by Bill Price
Technology has dramatically changed the oil and gas industry in the last decade. We know the effect of enhanced oil extraction on production but this was only possible through the introduction of sophisticated technology. The energy industry has become less labor intensive, as is true of most industries. The industry has experienced technology change in the role of not only people turning valves, but also in the roles of inspectors and clerks, as well as the tasks of analysis in general.
Technological unemployment has been occurring for some time. While many in the past would have thought technology would displace workers in the petroleum industry, it can create a shortage of skilled workers. A study by Graetz and Michaels found that the impact of industrial robots should boost pay for highly skilled workers while reducing pay for workers with low to medium skills.
In fact, Permian Basin energy companies have sophisticated control room operators who are engineers monitoring multiple drilling sites using up to 12 monitors. They check maintenance and production with a computer in an air-conditioned building. The drilling rig can be partially controlled from control room hundreds of miles away. This capability not only reduces labor cost but also improves quality of life for engineers. This reduces the need to be physically at the drill site. Perhaps these people could be located in Houston or maybe even in China someday.
While there may still be a need for pumpers to actually visit a drill site, now it is possible this task can be accomplished with the right video monitoring and mechanically connected devices. The site is only visited when something unusual is reported.
The business of finding and producing petroleum today has been likened to operations in an oilfield where “all the components integrate and communicate as well as your body does.” A McKinsey report describes a digital oil field where instruments constantly read data on wellhead conditions, pipelines, and mechanical systems. That information is analyzed by clusters of computers, which feed their results to real-time operations centers that adjust oil flows to optimize production and minimize downtimes.
Technology includes software, much of it specialized for the energy industry. Logging information is far more accurate than in the past, with a resolution from a few inches to centimeters. Measurement while drilling (MWD) provides data about the bore hole while the drilling is actually going on. Examples of high-tech advances can be seen in the work of DrillingInfo, Petra, and Petrel, as well as in 3D visualizations of a potential drilling site. Expert systems enable a less-skilled technician to tap the categorized experience of a seasoned expert while still in the field. Small cameras can be dropped downhole to actually look at the inside of a drilled hole. Communication is no longer radios but rather is cellphones with visual capability, messaging, and conference calling functions. Cameras can monitor gates to control who is allowed onto a drilling site.
The end goal is to integrate the well data, seismic data, and other advanced technologies with the help of software to understand the subsurface and improve hydrocarbon production. This represents an immense opportunity for oil and gas companies. According to Oil and Gas Investor, total upstream energy IT support spending is about 25 cents per barrel of oil. Also, Booz and Co. mentioned that some analysts believe digital oilfield technologies could increase the net present value of oil and gas assets by 25 percent.
A more recent application of technology is the use of cloud based computing. The idea is to have a centralized workstation and have the necessary software installed on it so the employees can remotely have access into it. This saves the hassle of installing software on every computer. Another advantage is that the data is stored in one location, so data sharing becomes easier from one department to another.
Technology has produced huge changes in the trucking industry and in improved communications for electricians, as well as for individuals responsible for lighting, for temporary housing, for safety monitoring. Industry-unique software not only reduces labor cost but also improves productivity, with resultant revenues and margins. Wells are far more productive and dry holes (once a huge problem) are now almost nonexistent. As the price of petroleum hovers at one half what it was five years ago, extraction has become more sensitive to costs.
Problems still exist in finding skilled technicians and business professionals with oil and gas knowledge. Expertise is needed in oil and gas accounting finance, software developing, mineral rights, and attorneys. It is rumored that some companies have moved to large cities in hopes better opportunity to capture these professionals.
Next is some good and bad news. First the bad. Texas Workforce has an expectation of 2024 as the date that would mark an overall workforce decline of 49,200 workers, as compared to 2014. Most of that decline has already occurred, though there will be some replacement. On the other hand, demand for highly skilled technology workers will drive growth in energy and other industry groups with a projected 25 to 40 percent growth in jobs. That is a dramatic reversal from the Texas Workforce prediction back in 2012.
In the future we will likely see further changes in both professional and skilled labor as a result of robots replacing workers. As an eternal optimist, I would say new, better-paying jobs are created as old jobs are eliminated. The new jobs just require additional education. Along those lines, some of you may recall the story by Spencer Johnson asking, “Who moved my cheese?”
Dr. Bill Price, the Dean of the College of Business and a Professor of Management at The University of Texas of the Permian Basin, has previously held several positions in human resource management and other leadership roles. He has taught various courses in human resources and has published a number of articles in the areas of human resource management and strategy. He can be reached at email@example.com.