​Digitalization transformed U.S. oil and gas production: WoodMac

As upstream companies move to adopt Big Data and digital technologies to help transform their businesses, players in the US Lower 48 have led the way, according to a new report from Wood Mackenzie.

The consultancy estimates annual cost savings of US$75 billion per year could be achieved by the global upstream sector through digitalization – and nowhere is this more evident than in the Lower 48.

“From increased drilling speeds to better production management, companies operating in the Lower 48 have embraced the benefits digitalization offers. On new rigs, drill floor tasks are at least partly automated, increasing drilling speed,” Wood Mackenzie said.

“In the past four years, drilling speeds across the Lower 48 have increased by an average of 10%, with the best operators seeing 20% increases. Machine learning algorithms, using production, completions and subsurface data, are starting to help Lower 48 operators develop better completion designs.”

These advances in drilling and automation have enabled companies to maintain production growth, achieve faster and more accurate drilling, all while using fewer resources and keeping costs low — in fact, Lower 48 oil production is at an all-time high despite running only half the rigs as at the peak of oil prices four years ago, Wood Mackenzie said.

“One of the biggest undeveloped opportunities digitalization offers E&P operators is the ability to optimize production from wells already on-stream. Managing production from mature wells manually is repetitive and labour-intensive. Current artificial intelligence systems detect production anomalies and recommend adjustments to operating parameters. The production results are fed back to the algorithms, and changes to field operations are implemented in real time.

“Typically, Lower 48 horizontal wells start generating positive cash flow within three years. After that, remaining returns depend largely on Lease Operating Expenses (LOE) – making these wells prime targets for optimization.”

Wood Mackenzie estimates that “placing these mature wells on smart production management systems that lower LOE by 10%, could add US$25 billion of value to fields across the Lower 48. A more aggressive approach, placing all wells on secondary recovery earlier, could take the value uplift to US$45 billion. Value gains of this scale are larger than the entire portfolios of some of the top Lower 48 operators.”

Despite the size of the prize of digitalization, and the wide range of digital technologies available, upstream oil and gas companies have been slow to seize the opportunity. Still, Lower 48 operators have been quicker to adopt digital solutions than their conventional peers.