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Petromall Insights April 2018 issue: io – developments “starting with the end in mind”

Published in Petromall Insights’ April issue and republished here with permission.

io consulting (io), established in 2015 by GE Oil & Gas, now Baker Hughes, and McDermott, helps oil and gas operators plan developments “starting with the end in mind”, as a means of rapidly screening various development options and making the best decisions.

io, a global business headquartered in London, helps oil and gas operators plan their field developments bringing its integrated capabilities, io start with the end in mind and apply systems thinking, embedding a Decision Quality framework throughout. These holistic capabilities are harnessed to develop a field development plan, importantly including a business case, that establishes the best way to move forward, taking all possible factors into consideration.

io calls this holistic approach “starting with the end in mind”, to show that it is different from the usual way of planning the development of fields. It means starting with an idea of what success

looks like. Then applying an integrated team from reservoir, wells and facilities, alongside commercial and strategic functions, to see if it can be achieved.

In the “starting with end in mind” approach, you build a single “holistic” team covering the reservoir

and facilities encompassing the economics, then try out different scenarios to identify the best solution. No discipline controls how the project develops, and everybody works simultaneously, rather than sequentially – a real example of collaboration at work.

To understand why this approach is useful, consider that with mature field operations, operators are not starting from nothing. They typically have infrastructure which is old but capable of handling more hydrocarbons than it currently does, and a number of larger fields coming to the end of their productive life. They also typically have a number of smaller oil and gas fields not yet developed, which are not large enough to have their own infrastructure, but could be economically viable if they could use infrastructure which has already been built.

Operators have multiple factors to balance. The existing infrastructure and processing facilities may need to be decommissioned if it cannot carry enough hydrocarbons to sustain its operating costs. Perhaps the imperative is to push the decommissioning date as far into the future as possible.

Some undeveloped fields will be larger than others, or be closer to existing infrastructure, or have less reservoir risk. There are other constraints such as the maximum throughput facilities can handle, the maximum ‘head’ a compressor can generate, and the maximum flow through a well.

If there is a large number of wells, and variation in production rates from them, it adds to the complexity. There are also many inter-dependent factors, such as the level of compression in gas lift impacting the oil flow rates, which impacts the revenue, and also impacts the date of end of field life.

There may also be aspects of the country’s tax regime and licence terms which affect the option with the greatest net present value. Perhaps the fields are best developed in a certain sequence, completing the largest or most likely ones first, and planning so that production from a second oil and gas field comes onstream as the first one starts to decline.

Other options to consider can include infill drilling to access bypassed hydrocarbons, injecting water or gas into the reservoir to maintain pressure, or making modifications to the processing facilities.

The usual approach

The usual way that operators work out how to develop fields is usually based on a number of sequential processes, says Turlough Cooling, head of drilling and subsurface at io.

Operators build sophisticated reservoir models, with all the available reservoir data, which they ‘tune’ against the actual production and any new data.

This reservoir model is used as a basis for working out new locations to drill, and what the anticipated production from the new wells will be, and what new facilities are required to handle the hydrocarbons.

This work can take many years, including computer time running the complex simulations, and calculating the costs of building the necessary facilities. It must be done repeatedly for different

drilling options.

A systems thinking approach

The “starting with the end in mind” approach is designed to come up with results which are just as useful in supporting decision making as the complex model, but solving it much faster.

A “systems model” can be built of the oil or gas field and its facilities, which people from the various disciplines can collaborate on simultaneously.

Note however that this is not a software project – there may be software involved in the analysis, but the analysis is not something performed by a single piece of software.

No single discipline has overall control of the model. It is a joint decision making tool. Everybody understands their part of it and can check it is working logically and correctly, says Tim Highfield, Head of Developments with io.

This way, you can be sure that the end outcome makes sense to everybody in their respective functions, even though people are not necessarily able to understand someone else’s parts of the model.

The final result can be analysed in more detail in a higher resolution reservoir simulation, but only to give a second level of verification to the final option chosen, not to actually drive the decision making process.

“This approach of ours offers a more optimised model suitable to help maximise value, better allocate capital, especially with complex mature field operations, and accelerates operators’ decision making into days rather than weeks or months,” Mr Cooling says.

As an example, one undisclosed client wanted to identify better ways to operate a development

with 250 wells connected to a number of different pipelines operating at different pressures.

It had the option of using compression to improve production, but wanted to work out the best date and point in the system to locate the compressor and the compression power required.

This problem was brought to io and it was quickly decided that a systems model should be built to

solve this wicked problem.

The objective was to maximise net present value, not necessarily maintaining a production plateau. This is a balance between maximising revenue (linked to production) and minimising

costs (spent on any modifications to the facility and compression).

Precise simplicity

It is important to get the right level of simplicity in the modelling – something which will give you similar results to a more complex model, but without over-simplifying.

For example, you might be able to understand production from 250 wells using a few well production depletion curves, rather than 250 curves.

“You can get something that’s good enough to make decisions conceptually, and screen rapidly, rather than spending months studying different production cases using subsurface models” Mr Cooling says.

Multi-operator models

The same approach could be extended for decision making where many different operators are involved, finding the best overall outcome.

It enables the participants to avoid a situation where each party is fighting for their own optimal outcome, to the detriment of the outcome for the whole system.

This could be performed for parts of the North Sea, with perhaps the Oil and Gas Authority advocating this type of model, Mr Highfield says.

If confidentiality is an obstacle (rightfully operators do not like to share their strategies with their competitors), a way around is for operators to appoint a trusted consultant to make decisions, whereby the consultant can see individual operators’ plans and strategies, but does not share them with others.

This is the way building surveyors work in the UK, where a surveyor is appointed by both sides in a dispute to work out the right way forward, rather than each side appointing their own surveyor and the surveyors arguing on behalf of their clients.

Need to do it now

The UK oil and gas industry has time constraints in that much of the offshore infrastructure will be not be viable to keep in operation within a few years, due to a lack of hydrocarbon throughput, unless more ‘small pools’ are put into production.

Furthermore, as some infrastructure is taken out of operation, there can be a cascade effect with more small pools being non-viable to keep in production because there is no suitable infrastructure nearby.

A lot of the delay is due to lengthy decision making processes, perhaps due to the complex models which operators use to establish the best way forward. Using ‘systems models’ could be considerably faster, Mr Highfield says.

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