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Automation makes its mark on oil, gas industry focused on reining in costs

After getting their feet wet with big data and automation during the 2014-2016 price collapse, U.S. oil and gas companies are in a position to harness technological advances to push down costs even further, from the wellhead to the back office.

"I think what we're starting to really see is when IT and operations are combined together, we're getting these transformational changes in our assets," Chesapeake Energy Corp. executive Mikell Pigott said in a recent presentation. Pigott, the company's executive vice president of operations and technical services, said the automation advances "allow us to pull together information like we've never done before," letting the company be more efficient in its operations as it tries to chip away at its debt load.

"We can pull in our drilling data, completions data, construction data, the finance, the marketing data, all into one pool of information; then we have to use our big-data analytics to process and crunch and ultimately drive value for the company," he said.

Accounting and advisory firm EY is one of a number of companies developing automation and robotics technologies intended to modernize oil and gas production. Digital automation leader Bill Hale told S&P Global Market Intelligence that the 2014-2016 price collapse was a disaster for the industry but well-timed for advancing automation.

"If we had tried to market this a year earlier, when oil was $100 a barrel, we probably wouldn't have had as much luck. Companies wouldn't have seen the need for it," he explained. "But coming out when we did, we could simplify accounting and supply-chain issues and not have to rehire people to do it."

One way automation is cutting costs for oil and gas companies is by reducing the need for office staff. "We're seeing examples ... around tax return creation and financial transactions [that] now can be done by robots, or algorithms on steroids," Regina Mayor, national leader for energy, natural resources and chemicals at consulting firm KPMG, said in an interview. "Where there used to be humans, the robots are now doing those activities."

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Getting automation into the nuts and bolts of the production process has occurred more recently, as EY has attempted to find ways to get existing computer programs for specific jobs to work together. "We may have 12 different programs that do their one job very well, but they won't talk to one another," Hale said. "They're not user-friendly in that respect."

KPMG's Mayor noted that one area where the oil and gas industry was ahead of the curve was the use of sensors at the drill bit to keep engineers aware of the situation below ground. "Oil and gas was probably one of the first, with sensors in development wells and active wells. Having those sensors auto-correct, talk to each other and give better information to people managing it is one of the more mature segments but still has a lot of potential for expansion," she said.

The industry has vast potential to automate processes further. Hale described "digital talking," which is intended to get engineers "out in the field and away from the keyboard."

"If you go to a lot of websites now, a chat function will pop up and the system will ask, 'Can I help you?' If we have the same function, it can be used in the field," Hale said. "An engineer can take a picture of a piece of equipment on [a] well that isn't working, get the serial number and start the process of getting it replaced right then."

The most ambitious step in the automation process has yet to come: "digital thinking," or artificial intelligence, that can predict when parts are about to fail or can simplify the drilling and production processes. Mayor said producers and midstream companies have had to sift through vast amounts of data but did not necessarily know how to optimize the information they were seeing. Automation, however, could help engineers stay ahead of the curve.

"I see them moving toward intelligent management, being able to predict failures and well performance," Mayor said. "Even small-scale pipelines, where they have people driving around looking for problems, analytics is starting to drive that."