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.
“In addition to compliance with legislative and company requirements, there is also a significant business benefit from ensuring the integrity of the assets/facilities. Minimizing of productions losses, prevention of unplanned shutdowns and rationalization of the purchase and storage of spare parts are some of the benefits that can result from a well-managed and executed integrity management system”, says Dr, Peter McLean Millar in his must read Asset Integrity Management Handbook. You shouldn’t miss it.
“Innovation distinguishes between a leader and a follower”, Steve Jobs said. Innovation behavior has positive relationships with career progression (salary growth and the number of promotions) and career satisfaction.
Only a few people are really innovators. According to Everett Rogers, 2.5% of the population. The professor got to this conclusion in the book Diffusion of Innovations, in which he explains his theory on how, why and at what rate new ideas and technology spread. He divided the technology adoption life cycle in 5 stages, by profiles of people that prevails in each stage.
Innovators are willing to take risks, have the highest social status, have financial liquidity, are social and have closest contact to scientific sources and interaction with other innovators. Their risk tolerance allows them to adopt technologies that may ultimately fail. Financial resources help absorb these failures.
Close to them are the “early adopters” of new technologies, about 13,5% of people. These individuals are also usually seen as “innovators” and have the highest degree of opinion leadership among the adopter categories. Early adopters have a higher social status, financial liquidity, advanced education and are more socially forward than late adopters. They are more discreet in adoption choices than innovators. They use judicious choice of adoption to help them maintain a central communication position.
Following them are the “early majority”, with 34%. They adopt an innovation after a varying degree of time that is significantly longer than the innovators and early adopters. Early Majority have above average social status, contact with early adopters and seldom hold positions of opinion leadership in a system.
Nobody is an innovator or a laggard for everything.
Each behavior depends on what is at stake
In the fourth stage come the “late majority”, also about 34% of population. They adopt an innovation after the average participant. These individuals approach an innovation with a high degree of skepticism and after the majority of society has adopted the innovation. Late Majority are typically skeptical about an innovation, have below average social status, little financial liquidity, in contact with others in late majority and early majority and little opinion leadership.
At last, with the same amount of people of innovators and early adopters together, 16%, are the “laggards”. Unlike some of the previous categories, individuals in this category show little to no opinion leadership. These individuals typically have an aversion to change-agents. Laggards typically tend to be focused on “traditions”, lowest social status, lowest financial liquidity, oldest among adopters, and in contact with only family and close friends.
Nobody is an innovator or a laggard for everything. Each behavior depends on what is at stake. The closer you get to innovator behaviors, the more you resemble a leader. On the other hand, the more you distance yourself, the longer you will must follow other people.
“Basic Coverage for Equipment Used in the Production, Drilling and Exploration of Oil and/or Natural Gas in Marine Operations (offshore) and Land (onshore) – Special Conditions (…) Clause 2 – Risks not Covered and downs Indemnified/ 2.1. In addition to the provisions in clause 5 of the General Conditions, are excluded from coverage claims for indemnification for losses, damages, expenses, or other costs resulting directly or indirectly from the following events: (…) j) natural wear for the use (including abrasion, friction, deterioration or encrustation by boiling machinery, plant or equipment as a result of use or daily operation), gradual deterioration, including any effects or weathering, oxidation, rust, flaking, scale, cavitation and corrosion of mechanical, thermal or chemical origin“.
The excerpt of the policy “Oil Risk Insurance”, from Tokio Marine Insurance Company (in a free translation from Portuguese), makes clear a practice of the insurance industry: not to pay for insurance arising from corrosion events. And the “Special Conditions” for pipelines and offshore platforms also list corrosion as a “risk not covered and downs indemnified”. “All risks of incalculable probability over which the insurer has no estimate capacity are not covered by insurance policies”, explained recently the executive of a reinsurance company to PhDsoft CEO, Duperron Marangon.
In fact, nowadays,
corrosion is a predictable phenomenon
In Brazil, where PhDsoft won its first clients, the insurance company Porto Seguro requires hiring a tracker that allows the location of a car in case of robbery or theft to vehicles of value from R$ 200,000 (link in Portuguese). “It’s the same logic that we are seeking to bring to the oil industry. Despite of deep water exploration in Brazil, no accidents that can harm the environment as much as the one with the BP offshore platform, in the Gulf of Mexico, has happened and this is partially due to our software PhDC4D®. We explain it as a comprehensive system resulting from the synergistic integration of a 4D-space-time visualization with a predictive corrosion algorithm, a regulatory code compliance engine and automation of engineering activities and best practices. This consolidates a safer and cost effective maintenance process”, states Marangon.
In fact, nowadays, corrosion is a predictable phenomenon. There are only few corrosion processes that any intelligent solution would have difficulty to deal with. Pitting – a form of extremely localized corrosion that leads to the creation of small holes in the metal – is one. Since PhDC4D allows companies to monitor corrosion conditions and its evolution, insurance policies could start to cover corrosion caused accidents. That is technological disruption uniting two very traditional sectors in a win-win relationship for everybody.
Nanotech sensors connected to the internet are dispersed in the painting of hulls and pipes, measuring thickness and corrosion rates in real-time and practically eliminating risks of offshore operations. It’s cool, but it will take a little longer. So far, it’s only science fiction.
But if the painting nano gadget is still a dream, the use of sensors connected to the internet integrated by a software like PhDC4D is headed in the next five years. Until the beginning of the next decade, thickness or and corrosion rates will be measured all the time. Since we are talking about very large structures, human measuring will still be needed, but in a more intelligent way, focused in areas previously selected with the help of sensors.
In fact, any device with an on and off switch to the Internet (and/or to each other) will be connected, in what is called the Internet of Things (IoT). The IoT is a giant network of connected “things”, which also includes people. The relationship will be between people-people, people-things, and things-things. Intel says that by 2020 there will be over 200 billion connected devices. In 2015, there were 15 billion.
Anything that can be connected, will be connected
This includes everything from cellphones, coffee makers, washing machines, headphones, lamps, wearable devices and almost anything else you can think of. This also applies to components of machines, for example a jet engine of an airplane or the drill of an oil rig. It is not different with Computerized Management Maintenance Systems (CMMS).
If you want to know more, have a look at this Guide to the Internet of Things produced by Intel.
PhDC4D is going through its final adjusts to be launched in App form, for Windows Mobile, Android and IOS. The App will allow user to do everything he does in the site, managing inspections and defects in hulls, pipes and other structures. Although PhDsoft expects it to be much more used to register anomalies than to manage inspections.
Besides having all equipment status in the pocket, the user of PhDC4D App will be able to synchronize the anomalies registered as soon as he is back to the office, making data available to every member of the team. And thus, PhDsoft technology keeps evolving to the integration into three systems:
- Computers – more technical, with its 3D models.
- Internet – more managerial, where are registered all defects.
- App – managerial and technical.
Intrinsically safe equipment
Since the App is going to be used in structures like offshore platforms, one alert we must make is that only intrinsically safe tablets or phones are allowed. Any other kind of equipment is forbidden because of the risk of explosions.
In intrinsically safe equipment, produced by companies like Aegex Technologies and Sonim Tehcnologies, the electrical energy available in any spark which can occur in the hazardous area will be non-incentive. This avoids the risk of explosions.