Abstract: The Impact of Information Technologies on E and P Profitability

Paul, Donald L. - Chevron Corporation

One way to think about the impact of IT on the general business drivers for E&P profitability is to consider the phrase ?More, Faster, and Lower Cost.?

More stands for increased production, reserves, and higher recovery factors per well, per platform, per field, and per unit of investment. More means improved capital effectiveness through continuing reductions and quantification of exploration and development risk.

Faster stands for the rapid identification, evaluation, and capture of business opportunities. Faster also means improved financial rates of return from projects and assets through continuing reductions in cycle time.

Lower Cost stands for reduced current and future operating expenses through improved designs, operating efficiency, incident free operations, and lower environmental impacts. Lower Cost means higher margins through value chain / supply chain optimization and integration, Lower Cost also means operating an expanded E&P business with fewer people and leveraging talent and knowledge on a global basis.

The presentation will discuss the current and future application of information technologies to E&P business processes and their impact on each of these drivers. For example, the industry has reduced the inflation-adjusted reserve replacement cost from a peak level of $20/BBL in 1979 to $5/BBL today, In terms of real costs, we are now adding reserves at about the same investment level as in the 1950?s, in spite of far more challenging operating circumstances. While the restoration of this level of capital efficiency has involved several areas of industry performance improvement, technology (and IT in particular) has played a decisive role.

Such is the case with the almost universal application of 3D seismic technology. Exponential increases in the power of computing, data management, and visualization have fueled both a significant technical improvement in the quality of subsurface images and a vast reduction in the unit costs for acquisition, processing, and interpretation of the data. Advances in IT similarly enable technology to design, drill, and complete complex well programs, to characterize and simulate complex reservoir systems, and to operate automated infrastructure. All these deliver More, Faster, and Lower Cost opportunities to improve E&P profitability. However, as large an impact as IT has made to date on the E&P business drivers, there is considerable evidence that the future will involve changes and impacts at least as great. A key observation is that although the E&P business is very technologically intensive and an important consumer of IT, the primary customers and R&D investment pathways for IT are outside our industry. Consider that in 1995 the total petroleum industry R&D investment (upstream + downstream + service companies) was just 1.5% of the total US industrial R&D base of $109 billion (down from 3% in 1985). By contrast, the financial services sector invested 2.7% of the total -- almost twice that of petroleum. A few of the examples of the key technology trends that we will likely see adapted and applied to impact the profitability drivers are:

- Greatly expanded visualization environments;

- New human / machine / data interfaces;

- Ubiquitous real-time data environments with ?smart? materials, objects and networked communication;

- Simulators for virtually every physical, chemical, engineering, and business process;

- Intelligence-driven data management and knowledge management system.

The adaptation and integration of these technologies to fit our specific businesses and supply chains will continue to enable More, Faster, and Lower Cost performance for E&P profitability.

AAPG Search and Discovery Article #90933©1998 ABGP/AAPG International Conference and Exhibition, Rio de Janeiro, Brazil