Article by Ed Evans, New Digital Business Ltd. 

Data Management has become a hot topic in the industry once again, as operators and service companies alike look for ways to reduce their costs while increasing efficiency.  PESGB supporters, New Digital Business, recently invited a number of independent, industry experts to discuss the topic of ‘Managing Data Management in a Downturn’. The panel, of very experienced, independent, consultants comprised: Steve Hawtin, Dave Cowen, Andy Thompson and Chris Eastment. The discussion was facilitated by Ed Evans of NDB.  They have 130 years’ combined experience in the industry, and have between them worked for BP, Shell, Exxon/Mobil, ConocoPhillips, Chevron/Texaco, Halliburton, Schlumberger, Woodside, BG Group, Statoil, Maersk, ENI, ADCO, ADNOC, Tullow amongst many others.

Whilst the industry is in a state of paralysis due to the reduction in oil price and continued uncertainty (as of January 2016) the panel saw it as a time when oil companies could make essential productivity gains by addressing Data Management. When you save $100M because you are not drilling a well you can do a lot of essential data management with 1/10^th of that. In fact, there is a business case that says you can ‘discover or rediscover’ more useful data than that which would be acquired by drilling a well.

This article represents a summary of the panel discussion. You are free to use, share or reference as we have adopted ‘Anti-Chatham House Rules’.  The other simple rules set out for the discussion were:

• We will remain focused on the topic.
• We will use generic names for Oil Companies and industry bodies where the information is not in the public domain.
• Ideas and suggestions should be discussed from a value and practicality perspective.

E&P Business Context

The current recession was felt to be most severe because of the rapid drop in price after many years of stability. There are additional supplies from US Shale and Iran, whilst OPEC maintains production levels.   Any response to the downturn is made difficult due to continuing uncertainty.  The Oil Companies’ response so far has been measured – a “wait and see” attitude; cutting costs and delaying or cancelling activity simply asking suppliers to reduce costs and making selective staff reductions. A continuing or further worsening of the situation will inevitably lead to more profound transformational changes with a focus on lower margin, lower risk, faster return activities  ConocoPhillips is transforming. Ryan Lance (CEO) has raised the concern about how even successful exploration in a deep-water environment takes many years to repay, particularly when compared to cash flow from Shale.

The UK has been particularly badly hit. As an operating environment the UK is seen as high cost with aging infrastructure.  Activity in the UK will be supported and encouraged by the new Oil and Gas Authority (OGA) formed in response to the Wood Report on Maximising Economic Recovery (MER). It is interesting to note that Data is an essential topic for MER and the OGA.

How has this affected Data Management?

The panel felt that companies are developing a better understanding of the value added from data management. So far, “Data Management” as a discipline or competency had held up quite well, in comparison to past downturns.   However, activity generally is reduced, fewer wells are being planned and drilled and projects are being mothballed. The point was raised that this would be a really good time to get after data activities. Perhaps there is a business case, comparable to acquiring data by the bit, for making available information lost or hidden that is rediscovered or made into a usable state.

To the panel’s knowledge there have been no recent examples of ‘fundamental changes’ in the delivery of data services to the business, such as new outsourcing models, offshoring, cloud data storage or applications as a service.  Some companies have looked at such changes but are cost-restrained, though the panel felt that more significant changes to the data management models will happen if the business environment doesn’t improve.

The biggest risk to the oil companies is the loss of competency in data. Experienced people with key skills are retiring or transferring their skills to other sectors. In particular, massive reductions in the service sector will have a delayed effect as this is typically where new people are recruited and ‘skilled-up’.

There is expected to be an increase in M&A activity, a data-intensive activity. We expect to see the Shell/BG integration and the Premier/EON’s integration requiring significant data management input. M&A activity traditionally shows data management at its worst, with incomplete, wrongly formatted or otherwise not fit for purpose data changing hands. A company focused on creating ‘divestment ready’ asset data would increase its value and reduce the overall data effort required for the transaction.

One of the OGA’s objectives is to make more data available for sharing, in order to reduce exploration risk in the UK. Most of the effort will go into improving the quality of the existing, national data set, filling in gaps and encouraging a quicker turn around for new wells and seismic data, possibly updating the PON9 standard, for which there are likely to be penalties for non-compliance. The OGA also has a role in decommissioning, specifically in defining what data an operator has to produce in order to relinquish liabilities and accepting that data when delivered.

For hard-pressed E&P managers what are the essential activities which need to continue?

The panel agreed that different sized operators are in different places according to what is essential and therefore what costs savings can be made.  In smaller companies DM is usually delivered by a small number of ‘heroes’ who turn themselves to anything, work all hours and don’t complain – it is unlikely that these people would be cut. The medium sized companies are typically trying to establish processes and standards to provide the framework required for rapid growth and increasing diversity. The investment required is likely to be under threat and the progress towards data management maturity will stop or recede. Teams will be reduced and there is a risk that the real competency will be lost. The larger companies find that the relative cost of an effective data management service is low. Savings can be made in squeezing suppliers, trimming managers and cancelling projects without unduly affecting the service or overall asset data quality.

Should the recession persist or worsen then further options such as outsourcing, offshoring, remote data storage (cloud) and ‘applications as a service’ will become more common. Decisions such as these require competency in E&P Data Management to sift through the hype, risks and potential benefits for such a service and to ensure that benefits are realised.

The ‘essentials’ identified by the panel:

1. Retain or build Data Management Competency within the organisation. It is critical to the E&P Organisation that Data Management competent resources are working in your interest, ideally as employees.
2. It is time to redraft the Strategy and Principles around Data Management, in order that all activity is in support of the business purpose. This means that ‘vanity projects’ and ‘cottage industries’ can be cut.
3. Safety Critical Systems are managed as an essential to the business.
4. Activity examined with more scrutiny. This is already happening and it is a good thing that the decision makers look more closely at Data Management business cases and the claimed costs/benefits. This is high quality business engagement.
5. In the UK make sure you are following the new OGA compliance rules and opportunities to reduce obligations and costs.

STOP. These are things that destroy value and increase the sense of division between DM/IT and the business:

• Poorly conceived and poorly defined projects and activities with unrealistic expectations
• Implementing software as ‘the solution’ without understanding consequences for the business.

Please note the ideas are not designed to be comprehensive but the priority thoughts from the panel discussion.

An opportunity to address ‘Universal Truths’ about Data?

The downturn may be an opportunity for Oil and Gas companies to address the basics, reducing costs immediately and improving the organisation ready for future growth.

• E&P Data Management is a core competency and NOT a commodity to be purchased through IT. (also E&P Applications and systems)
• The few, the most effective, operators have defined business engagement
  • Governance – business leadership of Data Management
  • Ownership – definition of business owners of data (which the DM team help with)
  • Roles and responsibilities – the ‘half-days’ of time required by the business to drive E&P DM
  • Competencies (includes everyone understanding DM)
• Understand the value of data and effective data management
• Understand the DM consequences of implementations –software is implemented in order to generate interpretations and models without considering how the results will be handled

Conclusion

The downturn is an opportunity for the business to engage with data management in order to ensure that the company has the competency to build and support the systems that are essential to successful operation at a low oil price and which are the key to functional excellence at any oil price.