Oil giants explore new technologies to cut costs

Crude prices have more than halved since mid-2014, forcing oil companies to cut billions of dollars in costs and look at smarter tech and design

Photo: AFP
Photo: AFP

Oil majors including Statoil, Shell and Chevron are experimenting with various technologies, from drones and drill design to data management, to drive down costs and weather a deep downturn.

Crude prices have more than halved since mid-2014, forcing companies to cut billions of dollars in costs. Determined to shield dividends and preserve the infrastructure that will allow them to compete and grow if the market recovers, they are increasingly looking to smarter tech and design to make savings.

French oil and gas major Total said it was now using drones to carry out detailed inspections on some of its oil fields following a trial at one of its Elgin/Franklin platforms in the North Sea.

Cyberhawk, the drone company that led the trial, said this kind of work was previously carried out by engineers who suspended themselves from ropes at dizzying heights. It said the manned inspection used to take seven separate two-week trips with a 12-man team that had to be flown in and accommodated on site.

The drones do the work in two days and at about a tenth of the cost, according to the UK-based firm’s founder Malcolm Connolly, who said it had also worked with ExxonMobil, Shell, ConocoPhillips and BP.

Total declined to comment on how long the manned or drone inspections took, or specify how much money was saved.

Statoil’s giant Johan Sverdrup field, the largest North Sea oil find in three decades, is a leading industry case study for cutting costs in the era of cheap oil.

The firm has cut development costs for the first stage of the project by a fifth compared with estimates in early 2015, to 99 billion crowns ($12.2 billion). The savings have largely been made by focusing on the most efficient technology and designs from the beginning, Statoil’s technology head Margareth Oevrum, told Reuters in an interview.

Executives say the growing attention on technologies that have been around for some time shows how wasteful the global industry had been in the years before the downturn.

For example, simply finding a more efficient route for the oil pipeline that would carry the crude from the Sverdrup field to the onshore refinery cut 1 billion crowns, Statoil said. It has also developed a drilling “template” that is acting as a guide for the first eight wells to be drilled at the field. It said it had reduced the overall drilling time by more than 50 days, saving about 150 million crowns per production well.

Global upstream oil and gas spending has fallen by more than $300 billion across the industry in 2015-16, according to the International Energy Agency. Around two-thirds comes from cost cuts, it said.

Alex Brooks, oil and gas equity analyst at Canaccord Genuity, said tech innovation in the industry was about “100 tiny things”, adding: “The bottom line is you end up with a much lower cost.”

Another way firms are looking to cut costs is by using their vast amounts of data to better predict their needs. Since the price slump, firms such as Shell, ExxonMobil and Statoil have started using software to better manage their data to cut wastage in the ordering of construction materials.

Gunnar Presthus, Nordic energy lead at consultancy Accenture, who advises oil majors and national oil firms, said the downturn had led to the industry waking up to the potential of the data they store.

“The oil industry, to some extent, is one of the most digitalized industries,” he said. “Companies are now able to use this wealth of data to make changes that will save money.”