Smart Fields: how to generate more value from hydrocarbon resources

Pieter K.A. Kapteijn, Smart Fields Coordinator, Shell International Exploration and Production, SEPTAR Rijswijk, The Netherlands Abstract
Over the next decade, the E&P industry will witness a revolution in the development and management of hydrocarbon assets. The integration of time-lapse seismic, subsurface modeling, dynamic reservoir simulation, smart wells and production facilities will yield significant improvements in recovery and productivity as well as a reduction in the environmental impact of oil and gas developments. Increasingly fields will become Smart. Smartness involves the systematic application and integration of control engineering and IT concepts to oil- and gas field management. By combining data gathering, integrated modeling and control elements in so-called value loops, optimization opportunities are created in every phase of the resource lifecycle. Different data sources may be combined to reduce uncertainties in reservoir models. Reservoir management may be improved by controlling individual zones in wells, acting on down-hole flow and pressure information. Another element of smartness is introduced when in future the transport, separation and processing of well fluids can take place at surface, on the seabed or down-hole. This creates additional development options and flexibility. The paper proposes a conceptual framework for the understanding and design of E&P smartness. It covers the fundamental elements of smart developments and discusses Shell case studies and projects to show the value of using Smart Well and Field technology. Shells approach to building an industry leading Smart Fields capability and stimulating the development of key technologies is discussed.

The Changing Landscape

In lifecycle terms the oil industry appears to be entering middle age early in the 21st century. Dependent on the reserves definitions used, we are fast approaching the point of having produced close to half of the current proved world reserves of oil. The high-margin oil and gas fields outside the Middle East have been developed or will be developed shortly. The environment in which the oil industry operates is also changing. Some trends and developments that are expected to have a medium-term impact on the industry are: The increasing knowledge- and information intensity required to make and keep developments economically attractive A developing shortage of skilled and experienced staff, often referred to as the big crew change combined with falling enrollment in technical and PE courses The increasing demands that are made on the industry in terms of environmental impact, energy efficiency, supply security and safety The introduction of e-business concepts and cross-linkages between technical, operational and business management, particularly in liberalized gas markets Each of these developments presents a challenge in its own right. Combined they force us to fundamentally question our current approach to the E&P business. The industry must find ways to significantly improve the performance of the business while meeting the increasing demands of society. Smart Fields may provide us with an opportunity to turn some of these challenges into opportunities. The technical and organizational capabilities needed to realize Smart Fields are well within the reach of the E&P industry, but the solutions may not necessarily come from within our own industry.

Understanding Oilfield Smartness

Over the past few years many Smart or Intelligent oilfield technologies have been brought to the market. Smart wells have only recently been introduced and are rapidly gaining acceptance, creating real business value. In the past 2 years some 70 smart well projects were initiated in Shell, representing about $ 200 mln of additional net present value.

Fig.1 Existing and emerging Smart Well functionalities

Smart well case studies and implementation projects in Shell led to a realization that the increased functionality of smart wells, in terms of measurement and control, down-hole processing and reservoir sensing, created value only when it formed part of a so-called value loop (fig.1). Unless a loop containing measurement, interpretation and (corrective) action was properly closed it did not generate any value or worse, it could destroy value. Two principal well-based loops were identified: one that allowed optimization of the performance of the individual well and one that spun off data and information that could be used to improve field management. In practice the distinction between these two loops quickly disappeared. Most smart wells in Shell are now justified on the business value created in the total integrated asset. Even so, over 50% of smart well projects in Shell derive their value from production improvement through controlled commingling. Initially the benefits in terms of improved recovery were considered secondary. Theoretical studies showed that, particularly in water floods, significant improvements in ultimate recovery could be achieved with downhole injection and production control. Full control and optimization in water-flood projects would typically yield an additional 10-15% recovery, often combined with production acceleration. These studies assume that the pressure and flow information from wells can be interpreted dynamically using well and reservoir models. They also assume that the resulting information can be translated in operational adjustments to injection patterns using appropriate optimization strategies. In short, for wells to be really smart the field will have to become smart also. Closing the value loop has become a central principle of well/field smartness in Shell, effectively taking an accepted approach from the process industry into the upstream sub-surface domain. Extending this principle to other phases and activities in the field lifecycle led to the insight that all major field development, management and optimization cycles or loops share similar elements and characteristics. All combine and integrate data gathering, modeling and interpretation, and decision making (fig 2).

