Science has made it possible to exploit alternative power sources, so years from now, we can generate power that comes from the sun, wind and water. However, as we all know, the world is still years away from actually being able to harness that power to its full extent. On the larger scale, global populations still rely on fossil fuels, and our need for them will only increase as our population expands, country by country.
IBM has long been a leader in technology and innovation, showing businesses how to move toward a future that is better for the environment. The company is continually helping those corporations in the energy industry understand how important it is to be more efficient and figure out how to get more energy out of the ground, without sacrificing the environment.
IBM has coined the term “Smarter Planet” to represent a move towards more sustainable exploration, reservoir management and production in oil and gas. The company has dedicated thousands of hours to leading the way for companies to get the most out of current oil wells and reservoirs.
The need has never been greater. Presently we are capable, according to IBM, of extracting only about one third of oil in an existing reserve, which means barrels are left in reservoirs in the billions. At a cost of $100, that loss is catastrophic. The facts are simple: “Just a 1.5 per cent increase in recovery from existing wells would yield enough oil for half a year’s global consumption, lowering the cost of fuel—which would mean lower prices for travel, homes, food and consumer products,” (www.ibm.com).
IBM’s aim is to show companies how to improve their bottom line and get more out of existing assets—all with the environment and more advanced technology in mind.
Andy Macrae leads IBM’s Chemical and Petroleum Consulting Practice in Canada and has over 15 years in oil and gas, as well as a long history with IBM. Along with Dave Steeves, Branch Director, Energy Sector, Macrae sat down with me at the 2009 Edmonton Athabasca Oilsands show to talk about how they’re helping clients drive towards smarter business and a smarter industry moving forward.
Sara Kopamees: Can you start by talking about why there is such a great need to integrate the technologies you offer with business processes, so we can work towards creating this “Smarter Planet” idea?
Andy Macrae: Over the last five to seven years, we went through this hyperinflation period, a huge economic boom, where there was a focus on capital and production. Companies were operating on the principal of ‘how do you get an extra barrel out so we can take advantage of $130 oil?’ Now, everything has slowed down significantly, which allows the companies to refocus on some of the fundamentals of business. This is the time when the really good operators go back and reflect: ‘Ok, as I increased production, that was great, but my costs were going up in parallel with that. Now that commodity prices have dropped, I can’t survive with this cost price.’ Now they’re asking themselves how they can reduce costs. You can do the fundamental things, such as cut 10 per cent out of your budget or reduce staff, but that doesn’t get to the root of the issue.
SK: And this is where IBM steps in?
AM: We help companies make better, faster decisions, by going back to some of the fundamentals, such as what information they need to manage business, and how it is structured in a way that they actually get good, timely information. We come in and help with the design of the business processes, data, and how that data will be managed with a selection of the systems. And ideally, IBM can bring in the configuration, design and the industry expertise to help companies [manage data and information]. That’s the value from IBM, and this economy allows companies to reset and redesign processes.
Dave Steeves: What you are seeing now is this kind of pause, where a lot of the more enlightened senior executives are planning for the recovery. They are doing so through redesign and organization and asking what the alternate strategies are around resources. There are more efficient ways of using people, and now companies are using this economic pause for that redesign.
SK: Are there sceptics out there who don’t see the benefits of using technology to integrate process and design for smarter oil extraction? It might be a big change for companies who have always done things a certain way.
AM: [chuckling] Well, the selfish humour behind that is if every company had it all figured out, we wouldn’t need consultants to come in and help them. Do we bring in magic formulas? Not really. We bring in well-proven fundamental methodologies and approaches. Our team comes in and says ‘this is your end point’ and drives towards it. Sometimes [companies trying to change] can’t achieve it on the business end because they have operating concerns, and that is why they bring us in. It’s funny, almost all of the work we have been doing comes down to a data-centre perspective with regards to environmental efficiency, reducing energy and carbon footprint, cost effectiveness, and how to do it all extremely efficiently. Companies learn from us how to do it efficiently and put it into a sustainable structure moving forward, and all of that is underpinned with technology. We help companies with that, whether it is a large or small enterprise.
DS: The oilsands in Alberta are going global. So that is another benefit we bring to the table: we are connected to a global network of oil and gas experts. A lot of these are our clients outside of Canada who are now invested in the oilsands here, so they are comfortable working with people like IBM. It is a matter of using these practices outside of Canada and importing them into Canada.
