BP cutting production costs in oil and gas with VR technology

BP has been working on reducing its production costs and recently revealed that VR technology has helped to reduce UK energy major’s shale oil and natural gas production costs by 34 per cent in five years. BP turned a profit for the first time in 2017 with the help of the technology. When discussing the value of AR to the oil and gas industry, BP said that “costs keep coming down.”

BP operates over 1,000 shale wells, and oilfield workers in the pine forests of eastern Texas are equipped with VR goggles to help BP’s shale business turn a profit. The tech functions by thousands of automated wells feeding data on the workers’ performance into the firm’s supercomputers each evening. If maintenance is required, a subcontracted repair firm is summoned to keep the shale wells flowing at optimal output and minimal cost.

BP’s progress in shale underpinned its $10.5 billion acquisition of BHP Billiton’s US shale operations in July. BP initially struggled to adjust to the fast-evolving methods used to tap shale via hydraulic fracturing and horizontal drilling, but the company’s newfound confidence in a sector that has challenged oil majors was emphasised by the deal. When the shale boom took off ten years ago, BP and other majors that traditionally focused on large, conventional drilling projects such as Chevron were left behind. However, BP is now catching up with smaller rivals, using knowledge and tech to urge shale into a second phase that it hopes will reward its large scale over the agility of smaller competitors.

David Lawler, head of BP’s shale business, is quoted to have said after the BHP deal announcement that the company has the lowest production costs they have seen in a long time, therefore this model will be applied to the BHP assets to significantly improve performance and production.

Other large rivals of BP in US shale production include Norway’s Equinor, ExxonMobil, and Shell. These companies are all expanding drilling and acquisitions, particularly in the largest US oilfield and centre of the shale revolution, the Permian Basin of West Texas and New Mexico. Their goal is to capitalise on the vast resources unveiled by new drilling technologies, allowing companies to quickly start and stop production in response to market changes.

BP will be transformed into one of the world’s biggest shale oil and gas producers as a result of the BHP deal; the company’s total shale output will increase from 315,000 barrels of oil equivalent per day (BOED) to over 500,000 BOED, and its reserves will increase from 57 per cent to 12.7 billion BOED. BP’s output of shale oil is anticipated to rise from 10,000 barrels of oil per day (BPD) to approximately 200,000 BPD halfway through the next decade. The deal also looks to leave behind the $65 billion fallout from the 2010 explosion of its Deepwater Horizon rig in the US Gulf of Mexico, as well as re-establish BP as a major player in the Permian Basin.

In commenting on the technology’s system of rating contractors after completing work, Brian Pugh, Chief Operating Officer of BP’s shale division, is quoted to have said that it means the company is not constantly hiring and firing staff as market conditions shift. Field workers are connected to experts in BP’s Houston offices via headsets to receive guidance while working. Many problem solutions are now collated in a video library so staff can search up videos to help fix problems themselves without consulting an expert. Algorithms crunch data compiled each evening and form a report altering operators as to which wells may require repair. BP have said that the systems cut downtime for wells needing repairs by half, boosting production last year by 70 million cubic feet of natural gas across its shale portfolio.

BP’s success in cost reduction reflects its ability to spend money automating its oilfields and overhaul work processes to reduce service and equipment costs. The shale business, now headquartered in Denver, was separated from the main company to allow the business to form its own culture.

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