No matter how successful a company was prior to the fall of oil prices, things are very different today. However, lost in the midst of the doom and gloom news coverage, ominous predictions and reports of company layoffs that have since followed is the fact that the drop in the price of oil is providing a much-needed opportunity for our industry to innovate.

Maintaining the status quo, not oil prices, is the greatest threat in this new industry norm. The unconventional oil revolution and recent geopolitical developments have brought online an excess of supply that is driving a structural change throughout the industry. This change is in turn driving price competition as well as an emphasis on operational efficiency. The quicker a company reacts, cuts costs and spends to optimize operations, the better positioned it will be when prices eventually rise again.

Companies that view the market’s downturn as an opportunity to innovate will be the real winners both today and tomorrow.

New emphasis on automation
While the oil and gas industry has relied on forms of automation for years, more aggressively using this technology is the key to success in today’s new price environment. The old way of using manual processes and minimal automation to monitor wells has remained commonplace in operations for far too long. The “throwing people at the problem” method might have worked when oil was $100 per barrel, but that time has passed. New full-stack technologies—solutions designed from the ground-up with all necessary hardware, network and software components—provide greater accessibility to solutions that only the majors, along with a huge automation and information technology staff, could previously afford.

Below are four best practices to put in place to significantly improve operating efficiency:

Cost effectively automating manual processes. For many operators, labor is not only their number one operating cost but also their most valuable asset. Pumpers and gaugers have an in-depth knowledge of operations, yet the majority of their day is “windshield time”—driving from site to site to collect operating data and production levels. By reducing manual data collection, it enables them to apply their knowledge where it can be used best—troubleshooting and eliminating potential problems.

Installing telemetry on wells is now more affordable and straightforward with packaged hardware solutions that have been designed and tested to work seamlessly together, with some vendors offering zero capex solutions to eliminate upfront costs. Network optimization studies identify which communications technology (cellular, satellite or 900 MHz) will deliver the highest reliability at that site.

Additionally, some vendors have constructed their own machine-to-machine (M2M) networks over production areas to provide better coverage and eliminate separate monthly communication charges. Even on low-producing wells where telemetry might not be justified, improvements can be made to reduce data collection time. Replacing physical logbooks with smartphone and tablet applications for field data capture significantly reduces data entry errors and eliminates trips back to the office at the end of the day to turn in hard copies. This process can even extend to a company’s service providers by enabling them to electronically submit run tickets or chemical delivery notifications.

Proactively addressing issues before they become a problem. Once a company has data that provide greater visibility into field operations, the next step is being able to use the data to spot issues before they become problems that result in downtime or lower production. A management by exception approach can be implemented at different levels of sophistication, depending on a producer’s specific operating model. For maximum effectiveness, data from any asset that could potentially shut in a well should be collected and monitored.

Configuring the appropriate alarms for each asset can be time-consuming, so ask vendors for their best practice guide. The same goes with notifications; the last thing a company wants to do is inundate its field operations team with hundreds of emails or texts during the middle of the night. Having a full mobile application is critical; it puts all historical data in the hands of the field operations team so they can effectively troubleshoot problems and capture notes around root causes to prevent reoccurrences.

Keeping assets running at optimal efficiency. Addressing issues before they cause downtime is definitely priority No. 1. The next step is addressing inefficiencies due to equipment not operating at the optimal settings for the current conditions. Oilfield systems are not something one can “set and forget.” However, often wells are found that haven’t had their critical set points changed for years even though the production has varied dramatically.

A good example of this is rod pump frequency and fluid fill set point. Not monitoring and controlling these settings can result in increased maintenance and downtime as well as significantly increased electricity costs.

A second example is chemical management. Several customers report production chemicals as their top lease operating expense, but when they audit their wells, they find that as many as 50% have injection rates that are above target.

By remotely controlling injection rates to adjust in proportion with the production volume, some operators are able to reduce production chemicals consumption by more than 40%, delivering millions of dollars in savings to their bottom line.

Streamlining reporting and operational decision-making. Even if the right data are collected, getting the right reports and insights can be challenging. While most operators want to see a similar set of information, every company’s operations are unique. Having role-specific dashboards are important as they allow different users to see their specific key performance indicators at a glance and have the information to prioritize their actions based on business criticality.

Vendors also should provide a comprehensive set of out-of-the-box reports that users can customize themselves; otherwise, operators will have to continually pay for modifications as their business changes. It is also important that the data systems integrate seamlessly into company measurement and production accounting systems so that production reports can be quickly and accurately finalized. Operators who do not implement this best practice often spend a significant amount of staff time each month manually creating reports, disrupting the day-to-day flow of operations and wasting staff resources.

The bottom line
All operators large and small can significantly benefit from implementing these four best practices. Many customers have seen operating and expense reductions in excess of 15%, downtime reductions greater than 30% and reduction in safety incidents of 30%.

The bottom line is that the oil and gas industry can no longer afford to do business as it was done in the past. The time for innovation is now. The global oil and gas industry has forever changed with the discovery of horizontal drilling and the unconventional shale revolution. The opportunity of today is to innovate again by revitalizing the way operations are managed and invest in new technologies. Those who take advantage of this opportunity will not only ensure their survival today but their long-term success tomorrow.

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