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Study Points to Public Policies to Develop Innovation in the Oil Sector

PhDsoft was invited to join in a study that has just been released: Technological Learning and Industrial Innovation – Working Paper Series. It was made by FGV EBAPE, a renowned Brazilian Institution. The objective was to answer two basic questions: To what extent and how have companies in the Brazilian oil and gas industry accumulated technological capabilities, both for operational activities and for innovation? And how has this process influenced the reach and strength (or weakening) of industrial competitiveness?

The choice of the oil and gas sector is justified by its economic and technological importance in Brazilian industry. Oil and gas extraction and its supporting activities have a share in the country’s industrial GDP of over 10%. Petroleum and its derivatives are products of great importance in the export agenda (11% of the total exported in 2014) and oil is the main energy source used in the world and in Brazil (representing 33% and 39% of the world and Brazilian energy matrix, respectively). From a technological point of view, this industry has presented new opportunities for innovation, with overflows for other economic sectors, such as the chemical and construction industry. In addition, partnerships for overcoming technological challenges are a notable feature of the oil and gas industry.

Brazil has 6% of the world’s oil reserves, which is a stimulus factor for investments in the sector. By 2020, the total investment in equipment and services for Extraction and Production (E&P) in the country will be US$ 400 billion.

Of this sum, more than 30% will be directed to the production of submarine equipment, which shows a good opportunity of scale to develop the local productive chain. Brazil ranks 13th among oil producing countries, considering the number of barrels produced per day, corresponding to 2.7% of world production.

The study got to several conclusions and pointed to public policies that could help to develop the sector in the country: “It is important to note that the internationalization of the oil and gas industry has been a high priority in the industrial policy framework of the sector in several countries. In Norway, for example, the policy objective was to use the technological capacity developed internally for the international market, thus strengthening the growth and development of the oil cluster in the country in the long term. Today, advanced products and systems created in Norway compete successfully in the global market, including in Brazil”, concluded the study in respect of the need of support for Brazilian companies to compete in the international market.

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PhDsoft’s revenue continues to increase in a $1 trillion potential market

“PhDsoft will grow in the current oil crisis because companies are searching for ways to reduce costs without raising risks, and that’s what we do”, predicted in the beginning of the year the CEO and founder of the company, Duperron Marangon. In fact, we know now, PhDsoft’s revenues are going to end 2016 in a 30% increase. Beyond the oil crises, though, there is a potential $1 trillion market to guarantee the company success at least until 2022.

Gartner has just published the report Top Strategic Predictions for 2017 and Beyond: Surviving the Storm Winds of Digital Disruption. “Digital business innovation creates disruptive effects that have a wide-ranging impact on people and technology. However, secondary ripple effects will often prove to be more disruptive than the original disruption. Digital strategists must actively identify secondary effects when planning change”, says the Summary.

One of the Strategic Planning Assumptions of the document is that “by 2022, IoT (Internet of Things) will save consumers and businesses $1 trillion a year in maintenance, services and consumables. The key findings were that: Assets under maintenance globally exceed $240 trillion, with maintenance costs of $27 trillion; Moving to predictive maintenance (with PhDC4D, for example) can often save 10% to 20% over preventive maintenance; IoT, properly deployed, can unlock this $1 trillion savings opportunity (excluding new technology investments).

Near-term flags are: Emerging use cases demonstrating the use of IoT to drive predictive maintenance; Proliferation of digital twin models to optimize predictive maintenance efforts by 2020; Reporting of improved efficiency based on IoT implementations by 2018; Software models of physical assets provided by suppliers by 2020.

The study recommends to: Identify costs associated with scheduled maintenance and consumable expenses; Target a 10% reduction of these costs, based on a shift to a predictive regime; Build a roadmap to implement IoT projects against the portfolio, targeting the fastest returns, initially focusing on larger, more complex and expensive assets — where downtime and waste are expensive — and instrument to deliver “low-hanging fruit” cost savings, starting with POC projects that have short payback periods in order to build momentum for these projects; Continue to prioritize additional IoT instrumentation for additional cost savings until you approach the point of diminishing returns.