Fig.2 Field management and optimization cycles: value loops

Seen in a field lifecycle perspective it is clear that each field development phase generates specific data, models and decisions. Each phase contributes to the total body of field or asset knowledge, ideally reducing the uncertainty and risk of successive development phases. The resulting compounded asset models - the virtual asset- should represent our best understanding of the physical asset, i.e. reflect reality as closely as possible.

The Field Life-Spiral Concept

The value loop model can be expanded to show that the so-called field lifecycle looks more like a life-spiral (fig. 3). Starting from the inner cycle moving counter-clockwise outwards, one can identify successive loops of data-gathering, modeling and decision making in the exploration, appraisal, development, operating and redevelopment phases of the field, ultimately leading to the abandonment of the field.

Fig. 3 The Field Life-Spiral

The life-spiral concept allows us to identify areas of improvement and helps understand the critical relationships between successive generations of data, models and decisions. A review of current field development practices in the industry shows that: The requirement to meet hurdle rates and obtain approvals for each development phase drives asset teams and disciplines to optimize individual loops in isolation. Later loops are impacted by early data that is not captured or of poor quality: in some cases there is only one opportunity to capture key data. Too little time is spent on justifying data gathering or additional functionality if the value is only realized in later loops Models may not contain or honor all available data. Discipline based models may not be consistent with models used by other disciplines. Few companies maintain a structured collective memory of key data, decision criteria and assumptions that allows reconstructing the complete field life-spiral. This in turn makes organizational learning and knowledge management difficult. New technology may not be anticipated in long-term development options. The experience gained by staff normally relates to their involvement in either one specific development phase in several different fields or several phases in a single field. Few staff has involvement in the complete life-spiral of a field, from exploration to abandonment, as field lives and oil-field careers are typically of similar duration.

A Smart Field Vision

A compelling vision of Smart Fields is required if we are to address the issues discussed. It must provide a conceptual framework to guide and align our technology and capability development activities. A high-level working definition of Smart Fields used in Shell is: A Smart Field is a field in which all key value loops are in place and completely integrated in terms of data, models and decisions. In a Smart Field the skills and experience of (discipline) staff remain of critical importance. The right work-processes must also be in place for the loops to work efficiently and result in quality decisions and plans. Smart Fields are not about automating the oil field, but rather about creating an environment that enables our staff to carry out higher value work. Another conclusion may be drawn from the conceptual model presented. In the future the key to optimum field development may well lie in inverting the spiral. It is the ability to define the key data that we need to acquire and interpret, working back from the critical decisions that must be made.

New technologies, new opportunities

The life-spiral model in itself does not redefine field development practices, but rather re-enforces the need for integration and multi-disciplinary teamwork in E&P. Recent technological developments however, present attractive opportunities to rationalize and improve the field life-spiral and build and integrate novel value loops. Within a few years, given the pace of technological innovation, we can expect to be able to: Acquire more and different data down-hole: - distributed temperature and pressure, flow, composition, micro-seismic. Transmit and process data more (cost-) effectively: - fibre-optics, low-cost telemetry, data fusion, middle ware, neural networks Apply new modeling strategies: - full dynamic asset modeling covering sub-surface and production system Control and optimize well and field performance: - smart wells, interval control, fluid transfer, lift and processing systems.. Operate and maintain assets differently: - remote operation, de-manning, vendor e-maintenance/surveillance concepts Through the integration of data, models and decision processes the value of individual loops can be leveraged and multiplied. Once the smart well data infrastructure is in place it can also be used to transmit maintenance and integrity data. Integration of different models e.g. reservoir dynamic and geo-mechanical, yields valuable additional insights in reservoir characteristics and dynamic behavior.

