Service Agreements For High Speed Communications In The Oil Field | Wireless solutions
The main issue with field communications for most companies in the energy industry is the lack of reliable high speed communications. How does a small energy company improve their communications when even the largest energy companies don’t know how to do it?
Today, there is an issue with how the majority of oil companies collect data from their producing oil and gas fields. Where low speed serial communications have been used for the last fifty years to monitor and operate these assets, the industry is now feeling the pressure to improve communications and move into the information age. Low speed communications are easier for a company to self-maintain. Providers, like cell phone or satellite companies, do provide reliable comms for low speed data requirements. But high speed communications require an engineered infrastructure that provide reliable networks that deliver critical information back to the companies in real time. Public cell networks are not built out into these remote areas and satellite has high latency and becomes too expensive when higher bandwidths are required.
What is driving the change and need for higher speed? More reliable networks? When oil is $100 per barrel and gas is $10 per MCF, oil and gas companies can be more relaxed on how they monitor these networks. The easiest way is to hire enough people to drive to each site and visually check the sites each day. This type of monitoring of critical assets is inefficient and has proven to not be effective with all of the personnel issues that are associated with it. With oil at $40 BBL and gas at $3 MCF, energy companies now need remote monitoring and technology integration to cut operational costs and meet regulatory requirements.
All you have to do is look at how the internet has exploded over the last 10 years to see how the information age has evolved. When the internet first came to companies and residents several years ago, dial up modems were prevalent in connecting everyone to the internet. Entire companies would utilize a single T1 (1.5 MBPS) data network to access the internet. Home computers used dial up modems that maxed out at 28.8 KBPS. The jump in modem technology to 56 KBPS seemed adequate to deliver a home network for years. But technology has improved and along with that came the need for higher speed networks in corporations and homes. Now a small company can have up to 50 MBPS for a fraction of the cost of what the T1 was several years ago. And home networks require 10 MBPS + just to keep their multiple Wi-Fi devices operating.
The energy industry is no different. In fact, the company that moves the quickest toward reliable high speed networks in these remote fields will have the competitive edge over those that continue to use low speed networks with manpower, heavy management, and monitoring. The manpower efficiencies of an intelligent field are overwhelming. If a company could have just 10 MBPS of reliable network at each oil pad, they could collect terabytes of data on every aspect of that site. With video and audio, they could see and even hear what is going on 24 hours a day. This would allow them to receive alarms if an unauthorized person visits the site. They could visually see any gas, water or oil leaks to prevent environmental issues. They would be able to monitor workers on site to make sure everyone is safe, and has performed their duties in compliance with company policies. Data collection would be immediate, so energy production would be optimized for highest outputs. Workers would be able to work onsite with computers to become more efficient in record keeping and operations. The list of reasons for implementing a reliable high speed network is endless. The companies that have the foresight to implement this first will be the leaders.
How does an energy company upgrade existing aging networks or implement brand new networks to get the competitive edge? The problem with most, if not all, is that most of these companies don’t know how to do this. The CIO and IT expertise is in how to build and maintain high speed networks in corporate offices and maybe field offices. (Carpeted Areas) Once the telecom need goes out beyond the corporate cloud, the expertise evaporates. A few companies have maintained a qualified telecom staff that tries to do its best to provide field communications. But the budget is usually controlled by the IT staff, and the cost for any network faster than serial or low speed Ethernet in the field is never budgeted, and even looked down upon by the current CIO’s. Field operations usually implement what they can without the corporate office finding out, and hope for the best. The installed field networks cannot support the future data needs but can support the slow speed, manpower intensive ways of doing business that have been prevalent for the last 50 years.
The best way to move a company into the real information age, is to upgrade or build these networks in the field. Easy to say, not so easy to do. How do you convince the C-suite to spend millions of dollars on a network that the C-Suite doesn’t even understand? It needs to start with CEO, CFO and COO of each company being educated on the product. The initial cost benefit for operations and ROI to pay back the company for saved inefficiencies, will drive this effort. Once the CEO sees the return and the improved efficiencies, the energy companies will jump towards this new way of doing business.
So what are the opportunities for service providers to capitalize on this issue that the energy providers have with their field telecommunication networks? Up until now, telecom vendors and service providers have been trying to get these same energy companies to upgrade and spend capital on their networks. The vendors just want their technology to be sold. Service providers just want to sell, install and even maintain the networks. And the energy providers want cheap communications in the field so that they can afford to keep operating, not realizing that cheap communications keep them from getting the competitive edge to move ahead of their competition, or even worse, they fall behind because they don’t see how reliable networks give them a new way of doing business.
