Compiled by Tyler Jones, Oil & Gas 360


Oil and gas companies are leveraging Machine Learning and Artificial Intelligence to reduce cost and improve returns.

The timeline on which investors in the oil and gas space expect a return on their investment has changed. Over the course of the last five years, capital providers increasingly pushed for companies to show greater financial discipline and faster returns. The result is a more efficient industry leveraging technology in pursuit of a free cash flow positive production model.

The push from investors has become so strong even large international exploration and production companies are investing in new technology to improve operations.

“We will reach a 7% reduction in production costs thanks to: advanced algorithms to ensure reduced asset downtime and higher production rates; and, predictive analysis systems, based on big data, which allow us to optimize maintenance, logistics and well operating costs,” said Eni CEO Claudio Descalzi.

A key component to in the implementation of new technology is the gathering of data and its use to optimize future operations. Data collection allows companies to better understand their operations and automate certain processes. This optimized use of information is allowing Machine Learning (ML) and Artificial Intelligence (AI) to make their way into the industry, improving operations and ultimately increasing the speed at which companies can reach “free cash flow Nirvana.”

Fluid management offers opportunities with ML and AI

ML and AI technology is taking shape in oil and gas through several initiatives including fluid management. Given the volume of water and other fluids associated with the production of oil and gas, systems that allow for more effective management of fluids offer a great deal of upside to operators. From water flow, distribution, and transportation in upstream, recycling, sourcing, midstream, and saltwater disposal, automation of fluids management represents an opportunity for the industry to lower costs across the entire oil and gas production cycle.

Customers of SitePro, a digital oilfield solutions provider focused on developing real-time, cloud-based software solutions to optimize fluid management operations, are already seeing a benefit from automation, according to the company. Using data aggregation, assimilation and analyzation of fluid transportation, delivery, valve operation, and flow monitoring SitePro can give its customers the ability to optimize their operations and save money.

One of SitePro’s clients with 65 sites was able to reduce its employee count from a one-to-one pumper-to-facility ratio to a one-to-five ratio during the day and one-to-twelve at night. Using data to optimize how personnel are used meant an estimated annual savings of $12.8 million over a 12-month period, said SitePro, while another client, with fewer facilities, saw $130,000 in savings using newer sensor technology which provided a greater variety of data than those being used previously.

“Making the reductions in capital expenditures (CapEx) and operational expenditures (OpEx) through our current and, future product sets, will continue to be a major benefit to oil and gas companies. Using our industry knowledge and foresight, we are building solutions with AI and ML which will further optimize our clients’ operations,” said SitePro Co-CEO David Bateman.

Improving Operations Are Attracting New Investors 

The drive toward improved operations and economics is making oil and gas companies that choose to embrace new technology an attractive choice to investors. Capital providers familiar with the industry are seeing stronger returns on deployed capital as companies leverage ML and AI, but this trend is also attracting a new group of investors – generalists.

There has been an increasing trend within the industry of generalist investors moving into the space to find the future of oil and gas while valuations remain low. Several large public companies in the space are beginning to include comparisons of their financial performance next to companies in other industries. Showing results next to healthcare, technology, or pharmaceuticals to attract a broader group of investors.

“We expect that oil and gas companies will increasingly look to ML and AI to better understand their operations and where they can be improved,” said Bateman. “There’s a wealth of information available and numerous opportunities to optimize performance.”

As companies continue to pursue a cash flow positive business model, investors are looking to deploy capital where it stands to make the greatest return. The use of technology in the oil and gas industry is giving operators the ability to reduce their costs using ML and AI, which is not only attracting dollars from traditional investors, but also catching the interest of investors looking for the next opportunity in energy.

 


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