Rebuilding, refining work process flow

The petroleum industry is on the verge of reworking every work process flow at all levels. Reworking has already taken place in some areas of construction. This process is working up through the value chain to the most leading sector - exploration.

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The petroleum industry is on the verge of reworking every work process flow at all levels. Reworking has already taken place in some areas of construction. This process is working up through the value chain to the most leading sector - exploration.

Super-computer power coupled with virtual reality graphical imaging systems are in the process of reconfiguring the way work is accomplished.

The old paradigm is rapidly changing to a true team environment where professionals will handle multiple projects and bring highly efficient application of their joint expertise. The following are examples of the new paradigm:

  • Exploration: The geophysicist, geologist, and petroleum engineer assigned to the North Sea meet in a VR facility to examine a new multi-client 3D survey. The geophysicist brings a suite of direct hydrocarbon indicator algorithms to test; the geologist brings a suite of well logs and depositional models; the petroleum engineer brings a database of reservoir parameters for field modeling and economic evaluation. Within two days they have reviewed the survey, identified the major anomalies, created preliminary models, and generated a series of economic sensitivity studies over the best prospects for management's review.
  • Production: The Gulf of Mexico Miocene team - geologist, geophysicist, reservoir engineer, and drilling engineer - gather to choose new drilling locations for a jackup on long-term contract. They enter the VR facility and activate the production databases on the company's properties. Certain properties need more proved reserves to meet new gas contracts. The fields' earth models are activated. The geologist adds new core information and reservoir studies. The geophysicist updates the anisotropic reservoir model with a borehole seismic survey. The production engineer adds new facilities cost data, and the drilling engineer applies the latest well data to the planning module. After four days of sifting, the team identifies five well locations that will satisfy the contracts, at minimal cost to the company. Economic models are presented to management, recommending a multi-well program for the jackup.
  • Facilities Engineering: Structural, process, safety, and naval engineers form a team to design and bid a new floating production system for West Africa. Their task is to find the best economic solution, and evaluate the choice of a newbuild or tanker conversion. They enter the VR facility bring up the computer models of the most appropriate vessels. Two days later, they have the solution, compared to the two or more months required now.
Industry work processes are moving to a continuous mode, rather than the jerky discrete processes of the past. By integrating skill sets of all professionals, with a common goal and within a VR workspace, significantly more information can be transformed into applicable knowledge in a shorter timeframe.

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Growth through acquisition continues. RD Shell could regain the lead by capturing Chevron or Texaco.
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Industry compression will continue

Recent mergers and merger talks continue to reshape the world's oil industry. BPAmoco Arco (under review), Chevron Texaco (called off), Exxon Mobil (in approval), Repsol YPF, Saga (in play by NorskHydro and Elf), and Total Petrofina are only the largest combinations among the publicly traded producing companies.

Rumors continue to float about. The deals are growing in size, compared to the surviving national oil companies, and are driven by the recent low oil price environment. Similar compression has already occurred in the service sector which is significantly changing all commercial relationships.

Enron's expanding value chain model

Enron is implementing an intriguing strategy. The company is extending its natural gas pipeline origins into new high-value markets. The story began a few years ago when US markets in natural gas pipelines and electrical transmission were deregulating. Enron identified synergies between gas production and electrical generation. It moved into electrical plant construction in combination with gas field expansion for developing countries, capturing value in several ways:

  • By developing gas fields
  • By expanding gas markets
  • By constructing electrical plants
  • By expanding electricity markets

Enron followed its basic commodity - natural gas - to a high-value use - electricity.

The company is now taking lessons learned in US gas marketing (the brokering of pipeline capacity), into the downstream use of electricity. The high-value component of electricity is not necessarily in serving an installed base with 60 cycle power (a commodity), but in the use of that power to move large data blocks.

Data movement has been limited in the past to magnetic tape or proprietary electronic links between corporate offices. This relatively new commodity, data, requires electrical power to feed the computer networks, disk drives, and software tools that make the data useful. Electronic bandwidth is the same conceptually as pipeline capacity. The Internet and satellite communications have changed the earlier paradigm by opening new larger "data pipelines."

Enron is defining a new benchmark as it moves to develop bandwidth marketing. The company now moves gas molecules, transforms them into electrons, and packages data according to the market's need. Enron has connected the physical world of natural gas to the intellectual world of corporate performance.

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