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An Expert Interview About Information Technology in the Oil Industry

Concluded in last June 1st, the Energy Perspectives 2016 – Long Term Macro and Market Outlook, from Statoil, begins with the following statement: “Global energy markets are in transition”. In fact, the 2008 crisis is not over yet and new technologies are promising to revolutionize the energy business, which also means lots of opportunities. This is the drive for Duperron Marangon, CEO and founder of PhDsoft: “We will grow in the current oil crisis because companies are searching for ways to reduce costs without raising risks, and that’s what we do”.

Expert in technology management and asset integrity maintenance, Marangon has been in the oil industry for the last three decades and see too many uncertainties regarding the future: “Everybody likes to talk about clean energies. I’m not different. The instant image associated to that is of a better planet. But nobody knows if this is going to be economically sustainable. Statoil Outlook, for instance, asks if cost reductions in extraction could affect the competitiveness of different fuels. There is no answer, as they analyze on the following excerpt”.

The Productivity Puzzle

Total Factor Productivity (TFP), primarily driven by labour productivity, has for several Western countries fallen since the IT boom of 1994-2004. This is unfortunate as its stimulus to economic activity has been slow and productivity gains are a necessity for a robust wage development. It seems legitimate to ask why this weakening has come about. Some of the recent new information products, such as social media, are innovative and improve people’s living standards, but do not seem to increase efficiency in the same way that the advent of PCs or the growth of the Internet did. Since the end of the financial crisis, companies have had easy access to labour and hence expanded the labour force instead of investing in technology to boost output. Furthermore, job creation has to a large extent been within low-skilled jobs in the service industry, where productivity improvement is typically low. It is also possible that companies have become more reluctant to invest in labour productivity due to stricter and more complex government regulations introduced in recent years. These regulatory efforts boost growth over the longer term, but slow the current momentum within industry and trade. Finally one might question if productivity gains are fully measured and captured in the “new economy” of e-commerce and so-called “sharing”, and in the service industry in general.

The world might have to get used to somewhat lower future productivity growth compared to recent decades, with a consequent slightly negative impact on the economic outlook. However, there will be supportive factors for productivity that could push it upwards. Reaping the full effects of the IT boom might come with a delay, as was the case with many earlier inventions, which were so comprehensive that it took years for their full impact to emerge. This – combined with the more recent drop in the cost of 3D printers and sensors, big data management, ongoing automation, and more – has the potential to transform the economy and increase productivity. Today, the world is increasingly connected and progress can spread rapidly. As labour markets in the Western world continue to tighten, putting pressure on wages, companies will have a stronger incentive to invest in training and technology, which will add support to productivity growth. Governments’ policy support, reform, and increased ability to invest in infrastructure will also be decisive for productivity in the decades to come.

“In other words, companies will not be able to keep going without raising investments in technology anymore. This is the only way to improve productivity, reducing re-work, preventing accidents and unplanned shutdowns, and so reducing overall costs. PhDC4D, our main software, has lots of cases, since it promotes more than digitalization of the whole maintenance process, but standardization. It makes everything more simple, effectively reducing costs without raising risks. As a matter of fact, it raises safety. As Statoil notices, all industries are expected to face digital disruptions in the 2020s, and will need to transition to new digital models to optimize their business”, explains Marangon pointing to another excerpt from the research.

Digitalization can improve efficiency and reduce costs, as illustrated by the progress made in the airline industry since the end of the 1990s. Sensors on planes have helped airlines realize fuel efficiency targets, maintenance and route optimization, while digitalization of sales and reservations has reduced errors and led to the “pricing and overbooking business” – where companies use big data to optimize plane occupancy. New ideas are developed as airlines understand their own data better, leading to a continuous learning journey of adapting and testing the operating model.

Brazil Oil & Gas Technology Radar

More focused in new technology and innovation, Lloyd’s Register surveyed Brazil-based oil and gas leaders, from 240 companies, between September 5 and October 3 2016, to produce Brazil Oil & Gas Technology Radar. It asked what the biggest barriers to innovation are today in Brazil, what challenges exist to the deployment of new technologies, and explored the impact of specific policies on the sector, such as the mandatory 1% levy on oil and gas production that is being redirected to local R&D. The survey also asked participants to rank a number of potentially game-changing technologies in terms of their short and longer-term impact on the sector.

