What's new in production

In April 2014, consultants McKinsey & Company took a dim view of production efficiency in the North Sea, referring to it as a “crisis.” They said, “North Sea offshore oil and gas asset production efficiency has fallen to record lows, costing industry and government billions in lost revenue, and jeopardizing the long-term sustainability of the basin.” Supporting that thesis were data released by the UK’s Department of Energy & Climate Change, which “…confirm that production efficiency on the UKCS (UK Continental Shelf) fell from 81% in 2004 to just 60% in 2012.”

Production efficiency challenges. “So why,” McKinsey asks (and answers), “has delivering sustained and high production efficiency become much more challenging over time? Our analysis of 20 years worth of regulatory data on 400 North Sea fields, as well as interviews or discussions with over 50 North Sea field managers, points to some crucial hints. First, consistent with the analysis conducted by the PETF (Production Efficiency Task Force), it dispels the commonly held belief that age is a barrier to good performance. Second, it identifies the two factors that most strongly correlate with performance: export system dependency, and the quality of operator practices and approaches.”

The United Kingdom Oil & Gas Authority (UKOGA) must have been listening. In a report issued in July 2018, looking at 2017 UKCS activity, the agency announced that production efficiency (PE) has risen for a fifth consecutive year. In 2017, it reached 74%, driving increased production on UKCS. The 1% improvement in efficiency from 2016 contributed an additional 12 MMboe in 2017; or 32,000 extra boed. Meanwhile, losses to production in 2017 were down to 200 MMboe, from 210 MMboe in 2016.

We should note here that for the purposes of this report, the UKOGA defines PE “…as the total volume of hydrocarbons produced in 2017, as a percentage of economic maximum production potential (Economic Production Efficiency) and is based on guidelines drafted by the Society of Petroleum Engineers (Production Efficiency Reporting–Best Practice Guidelines).”

How did they do it? UKOGA says new techniques, increased use of existing data (no surprise there), and creating a culture of efficiency are some of the methods used to improve efficiency.

New techniques. In the new techniques department, they report that one area…being actively pioneered in the UKCS is in light well intervention, using vessels on subsea wells. In 2016, the world’s first subsea intervention using coiled tubing was carried out, and another world first was achieved a year later with the use of coiled hose on a subsea well. Techniques such as this provide operators with low-cost alternatives for reducing well losses. Another technology that is being used by some operators to enhance PE is non-invasive tank inspection. The Oil and Gas Technology Centre (OGTC) identified that 80% of tanks could be inspected using this method, with possible savings of £242 million ($315.3 million) a year across the UKCS.

Comprehensive data analysis. As UKOGA notes, the average production platform constantly captures around 30,000 separate data points; however, only 1% of these are being analyzed. Techniques that use the existing stream of data being generated from platforms are already playing a part in improving efficiency. One such technique is using data science to run predictive analytics on production systems. The advantage of using this alongside traditional methods is that future equipment performance degradation and failure can be mitigated early. Analytics can spot relationships across a wide data set, creating an early warning system that allows action before losses occur, improving efficiency and reducing cost. New techniques, such as predictive analytics, are already improving PE for some operators. Increased uptake could help drive UKCS efficiency higher in the future.

Efficiency culture. Top-performing operators often use culture to improve PE, ensuring that an efficiency culture permeates through their business. The impact of corporate culture on operations has been shown in the past, as safety-focused cultures spread thorough operators, helping improve safety performance. Driving an efficiency culture has also been shown to have a similar effect. Some practical examples of this seen on the UKCS include: informing employees of the total value of production losses each day; and senior management team talks, emphasizing the importance of TAR efficiency on the businesses success before each shift change-out during a TAR.

Kudos to the UK, but how’s the U.S. doing?

Dig out your “We’re #1” signs. According to the U.S. Energy Information Agency, the United States likely surpassed Russia and Saudi Arabia to become the world’s largest crude oil producer earlier [in 2018], based on preliminary estimates in EIA’s Short-Term Energy Outlook (STEO). In February, U.S. crude oil production exceeded that of Saudi Arabia for the first time in more than two decades. In June and August, the United States surpassed Russia in crude oil production for the first time since February 1999.

This is an astounding accomplishment, and it’s even more so, considering one of the most prolific U.S. producing areas—the Permian basin—was essentially written off toward the end of what one could call, looking back on it, the Pre-Shale Epoch.

Meanwhile, the industry goes about its business. But, it would be understandable and well-earned, if the Tuesday of next OTC were a bit more, let’s say, like Mardi Gras.