Transformation and Change to Sustain Production
Authors: Denney Dennis 
Published: February 2015

This article, written by Senior Technology Editor Dennis Denney, contains highlights of paper SPE 150070, ’Transformation and Change in Oil and Gas Production,’ by Sergio Sama Rubio and Mark J. Lochmann, SPE, Halliburton, and Larry Denver, SPE, and Dave Rees, SPE, Knowledge Reservoir, prepared for the 2012 SPE Intelligent Energy International, Utrecht, The Netherlands, 27-29 March. The paper has not been peer reviewed.

Intelligent energy (IE) describes a new way of monitoring and performing production operations. Even though substantial gains are possible, the pace of innovation associated with these initiatives seems inconsistent. This paper examines the key contributing factor of manpower availability and its effect on the industry, and assesses the readiness for transformation within the exploration and production (E&P) industry.

Introduction

IE applies information technology to affect margins directly, enhance business productivity, boost corporate value, and act as a primary driver in economic growth. However, software implementation by itself cannot deliver the required gains because organizational change and buy-in (transformation) are necessary. Transformation in business is difficult. IE initiatives require new work processes, workforce adoption, and, ultimately, changes in behavior.

For a company to overcome the barriers and undertake the process of adopting a new way of working, some compelling benefit or precipitating crisis must be identified. Production organizations have evaluated their greatest cost, risk, performance, and strategic justifications; decided that there was no overwhelming reason to invest in fundamental changes; and have acted accordingly. Recently collected information shows that the E&P industry has identified multiple opportunities to realize gains in performance, cost reduction, and risk management.

Manpower Crisis

Spare capacity has been reduced substantially compared with the glut of supply in the mid-1980s. Equally important is that investors demand a reasonable return on capital employed, return on operating capital, and return on investment, thus putting pressure on operations to generate the necessary cash flow. For the E&P industry’s manpower crisis, three conditions are necessary. Stated simply, Condition 1 says that demand for manpower increases as employee availability decreases. On its own, Condition 1 is not overwhelming until one considers the existing profile of upstream technical professionals. Studies have shown that the average age of the upstream petrotechnical professional is more than 50 years, and many experienced professionals soon will leave the industry.

Condition 2 follows directly. The E&P industry is losing the most-experienced people rapidly, and a substantial experience gap will occur within the next 5 years. Increasing fresh-out-of-school recruitment cannot address this point as required. SPE membership in 1997 vs. 2010 is shown in Fig. 1. This chart shows the marked increase in age and the impending retirement of approximately 50% of SPE members (those at least 50 years old) further supporting the Condition 2 problem.