The opportunity lies within a forward- thinking company that can provide these private communications to the energy companies as a service. Instead of a company spending capital to build an infrastructure that it doesn’t know how to maintain. Energy companies need to sell their existing infrastructure, towers, radios and network equipment, to service providers that will then lease back these services to the same energy companies. All of the internal processes to keep their field networks operating at an optimal level are now handled by the service provider. This is really no different than an internet provider delivering internet to an entire community in a residential area. The energy provider has multiple field locations, oil pads, etc. that need a certain amount of bandwidth. The service company engineers and provides the network per the customers’ requirements. The customer pays for that network on a per site basis. A field office may require a 40 MBPS connection back to the corporate office and each oil pad requires 5 MBPS for today’s network. (video, audio, SCADA, security gate and corporate Wi-Fi) But in a few years, just like in the days of serial communications, additional bandwidth is needed on the pad. It is the service company that should be required to re-engineer a solution to provide the additional bandwidth required, the energy company keeps producing and improving with the new technologies the service provider supplies. If the communications network was owned by the service provider, then the energy company’s requirement for the network would drive the service provider to deliver an adequate network. Everything being paid for by the long- term lease between the energy provider and the service provider.
You may be wondering why the energy companies don’t just use AT&T and Verizon data modems to provide this same service. They actually try both cellular and satellite to do this same function. The short answer is that the cellular providers, even though they tout coverage across the entire country, do not build adequate networks to supply reliable communications in these remote locations. Their money is best spent in cities and towns where voice and data is the most concentrated. Even in cities, reliable enough cell communications to provide a continuous 5 MBPS network is not achieved. Over subscription of networks is how companies make their money. Several pads in a remote field would only be a fraction of the revenue that a small city or town would provide. It doesn’t make economic sense for a cell phone company to provide high speed 4G or 5G communications so they just provide enough coverage for some voice communications and low speed data. Satellite communications can provide higher speed networks to the field, but at a very high monthly operating cost. The performance is not optimal with higher latency due to the fact that it has to travel thousands of miles into the atmosphere and back down before the data can be processed.
The opportunity for a service company to purchase and provide back the networks to energy companies is large. The problem will be getting this information to the CEO and his team and convincing them this is the best way to move their company forward. The next issue for the service company is the capital to purchase the existing networks and upgrade them to the requirements the energy companies have. The service contract is a win for both the energy company and the service company. The energy company is the beneficiary of reliable semi-private communications network that is right sized for their needs, with the ability to increase or decrease the network when changes occur. The service company has the revenue to continue to deliver a quality service with a long-term contract.
Finally, how is a large or small company to justify the cost of a semi-private network. Is there actually a return on investment, ROI, or is this just another high O&M expense that makes it harder to reach the financial goals of each individual company. The truth is that the cost of operating the way Oil and Gas companies do today is not cost effective in how they acquire information and make decisions. An example is what manpower costs today just to collect the information that an automated network could do 24 hours a day. Below is an example of how manpower reduction alone can produce an ROI.
EXAMPLE: An oil and gas field with 500 pads and 1500 wells requires 100 pumpers to operate. The pumpers drive and check their approx. 15 wells per day. Since oil fields are typically not near where these pumpers live, they must drive an hour each way just to get to the field. (120 miles around trip) A pumper should be able to cover 15 wells easily in a day’s drive, but the number is higher due to days off, vacations, sick day, etc. And once an issue is found with a well, then the route is stopped and maintenance is performed. In all, a pumper most likely drives 200 miles per day just to check his wells. That could be as much as 50,000 miles per year. Take that times 100 pumpers and you have a total of 5,000,000 per year driven to check wells.
Now let’s look at what a pumper may cost the company. This math is simple also. Let’s say that with salary, benefits and overtime each pumper is paid $100,000 per year. That’s another $10,000,000 toward the companies O&M. What if this same company has lease holdings and they plan on increasing their field from 500 pads to 1,000 pads. Thus, also increasing their wells from 1,500 to 3,000+ depending on how many wells they drill on each pad. They have just doubled the pumpers to 200, the miles driven to 10,000,000 and the payroll for all the pumpers to maintain these new assets will be $20,000,000 with all the same inefficiencies as before with twice as many issues.
Automation over high speed communications in the field lowers the need for pumpers to drive around the field to check for issues. Video cameras, microphones, leak detection cameras, security gates, theft issues, etc. can all be managed 7/24/365. With adequate technologies installed, a company can now concentrate on keeping highly functional pumpers that now do preventative maintenance. And can react to issues faster than could be done with the old way of doing business.
In conclusion, just as we have all seen technology improve our daily lives and how immediate information, like smart phones, keeps us more informed and productive today. Technology using high speed networks in our remote fields will save companies millions of dollars each year and improve their overall production. All of this with results that could produce an ROI that pays for itself in a short amount of time giving the company that moves the fastest into this technology an immediate advantage over the rest of their competition.
Twin Eagle Consulting, LLC