Oil producers have a newfound interest in gear that cuts costs.
By Matthew Philips
May 5, 2016 — 2:38 PM CDT
Three years ago, Raymond Welder was still monitoring his company’s 150 oil and gas wells the old-fashioned way: Each day seven guys in trucks would drive hundreds of miles around South Texas checking each well. They’d jot down readings of production volumes and pressure levels and, once back at the office, type up the data and send it around to the rest of the staff. “We thought we were high-tech because we had e-mail,” says Welder, chief executive officer of San Antonio-based Welder Exploration & Production.
Back then, a day or more could go by before the company realized a well wasn’t working. Then a mechanic would have to be dispatched to the site to diagnose the problem and fix it. Says Welder: “Pretty soon, something small ends up costing you a week of production,” which can be a big problem for a small producer with about 700 barrels a day of output.
Today, it takes just seconds for Welder to learn that one of his company’s wells has gone down. That’s because in 2013, Welder Exploration became one of the first oil producers to sign on with WellAware, a tech startup that kits out clients’ oil and gas wells with hardware that transmits real-time data over its own radio network. Clients can access the information on a smartphone or tablet using WellAware’s mobile app or through a Web browser. Customers pay $15 to $100 a month per well, depending on the level of service and equipment.
Except for advances in drilling technology, which underpinned the U.S. shale boom, much of the oil industry remains strikingly antiquated when it comes to above-ground operations. Now, as companies transition from searching for deposits to slashing costs and improving the productivity of existing wells, digitizing their operations has become much more appealing.
“People used to tell me, ‘If you can’t help us find more oil and drill faster, I don’t have time to talk to you,’ ” says Dave Milam, head of product management at WellAware, which was founded in 2012. The company has raised $61 million in venture capital and counts billionaire Carlos Slim as an investor. The privately held company doesn’t report financial results, but Milam says its roster of customers has grown tenfold in the past year.
Welder says WellAware’s gear has saved his company hundreds of thousands of dollars in the past year. “It would’ve been a lot worse if not for this technology,” says Welder, who cut his staff by about a third over the past two years and idled about 30 percent of his wells. The use of the technology also helped his remaining employees become more productive. “Those guys who used to be in the trucks are no longer just data gatherers,” he says. “They’re problem solvers.” In 2014, Welder joined the board of WellAware.
In a report released in March, McKinsey estimates that each of the world’s oil majors could reap $1 billion in cost savings and production increases from the adoption of digital technologies. In California, Chevron is using artificial intelligence to mine troves of historical data on well locations with the goal of maximizing production. In late 2015 the company also began to fly drones over its oil fields in the San Joaquin Valley to collect data and build high-definition maps.
Ahmed Hashmi, global head of upstream technology at BP, says the company has plowed “several hundred million dollars” into digital field technologies, which now cover about 85 percent of its oil and gas production around the world, compared with just 20 percent five years ago. “Digital is the rare technology that allows us to do more with less,” he says.
Even so, it’s not always an easy sell. “A lot of guys in the oil and gas industry are older, and they don’t completely understand the tech stuff,” says Ken Sigmon, sales and marketing manager of Bluetick, a North Carolina company that offers remote monitoring and automation services for oil and gas companies. Sigmon chuckles about a recent conversation he had with a Texas oil producer who still used a flip phone. When “they see that their competitors are making themselves more efficient and profitable, then they’ll buy into it,” he says. “We used to use spears, now we use guns.”
—With Meenal Vamburkar
The bottom line: The collapse in oil prices is stoking demand for technologies to automate oilfield functions once performed by humans.