What is even more exciting: the cost of these functionalities is dropping fast while the reliability is steadily improving. We are nearing a point where we can acquire the data we need rather than work with the data we can obtain. This process of structured data acquisition and information management has been termed informatisation (Toffler, 1980) and can be observed to work in all maturing industries. We also have the practical means to translate the improved insight into meaningful action to optimize our oil and gas fields. The impact of smartness is best illustrated using the analogy of the car engine. Only 30 years ago the conventional car engine was essentially a mechanical device. The introduction of motor and car electronics coupled with a multitude of new electro-mechanical sensors and actuators have transformed engine and car performance. Ignition timing is optimized continuously, the fuel mixture is controlled responding to catalytic converter performance, suspension characteristics and brake modulation (ABS) may be adjusted to driving styles and road conditions etc. At the same time engine specific power has gone up and fuel consumption has improved dramatically while emission levels are down. Smart Fields has the potential to do for the oil industry what motor and car electronics did for the car industry: enable a step change in performance and value extraction.

Is the Oil Industry Different?

There are many examples of industries that have successfully and significantly improved their core processes and products using smart concepts e.g. car and aircraft manufacturing, pharmaceuticals and banking. Experiences from other industries are sometimes met with a degree of skepticism in the oil industry; we tend to think our industry is different as it has to deal with Mother Nature. We have limited information on the sub-surface, which means uncertainty and risk. The skeptics may have a point: we are not a manufacturing industry. The oil industry is unique in that it combines activities in two distinct and fundamentally different domains and requires excellence in both (fig. 4).

Fig. 4 The high-level field development process is fundamentally iterative In the subsurface domain sparse (seismic) data sets on large scales are processed and combined with localized small-scale (well test and log) information. The G&G/Petroleum Engineering work-process is essentially inductive, relying on modeling, the use of geological analogues and heavy application of simulation and visualization tools. Uncertainty, reflected in subsurface realizations, and the handling of risk are key issues in the sub-surface domain. The wells and surface facilities domain on the other hand represents the true engineering part of the E&P business. Provided with a clear specification the well and facility/process engineers design and construct the production system. Cost-efficiency and good project management are essential.

Across the interface between these two domains a phase change in uncertainty takes place. A subsurface development scenario may be translated in well locations and production forecasts. Well/facility engineers design and cost a facility/production system to meet this specification. The project economics are then run to evaluate the viability of the development. This process is repeated until an optimum economic result is obtained or a hurdle rate is met. The result is then tested for robustness against subsurface risks and uncertainties or changes in project variables. The high-level field development process described is fundamentally an iterative process. Successive iterations are tested against economic objectives e.g. maximization of net present value (NPV). Probabilistic models may be used to evaluate and handle uncertainties, but in the end a single development design must be approved and executed. If that development design is smart it will allow acquiring early performance data and have the functionality to respond to performance deviations e.g. through smart wells. This may serve to improve the quality of subsurface modeling or optimize the production performance of the field, closing the loop again. This simple model highlights a number of issues: To design for maximum lifecycle value, a large number of development options has to be generated and evaluated: the iterative process has to be efficient to allow that With new smart well functionalities and data gathering opportunities, the number of iterations grows rapidly: there are now multiple well/facility realizations to evaluate We may also observe that from a fluid processing and control engineering point-of-view both well and facilities engineering are converging towards a single domain: integrated production system design and construction. In the future many fluid processing steps such as separation, treatment, conversion and metering may be carried out down-hole or on the sea floor. This new processing flexibility forces design choices that can only be made when well and facility engineers work in a truly integrated and smart manner. Experience and learning from other process industries are particularly relevant for the E&P well/facility engineering domain.

Characteristics of a Smart Field

Using the conceptual models presented some attributes of Smart Fields may be defined. Within the next decade Smart Field technology should allow the oil industry to: Manage oil- and gas fields for lifecycle business value Operate fields as single dynamic systems using integrated models: the virtual asset Continuously optimize field (production) performance with right time data acquired anywhere in the system Efficiently design and evaluate development options, anticipating new technology Progressively reduce development uncertainty and risk Reduce environmental footprints and improve energy efficiency and safety through integrated production system design Better and faster decision making through simulation of options and decisions Enhance skills development and maintenance using field flight simulators Each of these attributes is supported and enabled by component technologies and capabilities, some of which are critical such as Information Technology. New sensors, simulation models, visualization software, decision support tools etc will have to be developed to achieve Smart Fields. But technology by itself will not yield the value unless it is combined with- and balanced by the right skills and work-processes. Smart Fields provides a framework for integrating the capabilities of disciplines but does not replace these. Deep competence in all areas will always be required, but the value of individual capabilities may be leveraged through smartness.

