Today, oil and gas industry is adopting a proactive measures rather than reactive approach to ensure optimum efficiency and ‘precision, consistency and repetition’ of all the processes within an upstream and downstream flow. This results in smooth functioning and higher productivity. To ensure this, the energy industry has shifted its focus towards digitization, artificial intelligence, automation, and other technological advancements to meet the needs of the diverse energy market. The impact of automation on oil and gas sector has been significant and will also impact the future course of events.
Automation is extremely versatile and can make an immense difference in the day to day activities. On the flip side, it means it can simplify the process and eliminate or modify some workforce requirement. Let us understand the activities that have been impacted by automation:
Diagnostics and monitoring- Inspection process of underwater equipment for repair and upgrade can be easily monitored by underwater drones and unmanned submersibles. The data can be broadcasted as live video feeds and can be centrally monitored and controlled. This will eliminate the need for skilled pilots however the vacancy for skilled auditor/analysts will open to analyze and monitor data
Weather monitoring system - Changes in seismic activity, ocean or atmosphere can impact the day to day activities of the energy industry. Thus, a weather monitoring system is put in place in the oil and gas industry. The system predicts natural calamities like earthquake, hurricanes and so on so that precautionary plan and safety measures can be activated. The automation here ensures job opportunity in the respective arena.
Drilling operations - Drilling is one of the most expensive processes for the oil and gas industry as it requires precision, high technical skills, and considerable safety risks for workers. Automating the manual activities like pipe handling and pressure drilling can enhance the overall drilling process by reducing safety hazards and speeding up the process. The labor force involved in these activities have a risk of losing job however if the workforce is trained well, they can be absorbed in some other tasks involving upgraded skillsets.
Measurement and monitoring pressure and flow - Automation has improved the efficiency manifolds. Smart sensors are installed to measure the pressure and flow of oil. sensors are connected to the central monitoring system, where the flow and pressure are monitored on regular basis and can be adjusted as per the need. This eliminates the requirement for an on-site crew. Only a few experts are hired to monitor and measure the pressure and flow and take the required action.
Rig management and monitoring - There are sensors that are installed on oil rigs at the various levels which produces data on a continuous basis. The data are carefully studied to manage, monitor and improve the performance of the rig. This also means the managerial and labor force required to manage rig goes down and new roles to comprehend data into meaningful strategies pop up.
Hiring and training - Energy sector had a traditional approach for hiring and training, however, things have changed with the advent of technology and digitization. Now with platforms like NrgEdge, finding the right candidate for the job role has got a lot easier. Also, the energy sector is absorbing new age tech-savvy candidates who are expert in digital media and analysis. For training and development of the workforce, simulation and augmented reality have made it easier to train candidate from any location. From job perspective, it will be safer to say job roles have changed but has certainly not declined.
Impact of automation on various aspects of job:
Labor productivity - Productivity tends to increase over time with automation and technological breakthroughs.
Job roles - job roles that require interpersonal skills, and creativity will be challenging to automate while the ones which require data collection, monitoring and analysis will be easier to automate.
Job polarization - Physical labor and some white-collar jobs have been replaced with automated processes and better software and computing power.
Hazardous work - Dangerous jobs in oil rigs have been automated or in the process of automation. This is done to ensure safer work conditions. However, it also implies lower compensation rates for workers as the risk factors get mitigated. Thus, automation deployed in offshore will reduce physical labor on rigs but will also open opportunities for more engineering jobs in control rooms.Final take: Will automation eliminate jobs or transform them?
Economists draw examples from the industrial revolution to demonstrate that the economy can create new jobs when the progress destroys the old ones. When technology replaces the labor in one sector, they get absorbed in another sector. So, it is safe to say the automation will transform job roles in the oil and gas industry and will not drop the workforce requirement. So, if you are looking to make a career in the oil and gas industry, it will be wise to upgrade your skills as per the changing needs of the industry.
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The Permian is in desperate need of pipelines. That much is true. There is so much shale liquids sloshing underneath the Permian formation in Texas and New Mexico, that even though it has already upended global crude market and turned the USA into the world’s largest crude producer, there is still so much of it trapped inland, unable to make the 800km journey to the Gulf Coast that would take them to the big wider world.
The stakes are high. Even though the US is poised to reach some 12 mmb/d of crude oil production next year – more than half of that coming from shale oil formations – it could be producing a lot more. This has already caused the Brent-WTI spread to widen to a constant US$10/b since mid-2018 – when the Permian’s pipeline bottlenecks first became critical – from an average of US$4/b prior to that. It is even more dramatic in the Permian itself, where crude is selling at a US$10-16/b discount to Houston WTI, with trends pointing to the spread going as wide as US$20/b soon. Estimates suggest that a record 3,722 wells were drilled in the Permian this year but never opened because the oil could not be brought to market. This is part of the reason why the US active rig count hasn’t increased as much as would have been expected when crude prices were trending towards US$80/b – there’s no point in drilling if you can’t sell.
Assistance is on the way. Between now and 2020, estimates suggest that some 2.6 mmb/d of pipeline capacity across several projects will come onstream, with an additional 1 mmb/d in the planning stages. Add this to the existing 3.1 mmb/d of takeaway capacity (and 300,000 b/d of local refining) and Permian shale oil output currently dammed away by a wall of fixed capacity could double in size when freed to make it to market.
And more pipelines keep getting announced. In the last two weeks, Jupiter Energy Group announced a 90-day open season seeking binding commitments for a planned 1 mmb/d, 1050km long Jupiter Pipeline – which could connect the Permian to all three of Texas’ deepwater ports, Houston, Corpus Christi and Brownsville. Plains All American is launching its 500,000 b/d Sunrise Pipeline, connecting the Permian to Cushing, Oklahoma. Wolf Midstream has also launched an open season, seeking interest for its 120,000 b/d Red Wolf Crude Connector branch, connecting to its existing terminal and infrastructure in Colorado City.
Current estimates suggest that Permian output numbered around 3.5 mmb/d in October. At maximum capacity, that’s still about 100,000 b/d of shale oil trapped inland. As planned pipelines come online over the next two years, that trickle could turn into a flood. Consider this. Even at the current maxing out of Permian infrastructure, the US is already on the cusp on 12 mmb/d crude production. By 2021, it could go as high as 15 mmb/d – crude prices, permitting, of course.
As recently reported in the WSJ; “For years, the companies behind the U.S. oil-and-gas boom, including Noble Energy Inc. and Whiting Petroleum Corp. have promised shareholders they have thousands of prospective wells they can drill profitably even at $40 a barrel. Some have even said they can generate returns on investment of 30%. But most shale drillers haven’t made much, if any, money at those prices. From 2012 to 2017, the 30 biggest shale producers lost more than $50 billion. Last year, when oil prices averaged about $50 a barrel, the group as a whole was barely in the black, with profits of about $1.7 billion, or roughly 1.3% of revenue, according to FactSet.”
The immense growth experienced in the Permian has consequences for the entire oil supply chain, from refining balances – shale oil is more suitable for lighter ends like gasoline, but the world is heading for a gasoline glut and is more interested in cracking gasoil for the IMO’s strict marine fuels sulphur levels coming up in 2020 – to geopolitics, by diminishing OPEC’s power and particularly Saudi Arabia’s role as a swing producer. For now, the walls keeping a Permian flood in are still standing. In two years, they won’t, with new pipeline infrastructure in place. And so the oil world has two years to prepare for the coming tsunami, but only if crude prices stay on course.
Recent Announced Permian Pipeline Projects
Headline crude prices for the week beginning 3 December 2018 – Brent: US$61/b; WTI: US$52/b
Headlines of the week
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