McKinsey & Company wanted to know how often of the data gathered on offshore oil rigs is used in decision-making by the energy industry. The answer, it turns out, is not much at all.
After studying sensors on rigs around the world, the management consulting firm found that less than 1 percent of the information gathered from about 30,000 separate data points was becoming available to the people in the industry who make decisions.
Technology that can deliver data on virtually every aspect of drilling, production and rig maintenance has spread throughout the industry. But the capability—or, in some cases, the desire—to process that data has spread nowhere near as quickly. As a result, drillers are almost certainly operating below peak performance—leaving money on the table, experts said.
Drilling more efficiently could also help companies achieve the holy grail—reducing the break-even cost of producing a barrel of oil, said Kirk Coburn, founder and managing director at Surge Ventures, a Houston-based energy technology investment firm.
Separately, a report by global business consulting firm Bain & Co. estimated that better data analysis could help oil and gas companies boost production by 6 to 8 percent. The use of so-called analytics has become commonplace in other industries from banking and airlines to telecommunications and manufacturing, but energy firms continue to lag.
The implications are real, according to McKinsey. In studying the offshore sector, the firm found that rigs in the North Sea, its largest sample group, were up and running as planned only 82 percent of the time. Improved use of data could result in better up-time.
“Most oil companies have a target of 95 percent. That’s a huge gap, and a lot of lost production based on unplanned outages and maintenance,” Tor Jakob Ramsoy, head of McKinsey’s Norway office, told CNBC.
The problem is that while oilfield sensors offer real-time data on operations, the information is usually used to make immediate, binary decisions—either do this, or do that—rather than being stored, filtered and analyzed to inform future decision-making.
While exploration and production companies may lack the ability to process “big data” the Silicon Valley firms that provide data infrastructure do not always understand how to apply advanced analytics to the oil industry, said Sashi Gunturu, founder and CEO of oilfield analytics firm Petrabytes.
Few drillers are analyzing huge volumes of data yet, but many are piloting advanced analytics programs. The future benefits could be significant, especially for the companies that operate in high-cost basins, such as North American shale and tar sands producers.
If energy firms can make new drilling much more efficient, they could achieve the holy grail—reducing the break-even price of a barrel of oil, said Surge Ventures’ Coburn.
Coburn believes a lasting shift toward greater technology use in the oil field will happen when younger executives take the reins, but he said drillers may expedite tech purchases now that oil prices are about 50 percent below their June highs.
“When oil prices were high, it was a nice-to-have,” he said. “Now it’s becoming a have-to-have.”
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