Establishing the Value of Smart Fields

Shell is currently mapping out the maturity of key technologies required to build Smart Fields. Case studies are carried out in Operating Units (OUs) to establish the business value.

Based on an analysis of performance improvements resulting from individual loops and extrapolating results from other industries, a preliminary estimate can be made of the potential value of Smart Fields. Early indications are that: Field design cycle times may be reduced by some 75% Production from existing and new fields may be improved by more than 10% Recovery from new fields may be increased by at least 5% Estimates do not yet include the other, admittedly difficult to value, potential benefits of Smart Fields such as improved staff training and more effective knowledge management. An important benefit of going smart could lie in restoring the image of the oil industry as a truly high-tech industry, attracting young engineers from non-E&P disciplines that are not normally drawn to a career in the oil industry.

Moving towards the Vision

It is clear that the Smart Fields vision is too big and the capability too complex for any one industry player to develop. We must explore new cooperative models, not only within our industry but also with universities, research institutes, government agencies and non-E&P industries, to create the momentum to develop the enabling technologies. The challenge is to build this capability by taking manageable steps in focused projects, and adopting a learning by doing attitude. A cultural change may also be required if we are to progress towards this vision. The risks inherent in field development combined with uncertainties in long-term oil prices tend to lead to a focus on reducing up-front cost. In many fields this will remain the right thing to do. The Smart Fields approach however leads us to treat decisions on data gathering and system functionality as investment opportunities; we buy options with which we can hedge our risks or improve our returns in the future. The ability to manage risks and uncertainties is core to our business. Only if the industry is willing to explore different approaches to risk management and decision-making can it expect to achieve the step change in performance that is possible. Over the next few years we must demonstrate that Smart Fields can fundamentally alter the risk/reward ratio of E&P projects. Probabilistic studies on smart well reservoir developments have already found that smartness can in fact reduce development risk, even if the reliability of the smart well is well below 100%.

South-Furious 30: Shells First Smart Field

In November 2001 Serawak Shell Bhd (SSB), a partnership between Shell and Petronaz, the Malaysian State Oil Company, commissioned its South-Furious 30 platform off the coast of Borneo (fig.5). The platform develops a stacked, laterally extensive oil field with four deviated gravel-packed wells, three of which are smart and one is relatively dumb, featuring only a down-hole gauge Wells are gas lifted and lift gas rates can be optimized and adjusted remotely. The smart wells allow zonal control of two different reservoir intervals that are produced commingled. The down-hole gauges combined with variable choke inflow control valves, allow flow allocation and measurement per interval, using vertical lift models coupled with reservoir models. Intervals can be production tested separately, by closing in the other zone. If one of the producing intervals waters out prematurely, it can be shut in without an expensive intervention. Because intervention was remote, the platform design could be slimmed down. All data is transmitted to shore and captured in a database. The platform is unmanned and can be controlled from the SSB offices in Miri. The upfront capital investment in well/field smartness is expected to pay back in less than a year. Additional recovery is predicted to result from being able to lift marginal zones for a longer period of time. Every percentage point recovery is worth about $ 2 mln PV to SSB. Shell considers the SF-30 development the shape of things to come and intends to build additional smartness into field/well designs, such as 4D seismic data acquisition.

Fig. 5 South-Furious 30: First Shell Smart Field

Conclusions
A step-change in field performance can be achieved by applying Smart Fields concepts and technology. Significant value potential is being identified through dedicated case studies. Shells approach to the Smart Fields concept involves the building of novel management and optimization value loops through integration of data, models and decision processes. New technology allows these loops to be constructed cost-effectively. The field life-spiral model can be used to analyze critical links and dependencies between successive loops. Smart Fields critically depends on having or developing the right skills and putting appropriate workprocesses in place. For the concept to take off the industry will have to adopt a value- rather than a cost focus. Novel cooperative models should be considered to stimulate the development of the key enabling technologies. Last but not least Smart Fields offers an exciting high tech vision for the industry that will help attract young staff.