Upstream companies can save as much as $100 billion through automation and digitalization initiatives in the 2020s, according to a new report by Rystad Energy. The report says service companies are reinventing themselves to help operators unlock the savings.
In 2018, more than 3,000 companies in the upstream space spent $1 trillion on operational expenditures, wells, facilities and subsea capital expenditures. Although there are varying amounts of potential savings within offshore, shale and conventional activity budgets, yet digitalization can lead to productive and efficient operations, saving 10% of the amount spent last year.
Operators expect digitalization to reduce drilling costs by 10% to 20%, and facility and subsea costs up to 30%. However, the study reported that cost reduction will vary across different field developments or drilling operations. Adoption across the entire value chain of suppliers from national oil companies (NOCs) to majors to smaller E&Ps will vary, so the realistic efficiencies and synergies will be closer to 10% by the end of the next decade.
“Many key industry players are setting optimistic goals, but the realization of these initiatives largely depends on how freely data is shared amongst companies and how commercial strategies are deployed to drive this development,” said Audun Martinsen, head of oilfield services research. “However, based on our analysis of 2018 capital spend and operational budgets, we believe savings could easily reach $100 billion.”
Upstream companies are rolling out new technologies, trying to keep up in the digitalization race, with major releases by Schlumberger, Baker Hughes and TechnipFMC during the last three months. Moreover, the oil market downturn has given upstream operators and service providers a strong incentive to adapt efficient operations or face shutdown.
In September, Chevron and Schlumberger announced partnership with Microsoft to create petrotechnical and digital technologies to visualize, interpret and ultimately obtain meaningful insights from multiple data sources across exploration, development, and production and midstream sectors.
Martinsen added that in addition to cost savings, digitalization initiatives can also increase productivity by increasing uptime, optimizing reservoir depletion strategies, improving the health, safety, and environment of workers and minimizing greenhouse emissions, all of which have significant value creation.
Devon Energy had been actively shopping the Permian Basin assets, and others in the Rockies, the past several months.
Oil major Exxon Mobil said Jan. 31 it would create three new separate E&P companies, effective April 1, in an effort to double its profit by 2025.
A big crowd turned out for an afternoon honoring industry leaders representing all facets of the energy sector.