Of the 26 technologies listed, respondents believed all would have some impact in the future. Distinctions were made between those that would have a high or medium impact in the short term (before 2020), medium (2020-2025) or long term (2025 or later) time horizon. Until 2020 were all incremental improvements on existing technologies: subsea robotics and other deepwater equipment advances, sensor technology such as wireless monitoring, and high-pressure high-temperature drilling.

“We’ve been investing in developments for the Internet of Things (IoT) for the last years, and our technology is ready to help the oil industry to get through the current challenges”, says the CEO of PhDsoft.

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From a hull maintenance software to an innovation platform

The use of hull life-cycle maintenance software since 1995 on 26 major Brazilian oil company tankers has reduced inaccuracies in the evaluation of ship renewal costs during dry-docking. Due to its success, the software has been redeveloped and extended for the whole floating fleet, including FPSOs and jackups, replacing regular drawings by the 3D models. While jackups’ needs are very similar to ships since they can dry-dock, FPSOs have a totally different approach with attention to corrosion being the primary focus. Past 20 years, PhDC4D has become an innovation platform that can include almost any kind of new features tailor made to companies’ needs.

Today, PhDC4D is already in use for painting and pipes of the FPSOs process plant of a major Japan company. It is also in test for the Internet of Things, both to ROVs and measuring sensors of tube thickness. Soon it will include cranes and pipelines as much as secondary equipment as an FPSO stair. “The software allowed a sophisticated data acquisition process to be applied, capturing and applying large quantities of key information thus enabling risk-based inspection to take place”, explains PhDsoft CEO, Duperron Marangon.

Results achieved

The technology incorporated into the software has been shown to reduce by 50% the cost required to renew steel on a VLCC. By extrapolating old gauging data to achieve a better mapping of the corroded areas, we were able to raise the accuracy of the forecast steel renewal figure. The client was therefore able to predict the budget required ahead of time more accurately.

We subsequently had two cases in which we helped to avoid a tanker’s repairs to continue regular operation. Due to the large amount of steel renewal that would be necessary the hulls were converted to FPSOs instead. Use of the software also allowed a ship owner to anticipate a request for classification societies to use FEM criteria to produce reassessments. This reduced by half the amount of steel renewal required.

PhDC4D allowed users to realize the poor quality of some thickness gauging reports and take actions to improve accuracy. Besides the primary applications for the software such as identifying areas of greater risk or those with higher corrosion rates, the models were also used to aid knowledge management for all structure-related issues. This replaced the existing management systems for this information. The models became the database for risk-based inspection procedures adopted by Petrobras.

The sharing of information through the software between ship and rig owners with classification societies’ consulting branches and gauging companies has been made possible through a common interface. Petrobras has hired the consulting branches of major classification societies to develop and update the many different models to assure the safety of offshore rigs including stability, hydrodynamics, FEM and degradation. For stability they developed their own software to keep a common interface for all rigs. The same approach has been used for degradation information by using the single interface provided by PHDC4D with the various classification societies involved.

There have been no major structural incidents with Transpetro tankers during the last two decades, when they have used this technology. In part this is due to a broader set of good practices being implemented such as better control of structure integrity status through the use of PhDC4D.

Technology standardization

A number of other organizations developed products with similar goals. Similar approaches have been used applying the same principle as the classification rules. These had to be standardized according to IACS common structural rules. On December 14th 2005, the Common Structural Rules for Tankers & Bulk Carriers were unanimously adopted by the IACS Council for implementation on 1 April 2006. The Council was satisfied that the new rules have been based on sound technical grounds, and achieve the goals of more robust and safer ships. IACS started then to implement the CSR maintenance program (IACS Procedural Requirement No32) via the IACS CSR Knowledge Centre (KC). All the agreed Q&As and CIs (common interpretations) are published on the IACS web site without delay in order to assist its member societies and industry in implementing the CSR in a uniform and consistent manner.

