities… you know?

To give you an example, just the fact that I can get there, I don't have to send people every day to the wells. So less travel time, getting fewer accidents. That's the number one reason for HSE incidents are travel, people getting into accidents. If you put proper sensors to smell all these poisonous gases, obviously, you can get warnings and alarms early enough, and then you can see things before they happen.

But it may seem to be kind of clichê, but HSE is so intertwined to digital oilfield that it is a natural sub-sequence of what happened, improvement of HSE standards and reducing HSE incidents. It is a basic element of it.

TH So just interlinked. One doesn't exist without the other?

HN Yes, I mean, unless you consider data management as a digital oilfield project, which you're not doing anything at the well side or the facility side. But a true integrated digital oilfield system requires all these pieces to come together.

The most fundamental, basic first step is, yes, remote surveillance, being able to see information remotely. So I don't have to have people going to the well side every day. I have sensors; I have instrumentation. So if you do that, the natural product, the natural result, is going to be a dramatic improvement in your HSE incidents, occurrences.

TH It would be remiss of me if I didn't broach this subject given especially what's happened in the Middle East over the last year or so is a cyber security.

HN Yes.

TH And the threat of cyber incursion when so much of the oil and gas business is now linked to computer systems. Where does cyber security come into this? And given that we are hooking up everything from logging equipment to VSAT technology, should we be concerned about recent events?

HN There's no question cyber security is a big issue on everybody's mind. Let me say a couple of things about that.

A lot of companies are working very hard. Within the digital oilfield, obviously, we are much more aware because of some of these incidents about cyber security issues. So there is a lot of work going on. As a matter of fact, in the new project that we're involved in at KOC, we are putting a lot of emphasis on that.

So there are a lot of technologies out there. We're talking to leading edge companies that are evolving some pretty high tech stuff with respect to cyber security. In digital oilfield, yes, there are many aspects of these projects and these systems that should make you worry because in a digital oilfield system, you're connecting remotely to your wells and to your facilities where people if they intrude, they can shut down the facilities. There are many layers of security that you can build into the system.

Let me say this. In our business, I don't know if we'll ever be able to build anything that's truly 100% bullet proof. If the cyber attackers can penetrate the US Government, and so on, the most secure facilities in the Pentagon, and all of this, I'm sure they will find a way to penetrate an oil company.

So what you try to do is try to build the security. You try to manage it. You try to build various types of firewalls. And you build into your processes what is the worst case scenario. Let's assume they go into a facility. The worst case is, let's say, is they shut down the facility.

So you try to envision the worst case scenario and shutting down doesn't kill people; you just stop production, which is not good, but you try to build for the worst case scenario. Other than that, you try to build analogue as well as digital devices. Still if you go analogue, or there's no automation, nothing could happen. So there are back-up to back-up to back-up systems.

We are working on it. It is not easy, or a lot of new technologies are there. It is a big concern to everybody.

But let me tell you this. A lot of people that are… wanted to find a reason not to do digital oilfield. They say, oh, it's cyber security, and if I build a digital system, that means people are going to get into it. That is not a good excuse. You build your own network. You build your own communication. You build a lot of encryption into your system, and that's how you deal with it.

TH The problems will always be there, and as you said, there is no magic bullet.

HN There is absolutely no magic bullet. Cyber criminals are breaking into banks, they are breaking into the Pentagon, NSA, you know? Come on. We're not more powerful than all these institutions. You try to control the damage if anything happens, and you try to do the best you can. You don't ignore the problem. You build a lot of security firewalls. But it is going to happen. It will happen again.

TH Hatem, the last thing I'd like to ask would just be for those people that are switching to a fully integrated digital oilfield framework. Where do you start and what should your expectations be? And what kind of mindset should you have?

HN Well, let me first say that it is inevitable. Small companies, big companies, medium sized companies who are not thinking about it or not doing it, they will regret it. What is a digital oilfield can have a zillions flavours obviously, but this most basic concept that I can capture my data remotely; I can analyse it; I can process it; I can diagnose my problems; I can optimise; I can predict what happened. That is the concept of a digital oilfield in its simplest terms.

The industry has really taken on a slow pace because it's significant investment. It is a significant undertaking. You have to do it. You must do it. If you don't do it you're going to be obsolete. We're not finding oil and gas easily, especially oil. If you look at the new discoveries over the last decade, we have made very few major discoveries. So how we are going to get more oil? You're going to get more oil by increasing the recovery of your existing assets, your existing reservoirs, and managing and optimising your production.

So how do you do it? This goes back to the concept. Digital oilfield where I can see everything, I can monitor, I can predict what's going to happen, I can optimise. And we don't have enough experts in the business. I have to do more with less. I have to concentrate my knowledge base in one collaboration centre where people can work and can make decisions on a lot of different wells, a lot of different fields, with the smallest number of resources.

So where do you start? Let me tell you. The most basic place to start is you've got to build the infrastructure to connect your wells, meaning I have to be able to see what's going on at these wells. And that requires, believe it or not, that basic infrastructure, or getting the wireless infrastructure to communicate, because they had to do it most of the time wirelessly. You can do it via fibre optic, via LAN connectivity, but that's too painful unless you have a new field and you can run cables to it.

So we have to put in the connectivity to these wells and the most basic aspect of it is connecting all your instrumentation, bring the data, and then you can start building on it. You can start building all the workflows and all the analysis, software, and all the modelling and all of that, that will help you analyse the data.

But as a starting point, just connect. Make sure that you can see every asset that you have. And you can get all that data into the office. And it's a lot of data, and then once you start building on that, and you've got to start integrating with your other systems and your other data management system, your other software, your other modelling or optimisation. A lot of companies have a lot of existing systems out there.

But that is the first step that anybody can take. I give the analogy. You need to build the highway to get people moving.

TH Great. I think it's a good analogy, and it's a good advertisement for anyone who's out there. Go digital or become obsolete. That's the end of the story.

HN Absolutely. You have to do that. We are not finding new oil. There are no discoveries today compared to the discoveries we used to have decades ago. No more. And if you don't go digital, you go obsolete. If you don't go obsolete now, you go obsolete in five/ten years from now.

TH Hatem, I appreciate you spending time with us and giving that insight. We look forward to seeing you at the conference in November.

HN Thank you very much and have a great day.

Tim Haðdar is the Editor In Chief at Oil & Gas IQ. Reach Him At Twitter Or OGIQ

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