BP U.S. Onshore’s Use of Smart Tech Drives 50% Reduction in Man Hours

BP’s U.S. onshore operations using drones, big data, augmented-reality smart glasses, multilateral wells

“If you look at any industry, every single one is being turned inside out by technology,” Brian Pugh, Lower 48’s chief operation officer – production said. “The energy industry is no different.”

BP said many of the new innovations being deployed across the Lower 48 business have been borrowed from other sectors, including the logistics, wearable technology and personal computer industries.

“We’re trying to bring the consumer electronics revolution to the oilfield,” says Pugh. “In the past, it has been dominated by very specialized companies with incredibly expensive equipment that doesn’t evolve very quickly. Now we’re breaking down some of those barriers.”

New technologies for operators in the field

As part of its new ‘Intelligent Operations’ operating model, BP’s Lower 48 group is using a series of new technologies that automate many of the time-consuming, routine maintenance activities performed by operators in the field.

BP cites one example: an analytics-backed logistics system – inspired by parcel delivery companies – that helps operators make the most of their time spent at well sites. This includes an algorithm that develops dynamic routes for workers so that they’re being directed to the highest-priority wells, whether it’s for health and safety, preventative maintenance or performance optimization reasons.

“In the past, we had pre-defined geographic routes that everyone ran,” Pugh says. “Now our computer system is actually prioritizing activities based on the algorithm that we’ve created.”

“Consumer tech”: safety glasses with augmented reality coming to Colorado New Mexico, Wyoming, Oklahoma and Texas

During site visits, operators are using smart glasses – safety goggles that enable workers to read sensor information on their lenses and communicate in real time with technical experts at a control center. Using augmented reality, the experts can overlay instructions and data in the technician’s field of vision as they work on the equipment. The glasses were piloted over several months at sites in Texas and Oklahoma and will soon be deployed across the business, including in Colorado, New Mexico and Wyoming, BP said.

“The smart glasses greatly increase our productivity, and we’ve seen improvements in the safety and efficiency of our operations,” Pugh said.

Using drones as first responders

To help its teams see things their naked eyes can’t, BP has deployed drones to perform routine well site inspections, detect potential leaks and, in some cases, serve as first responders. “If our alarm system notifies us of a potential problem,” Pugh says, “we can send a drone out in the field to get a better idea of what’s happening so that the operator can be better prepared as they respond to the situation.”

Well control computer that is “industry-disrupting” and a fraction of cost of traditional equipment

BP says its U.S. Lower 48 division has developed an “industry-disrupting” alternative to the computers it uses to control a well. “Historically these units have cost thousands of dollars and are difficult to work on, because they require a very specialized skill set,” says Pugh.

BP is replacing those complex systems with small single-board computers – technology that was originally developed to help teach basic computer science in schools and developing countries. The microcomputers are a fraction of the cost of the traditional equipment, which will enable Lower 48 to use them more broadly.

Tech is generating a 50% reduction in man hours, operating expenses required to keep wells online

BP says the pilots for these initiatives and others have yielded a 50 percent reduction in the amount of man hours needed to keep Lower 48’s wells online, as well as a 20 percent increase in production. And over the past three years, as these technologies were being tested and deployed, the business cut its total operating expenses by nearly half.

“We’re creating a whole different way of operating—not just incrementally different on what we’ve always done,” says Pugh. “It’s not just a refresh of the same old ideas; it’s a fundamentally different way to work.”

Multilateral drilling

A specialized technique known as ‘multilateral’ drilling is revolutionizing the way that BP is extracting energy from its reservoirs.

BP said it completed its first-ever multilateral wells in 2015 in the San Juan Basin, located mainly in New Mexico and Colorado. Multilateral wells feature multiple horizontal wells connected to a single vertical wellbore, allowing producers to access more of the oil and gas in a given reservoir, while reducing the number of drilling sites.

Harris Cander, vice president of exploration and subsurface technology for BP’s Lower 48 division said, “For the vast majority of the industry, for every one horizontal well that’s drilled, there’s one vertical—so it looks like the letter ‘L’,” he says. “The idea with a multilateral is that from one vertical well, you’ll drill more than one horizontal leg to it—so it looks more like an upside-down letter ‘F’.”

