Shale Oil Needs to Virtualize Operations

Jan. 28, 2015
At the Well Site Automation for Unconventional Oil & Gas conference this week in Houston, speakers urge shale operators to embrace the technology and philosophy of more automated production.

As the shale oil industry booms in the U.S., producers are running fast and furious to get what they can from their well sites. And they’re doing it largely without automation. There’s still a predominance of guys driving around in trucks, checking meters, writing things down on paper and getting the information back to the main office.

That needs to change.

“In the oil business, we’ve moved a lot of the functions to the computer,” notes Randall Wilkins, measurement and automation supervisor for Vine Oil & Gas, an exploration and production company headquartered in Dallas. “Why can’t we computerize the operations part of it—the part that’s always been done manually? Well, I think we can.”

The electronics are already in place. The sensors are already in place. Now the team needs to be put in place. “We measure everything,” Wilkins says. “Pressures and flow rates and temperatures and tank levels and compressors, and we collect mountains and mountains of data. But there’s more to it than just computers. Just like in accounting, where we might install SAP, for instance. That’s not going to do the job alone. You need a team. You need to be able to utilize that information.”

Two of the three components of that team—measurement and SCADA—are relatively well established, but the operations center has been neglected, according to Wilkins. As chairman of an inaugural conference going on this week in Houston, Well Site Automation for Unconventional Oil & Gas, Wilkins is leading the discussion among his peers, particularly in shale, who might not have the automation set up to optimize operations.

And while some, including in the audience here, express concern about the ability to spend the resources for automation now that oil prices have dropped to less than $50/barrel, the fact is that now is the time those oil producers can’t afford not to automate.

“There’s no better time than now to go to the digital oil field. Come on. $3 gas? Your companies are dying for some way to reduce cost,” Wilkins urges. “With a virtual operation, you can significantly cut your operations cost. And it’s simple to do. You already have electronics. You could do this; it’s a matter of having an operations center.”

Wilkins knows this firsthand. He developed an operations center at EXCO Resources, a natural gas and oil E&P company, and delivered more than $50 million in increased revenue each year through reduced downtime and optimized production. The concept of virtual operations that he developed at EXCO led to a sharp reduction in operations expenses in the field.

Wilkins advocates moving to a model of virtual operations—pumping from a computer, as he calls it. “In the late ‘80s and early ‘90s, we would, from the SCADA system, maybe send information to the pumpers in the morning before they started their route,” he explains. What needs to happen now, however, is no route.

That’s a difficult concept for some folks in the industry to swallow, but Wilkins insists that it can be done for at least 80 percent of the well sites. Maybe 20 percent—whether they’re old and leaky or just in a critical or high-production area-might need to be checked more regularly, but “the other 80 percent can be pumped from the operations center.”

At EXCO’s operations in the Haynesville Shale area, they went from 14 routes to just two after implementing an operations center. Better to eliminate lease operators spending hours of windshield time in the field and have virtual operators instead who can check chemicals and pressure changes probably better than the lease operator can now. This makes the new routes strictly for maintenance, Wilkins explains, putting the predominant 80 percent of well sites on a non-visit schedule of every seven, 14 or even 21 days.

Lest there might be any lease operators worried about their future employment prospects, Wilkins notes that probably the best people to staff the new operation centers are the lease operators themselves. “They can visualize the location. They know that stuff, so it’s really easy for them to function. They’ll probably be doing two-way communication with whoever goes to repair it,” he says. “So they’re not cut, they’re just retrained.”

Some key benefits of operating under the virtual umbrella, Wilkins notes, are standardization, alarm management and a reduced need for contractors. Ironic though it might seem, it pays for gas producers to save on gas. “I can drastically reduce the use of gas in the field,” Wilkins notes. “At EXCO, the biggest shocker was the reduced gas costs.”

In a presentation following later in the morning conference sessions, Shaun Derise, shale automation supervisor for BHP Billiton, noted not only the reduced cost of less windshield time for lease operators, but also reduced safety concerns. It turns out, when the oil producer examined what the biggest HSE risk was for its lease operators, it was the driving time.

Wilkins acknowledges that probably the biggest hurdle is getting people past the concept of not visiting well sites on a daily basis. In a sentiment echoed later by Rene Beck, manager of applied technology and SCADA at WPX Energy, it’s a concept that needs to be overcome. “I’ve done it. It’s not rocket science. But it is a concept that’s very hard to swallow,” Wilkins says. “It’s the concept, not the doing.”

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