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Market leaders in their respective sectors, IBM and Schlumberger, which have collaborated a number of times in the past, announced in August that they would form a partnership to combine Schlumberger’s production optimisation services, upstream expertise, and industry-leading Avocet production operations software platform with IBM’s enterprise asset management and services in order to deliver an end-to-end service for optimising integrated production operations.
The companies have said that customers should expect improved productivity, efficiency and cost management across operational areas including production optimisation, flow assurance, logistics, scheduling, HSE, human resources, equipment monitoring and maintenance.
Tech in harmony
Asked why the companies decided to combine forces, IBM oil and gas industry solutions executive David Haake says: "For 100 years we [Schlumberger and IBM] would work on the same job sites but for different project managers; Schlumberger in engineering/operations and IBM in IT.
"Enterprise and domain solutions were not always well integrated because they were bought separately, implemented separately, and operated separately by the oil company.
"But, in fact, everything that goes on in the oil business is one continuous value chain or lifecycle, so there are many opportunities to better integrate the steps of the oil business. It is in those business processes, workflows, interfaces, and integration that we see new value."
Cliff Moyce of DataArt, a technology consulting and solution design firm, explains how he thinks the companies’ combined technologies will complement each other.
"Schlumberger’s Avocet platform is one of the leading technology solutions for monitoring, simulating, forecasting and controlling offshore gas and oil production," Moyce says.
"However, though it is an integrated suite of services with many functions – including workflow management and decision-making around its core functions – it does not extend, currently, across the whole business architecture. It does not, or does not fully, cover administrative functions such as people planning and scheduling, financial management, logistics, procurement, HSE, and lifetime asset management. This is where IBM’s solutions for enterprise resource planning and asset management come in."
Moyce adds that: "If Schlumberger and IBM can get their solutions to work together in a seamless and configurable way, and they embed best practice into their processes, which is very important, then it will offer significant productivity gains to their customers, as well as improved data management, analytics and decision-making capabilities."
Presently IBM is conducting a major transformation project inside Schlumberger so the companies already have close management ties.
From 2010 to 2012, they worked on the same eight grassroots LNG projects in Australia.
"We had an opportunity and we took it to design the entire portfolio and business process of the new LNG ventures, or at least many of them," says Haake.
"Over time our clients began to realise that they wanted us to work more closely together. We have really strong evidence that this adds value, improves reliability and efficiency, and lowers their operational risks."
Currently, the firms are integrating their technologies on a four-year project for an Asian national oil company.
"We are changing all the business policies and helping the client establish an integrated operations centre," says Haake. "In their headquarters the company has connected some 50 different fields into one room and we have still a lot of work to do to add functionality; we are only 18 months into it."
Haake believes drawing on the different perspectives of Schlumberger and IBM – as an engineering company and an IT company respectively – can provide best practice, better integration and improved workflow practices.
"IBM has a broad systems integration and technology capability and a management consulting perspective on business process improvement," Haake explains. "Engineers generally believe in and follow a philosophy called Six Sigma, and this concept in essence means that you can always make something a little bit better.
"The oil industry has always employed ‘operational excellence’ strategies, a term which is synonymous with continuous improvement, and which has historically been focused on safety and reliability issues. It looks at the same issues somewhat differently; they look at improving the end-to-end process, which is a ‘lean’ approach. It’s a combination of these two ways of thinking that can lead to progress," Haake adds.
Overcoming new challenges
Although the digital oil field has been an industry initiative for over a decade, one of the challenges Schlumberger and IBM currently face is actually selling the integrated solutions to the oil and gas industry.
"We are trying to change the way customers operate," Haake explains.
"When they are changing and automating their way of working though, it takes strong change management for this to be successful. People like doing things the old way as that is the way they have always done things. It doesn’t mean that it is the safest way, the most efficient way, and doesn’t mean it will produce the most oil or highest yield.
"To get an oil company’s staff to trust new business processes and use the systems is a big part of the challenge the oil company, and we as the vendors, face. We have to go to management and say that if you are not committed to these changes, it won’t work. For you to have a better oil company you have to change the way people work."
Haake adds that the lower oil price at the moment is forcing companies to reassess the way they do things.
"In a way, the current low oil prices are a good thing, because if you make a lot of money and it is easy, you have no motivation to change or get better equipment, software and so on," he says.
"But in tough conditions like today, with $50 oil prices, the publicly-held oil companies in particular are under extreme pressure to improve key performance indicators such as yield and reserves replenishment rate, and grow or at least maintain revenues."
The return on investment of the project is quite fast, says Haake, because the technology doesn’t take that long to integrate as it is a case of connecting operations with workflow tools rather than replacing everything.
More about Schlumberger and IBM’s work together will be announced at Schlumberger’s biannual conference, The Forum, in Paris in April 2016. Haake has high hopes for the scope and ambition of the partnership.
"It’s fair to say that our $100bn [company] and their $60bn company have big plans."