It took some time for the rules to be standardized and we believe there should not be the same delay for hull maintenance software. The sooner standards are established, the sooner the industry can benefit from a common interface. Establishing a common database format, but still requiring a user to have deal with multiple different interfaces according to the classes of their fleet, is not desirable. Ideally broader development cooperation should be realized to facilitate faster development and interface standardization.

PhDC4D as an innovation platform is mature for large-scale application. Building models and inputting data is a long-term process. Addressing differences between emerging technologies represents the next big challenge. PhDsoft has experienced these issues while the software was under development with models having to be adapted to reflect changing technology. The software development process, therefore, has to be sufficiently flexible to address evolving technology and successive model changes.

Please, contact us for more information: +1 (713) 340-9958 or phdsoft@phdsoft.com.


PhDC4D offers investment opportunities for oil companies

This is a Remotely Operated Vehicles (ROV) integrated with PhDC4D. It was a project financed by a private company, like the oil ones obliged to invest part of its revenue in R&D, in Brazil. Last year, this obligation resulted in more than R$ 1 billion invested in projects like this. PhDsoft is looking for new partnerships.

There are no limits for what can be done with PhDC4D. The software operates in a Computerized Maintenance Management System (CMMS) category, which is like the known businesses managements ERP (Enterprise Resource Plannning), but focused on maintenance. In terms of business intelligence and knowledge management, PhDC4D is a CMMS. Its differential is that both CMMS end ERP can be resumed as an amount of tables.

In other hand, PhDC4D begins with the modeling of a structure in three dimensions, at a specific date. Somebody could think about defining it as a sophisticated CAD, but what about this fourth dimension that allows to simulate the evolution of structure along time? It results in a 4D software that can help to solve any kind of problem.


R&D obliged investments in Brazil

In order to expand technology to meet the integrated needs of customers, PhDsoft has traditionally built partnerships with big players of the oil sector, like Petrobras. These partnerships has resulted in a sort of new features such as the ROV integration.

This project used PhDC4D’s technology to manage the hulls and keep track of the maintenance of an offshore platform´s operation integrity by using the exact location of the data obtained by robots in real time.

The best news is that, although it has international headquarters in Houston, PhDsoft’s development teams continue to be coordinated by its unit In Brazil. This means PhDsoft is still a Brazilian company an so can be considered eligible to the demand for national content for the R&D investments oil companies are obliged to make in the country.


Internet of things

Last year, the Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP) has changed the rules for these investments. From now on, 10% of the revenues must be invested in Brazilian companies other than the one that originated the revenue, like PhDsoft.

In the first three months of 2016, almost R$ 150 million were generated for obliged investments in R&D by oil companies operating in Brazil. In 2015, the amount reached more than R$ 1 billion. The deadline for the investments related to 2016 ends at June 30th 2017.

The next generation of projects PhDsoft is preparing intends to enroll everything related to maintenance in one only solution: static and submarine equipments, pipes, risers, structures and secondary structures, cranes, among others. One goal is to make it all ready to the internet of things. The objective is to integrate PhDC4D with sensors like the ones inserted in pipes to measure corrosion taxes or the ultrasonic thickness and strain gauges.


C4D software helped a client save US$ 400K

A container ship suffered bottom damage due to grounding. Two shipyards were contacted to evaluate the damage and provide repair estimates. But the estimates of the amount of steel required for repairs varied by 40%. An accurate assessment of the actual extent of damage extent and required repair material was urgently needed.

The case is real and happened to a PhDsoft client, a major company that operates ships in Brazil. In a few hours, using the repair tools of C4D Software®, the steel requirements were recalculated, showing that actual repair needs were 61 tons of steel, 60% less than the high estimate. It was clear that the shipyards significantly overestimated the amount of steel to be replaced.

Considering the cost of steel renewal in local shipyards of $11K/ton, the result was a saving of $400k. With the actual figure at hand, the client could safely and confidently select the shipyard with lower price and avoid the risk of the scope of materials increasing during repair execution.

“Without C4D Software we would have been forced to blindly follow the quotation of the shipyards with no control over the situation. Without C4D we never would have received the accurate numbers in time to make the right decision. The calculation of steel renewal done by C4D Software is more accurate than the shipyard because it takes into account all the original thicknesses”, stated the company.