SK: How is it working, selling parallel agendas to these companies? Selling them on the idea of building better business practice with the environment in mind? It’s no secret that your strategy here is twofold.
AM: Our customers are there already. I think they are asking for it; it’s expected. If a company is going to change their business processes, there are many dimensions to consider, one of which is the environmental footprint component of [oil and gas]. I haven’t seen any of our clients discount [the environmental element], they are actually saying they want environmental considerations as part of every project they are going forward with.
DS: And they are burying those costs as they move forward.
IBM helps organizations integrate and process geophysical and other such data to create 3-D models of reservoirs, which are able to identify oil and gas that wouldn’t have been accessible previously. The company is then able to capture data about the quality of the oil before money is spent building a new well. IBM currently works with majors in the oil industry to improve processes related to Steam Assisted Gravity Drainage (SAGD), Enhanced Oil Recovery (EOR), and conventional oil recovery. IBM is also working worldwide to explore the use of sensors and predictive analytics to enhance production adaptability and responsiveness of oil and gas supplies. The company also looks into the way companies organize their supply chains and help them use technology to mitigate risks and reduce costs.
SK: Where did the “Smarter Planet” idea come from?
DS: That was an evolution. The Smarter Planet is the next enhancement of a strategy around key pillars leading to smarter oil and gas retrieval. This is where IBM is spending its investment and research dollars—around enhancing those themes.
AM: The smaller operator and the larger operator both have the same issues. They need the underpinnings of technology to design their business processes, and they need to do it in a compliant and environmentally-friendly way. What we build is an asset base where we can bring in a set of templates and accelerators. What we do is get you started at what you need to solve your business problem.
SK: All in the name of a smarter planet. That’s very forward-thinking. How complicated are the technology processes you’re creating to drive oil and gas players forward?
AM: That’s got to do with size and degree of complexity. Let’s say we’re liaising with a global major and they operate in a hundred different countries with 50 different operating languages, and they are trying to get a standardized set of processes systems across the organization—it’s a big task. It tends to be a journey that takes five to 10 years because it is a complete evolution. Small companies that don’t have those geographical complexities can be quite quick to turn around. We can put in a good, functioning support system in six months to test it and get it operating. But, it’s interesting, you have to ask clients, ‘how unique is your organization?’ and if you can go with industry standards, you can get there very quickly.
SK: Where is the business going to go?
Andy: From a services perspective, I would say we have two phenomena happening. One is the economic environment we are facing, and that looks very different between gas and oil. Gas is depressed and oil is sustainable. Second, there is a lot of global interest in Canada in the oilsands. So we are seeing these big global majors look to Canada for reserves, to protect their self-sufficiency, for that investment. Before, we were a predominately Canadian-based company with a focus on Calgary and Alberta. Now, we have to look globally to protect locally. And because of that, as we work in Canada, we bring global expertise here. Companies need our local expertise related to oil sands because they are so unique in the world. It is those two trends. First, operational efficiency in gas, so gas producers can drive cost down, and how we help them through that, and for oil producers in the oil sands it is dealing with the global economy. Second, taking the strength of those global majors and combining what IBM can do globally.
DS: There is a lot we can bring to the table to move toward a smarter planet. There is work we are doing around water, for instance. People don’t think about water as an endangered commodity, but here in southern Alberta, it is a big problem. If we are more informed, maybe we will be more conservative in water use.
SK: Any final messages?
AM: We have strong industry experience, combined with compelling technology. That combination differentiates IBM from our competitors. We can design, build and operate systems—and we do that cost efficiently because of our global reach.
DS: We are in it for the long run. And we have a great history. We have been in oil and gas for over 50 years, so we are a reliable partner.
IBM is continually working towards the goal of a Smarter Planet with their clients, moving towards environmentally sustainable development in oil and gas, and beyond.
Within global oilfields, IBM helps clients gather and manage real-time data from across total production streams, in vast quantities. According to the company, real-time data is critical, as is “making sense of all this information…about exploration, production and management”.
To IBM and its customers, being “smarter” means anticipating issues before they arrive in exploration and production, and adjusting to prevent those problems, reducing risks to people and the environment. AB
TO FIND OUT MORE VISIT www.IBM.COM/CA.
By Sara Kopamees