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AI, ML and DL in the Oil and Gas Industry. Is it an evolution or a revolution?
March 1, 2019 News


While most businesses in various industries are embarking on their digital journey, the digital transformation journey for the oil and gas industry is a rather different ball game. To approach oil and gas organisations to explain to them the importance of data processing would be quite a pointless approach. This is because the oil and gas industry relies heavily on data and has been processing data since the 70s.

So how does the oil and gas industry embark on its digital journey?

Speaking to AOPG exclusively on this was Dell EMC’s CTO of Energy, David Holmes. David is responsible for bridging the gap between information technologies, operation technologists, engineers, geoscientists and business leaders in the energy vertical. Over the last two decades, David has architected some of the world’s largest petro-technical IT solutions and holds a patent for his work on the remote visualisation of geotechnical applications.

On the oil and gas industry, David said the industry is the original generator of big data. They have high-performance computer systems processing their data for decades. Therefore, it’s not really a new idea to bring data analytics to this industry. However, he added that the material changes in the last couple of years such as the availability to have access to your information all the time and automation as well as archiving systems for their physical data tapes have made oil and gas industries invest in digital expansion.

“The new deep learning (DL) and machine learning (ML) technologies have given us a justification for revisiting what a billion of dollars’ worth of data assets. The cost of seismic acquisition is in the hundreds of millions to billions of dollars. The cost of drilling deepwater wells cost about 100 to 150 million. All of this is just to generate data. With ML and DL technology, we can take all of these assets and generate new value and new insights to look at analogues and identify particular patterns the can be used to train DL systems to be able to identify missed opportunities.”

Adding to that, the asset lifecycle in the oil and gas industry run for many decades. In the past, oil and gas companies were only interested in sourcing for oil and gas. They would source out from multiple vendors for software tools needed in the industry. Today, oil and gas companies have revisited their position on generating their own software in their warehouse. The digital transformation revolution has caused companies to revisit how they can use technology as a strategic lever to their business.

The new levels of platform technology allow companies to materialise their intellectual property in software on industry platforms that are relevant to oil and gas. According to David, if an oil and gas company want to develop their own technology because they have their own intellectual property, it’s much easier for them to do that. These companies are now finding a balance between what software to buy from vendors, which technology from open source to use and how will they as an oil and gas company contribute to the development of that open technology which will be nondifferentiation but an essential platform technology. Finally, how will they invest in developing their own software in differentiating themselves as an oil and gas company.

He added that the new generation of geoscientists coming into the industry will be the ones helping to develop these techniques. However, David added that the established range of workers in the oil and gas technology might not be highly skilled in using new technology, but they are still needed to manage and operate the established tools.

“New technologies are augmenting the existing workflow. This isn’t Uber-style disruption. This is how can we use this new technology to augment the way we work. We must bear in mind the top priority in any oil and gas company is safety. Companies are very risk-averse. They can’t afford to take huge risks in a safety critical environment. With new technologies, you will need to validate, cross reference and test against the established tools. So, it is more evolution rather than revolution.”

Having said that, these new technologies include the use of Artificial Intelligence, Machine Learning and Deep Learning. David said it is a big challenge in getting enterprises to find the best fit for these. So, this is where an organisation like Dell Technologies comes in. They work closely with oil and gas companies to be able to solve these problems. In a specific context of DL and ML, Dell produces a number of AI-ready systems.

“We solve a couple of problems for enterprises. When you start getting serious about the application of AI into your business, it becomes a lot like a high-performance computing problem. In an ML and DL environment, you need a curated set of tools that can all work together. We provide these tools that can help them get up and running much faster while providing that level of security that’s required for enterprises to embrace this technology.”

As oil and gas industries embrace more technologies for their operations, David also said that the industry is headed towards an era where automation will do almost everything in an oil rig. In other words, the need for manual labour to work on rigs will be reduced over time as technology improves. He also added the facts that oil and gas companies, in their research have predicted that they will have savings of up to six to seven billion dollars a year through the reduction of crews working on rigs with the implementation of autonomous technologies.

“Why are oil rigs above water? This is because human performance underwater is poor. But if we had a fully autonomous rig, why would it need to be above the water? We can have rigs that sit on the sea bed.”

Looking at the economics of the oil and gas industry, while they may save a lot by reducing manual labour and going fully automated, it is also important to take note of the price of crude oil. The oil and gas industry are mostly determined by crude oil prices which is supply-driven. The more the demand, the higher the price of crude oil and the more profits these oil and gas companies make. But David believes this may not necessarily be the case when it comes to investing in technologies.

According to David, over the next two decades, the demand for oil and gas will continue to increase. He added that oil and gas will take a larger share of primary energy supply. There was an oversupply of oil and gas in North America because of the reduction of prices. Due to this, companies faced a crisis. When this happens, the first thing oil companies do is look at reducing operational costs which include reduction of employees, reduce the drilling of new wells and operating expenses, deferment of projects and such.

This is when oil and gas companies also realise, they need to reorganise their business and make it more efficient. And this, David points out, is where technology comes in. They realise that without investing in technology, they will not be able to position their businesses to survive in the current economic climate.

“When oil prices are at about US$100 a barrel, nobody cares about investing in technology. All they care about is pumping the oil out from the ground as fast as possible. If I went to an oil company and said I can save you US$2 a barrel on your costs, they’d not be so interested because it’s just a small margin. However, if oil prices go down to US$32 a barrel, and their production cost is US$36, that US$2 a barrel is halfway towards them becoming profitable again. All of a sudden, the demand for technology goes up again.”

David added that in the last two years they have seen an enormous increase in activity inside oil and gas companies investing in technology. In other words, changes in crude oil prices will also have a demand effect towards technology as more oil and gas companies look towards improving their efficiency.

As David puts it, “Evolution and not revolution is the focus for oil and gas companies.”