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Technology could see oil and gas production costs cut by 30% says BP

16/03/2018
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The average production costs of oil and gas could be reduced by as much as 30% through the utilisation of new technology by 2050 according to BP’s Technology Outlook 2018, which was published this week.
 The report identifies capital-intensive resources as being those with the greatest scope for cost reduction.
The report identifies the most capital-intensive resources such as deep and ultra-deep water, and those requiring large numbers of wells, such as shale, as being those with the greatest scope for cost reduction. 

BP claims that improved rig and platform design as well as subsea and flow line development could unlock production savings. At onshore sites, such as shale fields with large numbers of well pads, a standardised, repetitive manufacturing-style approach could reduce costs. Optimising production operations and field development could also lead to cost savings.
Digitalisation is likely to underpin one third of the cost reductions associated with technology improvements.
Digitalisation

Of the new technologies being introduced, BP suggests that digitalisation is projected to underpin 25% of the increased volumes and one-third of the cost reductions associated with technology improvements, with the greatest impacts potentially coming from artificial intelligence.

Automation

Automation is another development mooted by BP that could drive change and consequent cost savings. The report states that “the industry is looking ahead to major advances in automation of well design and construction, maintenance and processing activity in facilities, and optimisation of production.

Other innovations

Other production innovations outlined in the report include various forms of non-mechanical drilling using lasers, burners or electrical discharges. Digital innovation could also have a role in preventing losses of energy during production, for example through the use of sensors and blockchain technology to track methane and reduce leaks.

As a contributor to the report, James Haywood, Director, Global Growth Strategy & Strategic Planning at Baker Hughes, said:

“Despite great advances in technology in recent years, only around 35% of the oil in a typical field is recovered and only around 3% of data captured at oil and gas operations is used. There is therefore massive scope for technology to transform the energy industry, reducing capital expenditure, lowering operating costs, and increasing production and reservoir recovery factors.”

It's clear that technology can, and will, unleash significant production gains and cost savings in the period leading up to 2050.
BP's Technology Outlook also examines the impact of technology on the broader energy industry beyond oil and gas production.
Technology transforming the broader energy industry

BP’s Technology Outlook 2018 doesn’t just examine the oil and gas industry, but analyses how technology could potentially revolutionise the broader energy industry up to 2050.

Key conclusions from the report include:

  • While meeting the goals of the Paris Agreement is technically feasible, the Outlook’s modelling suggests that technology advances alone cannot deliver the carbon reductions needed. It suggests further action is required, particularly policy measures such as putting a price on carbon emissions, as well as consumers making lower-carbon choices.


  • Improvements in energy efficiency have the potential to save around 40% of current primary energy use, although many of the improvements require significant investment. Areas where savings can be made include increasing vehicle efficiency, improving building design. And the use of energy in cooking and washing.


  • Digital technology, including sensors, big data and artificial intelligence, is the most significant source of system-wide efficiency improvement.


  • Onshore wind power looks set to become the most economical source of electricity by 2050, with grid-scale solar power also becoming much more competitive. However, there are integration costs to overcome intermittency issues when a high proportion of grid demand is provided by wind and solar power.


  • The way goods and people are transported will continue to change significantly, led by, but not limited to, electrification of lighter duty applications as batteries improve. Liquefied natural gas is projected to become a competitive fuel for heavy duty trucks and some ships, and bio-jet remains one of the only viable solutions to reduce emissions in aviation.


  • Space heating is likely to continue to be primarily provided by gas-fired appliances although a high carbon pricing could favour hybrid appliances using heat pumps supplemented with gas, as well as all-electric systems.


  • Decarbonised gas- including gas with carbon capture, use and storage (CCUS), synthetic gas, bio-gas and hydrogen- has wide potential application in balancing power systems, and in the heating and heavy-duty transport sectors.

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