While there can still be sound financial or strategic reasons to drill a vertical well or a conventional horizontal well, multilaterals can deliver premier returns in some of BP’s reservoirs. For example, drilling multiple horizontal wells from one vertical wellbore requires just one drilling pad. “Having one drilling pad instead of several means there is less surface disruption, which helps to shrink the environmental footprint,” says Cander. “And reducing the surface footprint generally helps to reduce the carbon footprint, too.”

BP said it has drilled at least one multilateral well in all five of its U.S. regional business units. It expects that many of its new wells in the San Juan Basin will be multilaterals, and is pursuing similar well design improvements across all its operations.

BP operates 10,000 wells in 5 states

BP’s Lower 48 onshore business operates nearly 10,000 wells in seven oil and gas basins across Colorado, New Mexico, Oklahoma, Texas and Wyoming. In 2016, the Lower 48 U.S. division produced an average of 302,000 BOEPD. In the San Juan basin BP operates approximately 3,900 wells. BP invested approximately $1.6 billion in CapEx in its Lower 48 onshore business in 2016.

BP New Mexico well IP-30s at 12.9 MMcf/d from Mancos shale – highest in 14 years: BP

BP (ticker: BP) announced a discovery in New Mexico in early August, showing strong results from a natural gas well in the Mancos Shale in the San Juan Basin.

The NEBU 602 Com 1H well targets the Mancos Shale with a 10,000’ lateral in San Juan County, New Mexico. The well had a 30-day IP rate of 12.9 MMcf/d, which is the highest achieved in the past 14 years in the San Juan Basin, according to BP.

This well was drilled on acreage that BP purchased from Devon in late 2015, when the company bought 33,000 gross acres and 480 wells. BP operates the San Juan assets through its Lower 48 division, which has about 3,900 wells in the area.

BP Q3 2017 conference call Q&A – Lower 48

Q: The question was really on the Lower 48 business. When I look at the opex per barrel you have reported, it is at the lowest level since you started splitting out this business. So, with the inflationary pressures inside the Lower 48, is that the end of the runway there with the opex per barrel for the Lower 48 business?

BP CFO Dr. Brian Gilvary: In terms of opex per barrel, I think we just continue to see, in Lower 48, improvements around the way in which that business is run. We have the operating cash breakeven down to about $1.50; in fact, it was lower than that in 3Q. Our free cash flow basis is comfortable at $3. That provides us lots of optionality as to where we go next, and, with the opportunity set that we have in Lower 48, it is one of the activities we can ramp up relatively easily, compared to other areas, and that will be a decision for Bernard and the team in terms of what they lay out for next year.

Q: Going back to the capex guidance for next year. You have a $2 billion flexibility within your capex guidance for next year. Can you just talk about what are the key flexible elements in that for 2018, and so in a higher oil price scenario, what are the things that we should expect to see coming back? Would that be more exploration or more Lower 48 spend? Can you give some of the key elements of the upside?

BP CFO Dr. Brian Gilvary: I do not want to defer this out to later in the year, but I think we have already alluded to the fact that if we wanted to ramp up activity, the place where we could do it easily would be on the onshore, and that would lead you to Lower 48. There is no question we have opportunity sets where we can ramp up activity. But we are going to manage the frame pretty tightly, so I do not think you should assume if we see a higher environment, we are necessarily going to ramp up capital; we are certainly going to stay within the $15 to $17 billion frame, we will be pretty disciplined about how we deploy that capital.

Moving Lower 48 HQ to Denver 

Last December, BP announced it would move its Lower 48 onshore business to Denver in a strategic move to centralize its headquarters near operations in the Rocky Mountains.

BP reported it had signed a lease for 86,000 square feet of office space in the Riverview building at 1700 Platte St. in the Lower Highlands district near downtown Denver. The company anticipates the office will open with at least 200 employees, including the CEO and executive leadership team, with more staff to be added later.