In early May, some 67,000 people made their way to Houston’s Reliant Center for the annual Offshore Technology Conference, which marked a 13 percent increase in attendance from last year. The theme was “Transforming the Industry,” as if presenters and attendees alike needed a reminder that technology is changing the way oil companies do business.
One might expect to hear the words “bits,” “bytes,” and “bandwidth” bandied about corporate hallways in the Telecom Corridor and Legacy Park. But today, these and other high-tech terms are just as ubiquitous in the engineering centers, seismic rooms, and research centers of today’s oil and gas companies. That’s because energy companies are turning to technology at an unprecedented rate to tackle a whole new set of challenges facing the industry.
As energy companies look for new ways to find more oil and gas deposits and produce more from existing fields, data has become as critical as the drill bit. While Dallas may no longer be home to the research and development labs of the major oil companies as it was in the 1980s, IT and telco firms like EDS, TI, and Nortel are developing new technologies that are driving much-needed solutions for oil and gas companies.
Smaller, local companies are having a big impact too. Allen-based Fiber Systems International excels in providing fiber-optic communications, particularly in harsh environments. Flowserve in Irving focuses on the pump, valves, and seals critical to keeping oil moving once it’s out of the ground. And Avatar Systems in Frisco concentrates on software to track accounting, land, and production of wells.
From data collection to oil production to refinement, communication and information technology has been a boon for the oil industry. As pressures mount, oil companies will rely on it even more. With a deep history in both the telecom and oil industries, DFW is poised to capitalize on that need.
The oil industry today faces increasing demand for its product. However, unlike previous eras of high prices, the most recent period has not been accompanied by an economic slowdown. According to ExxonMobil’s latest forecast, by 2030, demand for oil and gas is expected to increase by 40 percent over 2005 levels, and that assumes significant increases in energy efficiency.
While prices are high, costs are increasing as well. According to a recent Cambridge Energy Research Associates index, oil company project costs have increased 128 percent since 2000. The service and supply industry that provides most of the equipment, much of the technology, and many of the required services is operating at or near capacity. Rates to rent deepwater drilling rigs are at or near record highs. Lead time to purchase large capital equipment is measured in years, not months or days.
To make matters worse, getting the oil and gas out of the ground is becoming increasingly difficult. In offshore developments, companies are operating in much deeper water to drill and complete wells. In 1980, the world’s deepest offshore well was 619 feet. Today, wells are being completed in 9,000 feet of water in the Gulf of Mexico. Pressures and temperatures are much higher at these depths. Subsea systems—the set of valves that control the flow of oil and gas from a well on the ocean floor—must be able to withstand 15,000 psi in pressure from the water depth outside of the well and temperatures up to 350 degrees Fahrenheit from fluid produced in the well.
Today, advanced digital technologies and large fiber-optic networks are enhancing companies’ ability to collect, transmit, store, and process massive amounts of data, greatly facilitating their searches for new oil and increasing the chance for success on projects in which hundreds of millions of dollars have been invested.
In particular, advanced data processing technology is providing the ability to pinpoint oil and gas finds using seismic data. As energy companies explore deeper waters and drill to deeper depths, traditional seismic methods reach their limits. Advances in processing speed, data storage, and other elements of computing power are providing geologists with a clearer picture of potential hydrocarbons in geologic formations. Chevron’s massive Jack discovery in the ultra deepwater Gulf of Mexico is one such example. In order to discover Jack, Chevron geoscientists had to use new technology that could unscramble the seismic sound waves warped by up to 10,000 feet of overlying salt layers. The result was potentially the largest find in the U.S. since the Alaska Prudhoe Bay discovery of the 1960s.
Additionally, high-bandwidth networks, sophisticated fiber-optic sensors, and advanced software enable oil companies to monitor production rates from individual wells, as well as automated and control valves to ensure the flow of production in the field, all in real time and at remote, distant locations. New developments are being tied back to existing offshore platforms and pipelines, significantly reducing the costs of development.
Scheduled to become operational later this year, Norsk Hydro’s Ormen Lange off the shore of Norway will be one of the most advanced examples of remotely operating a field. This “subsea to beach” project will have no visible equipment above the water line and will be tied back to the shore directly, approximately 70 miles away. With the help of fiber-optic systems, Norsk Hydro will be able to open and shut valves in the wells from remote locations and continuously monitor production in real time.
One truly game-changing technology will debut later this year in the North Sea. Houston’s FMC Technologies is developing the first full-scale subsea processing system for Statoil’s Tordis project. In it, the subsea equipment along with other field enhancements will increase the ultimate recovery from the field from 49 percent to 55 percent, or about 35 million extra barrels of oil.
Across the globe, such advancements have increased the production and efficiency of today’s oilfields. But as energy demands continue to rise along with the cost of production, technology must continue to pioneer new ways of getting oil out of the ground. Dallas-Fort Worth technology companies have played and can continue to play a significant role in enabling the oil industry to address its challenges.
First, in the late 1990s and early 2000s, the telecom and IT industries rapidly developed and proved the reliability of high-bandwidth, large, fiber-optic networks, sophisticated sensors and other data-gathering technology, and large information technology infrastructures. In recent years, the oil industry has in turn developed the required hardware to utilize these technologies and more efficiently and effectively find and produce oil.
Second, from large IT outsourcing firms to small manufacturers of fiber-optic sensors to developers of web-based industry software packages, a number of DFW-area companies are providing critical products and services to the energy industry on a global basis, such as the previously mentioned EDS, Fiber Systems International, Flowserve, and Avatar Systems.
Though the oil bust of the 1980s and the telecom bust of the 1990s reduced the footprint of both industries in the Dallas-Fort Worth area, each can benefit from the other. For the foreseeable future, the challenges currently facing the oil industry will continue, as will the need for advanced data technology to address them. The oil and gas industry tends to adopt new technologies relatively slowly and step-wise. They face shortages of talent in virtually all areas, especially young, technical talent well-versed in today’s digital applications. These challenges present virtually unlimited opportunity to Dallas-Fort Worth technology firms that are capable of providing pioneering minds, innovative solutions, and advanced technologies.
Bruce Bullock is director of the Maguire Energy Institute at the SMU Cox School of Business. Bullock is responsible for elevating the profile of the institute and advancing its mission by developing new programs and building strategic relationships with industry participants, governmental policy makers, and leading academics.
