The oil industry

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This was the introduction to the keynote speech given by Peter Griffiths, managing director BP Oil New Zealand Ltd at the 2001 Technology Education New Zealand (TENZ) national conference. In his address, Peter took the audience on a brief journey through BP's business and outlined how the company was applying technology to enable it to achieve its ongoing business objectives.

Peter explained that technology is a core element in BP's brand values. These brand values define what BP stands for as a company:

In his address he looked to link the modern oil industry and the operation of BP as a company with the concepts of technology and technological literacy as outlined in the technology curriculum statement.

The global demand for oil

The global need for energy is now greater than ever. Energy is one of the fundamental requirements for development and sustenance of a modern economy - the source of heat, light, and mobility for 6 billion people.

Today, the world will consume around 77 million barrels of oil. By 2010, the demand for oil, even on conservative assumptions about economic growth, could be as much as 90 million barrels a day. A 15 percent increase in just 9 years - and it could well be more.

It is this human need for increased energy, which is shaping the future of the oil industry through two powerful forces - efficiency and substitution.

Those two forces are the focal point of a great deal of technical change. They represent the points at which technology and business come together.

Efficiency

There have been a series of advances over recent years that have transformed the efficiency of prospecting, recovery, and production of oil.

Technology has increased the quality and speed at which seismic data can be acquired and interpreted - which in turn leads to a greater understanding of the sub-surface characteristics and structures of oil and gas reservoirs.

Seismic data can now be interpreted in three months when it could previously have taken a year - this reduction in time avoids the drilling of additional wells resulting in a cost saving of around $100 million per well.

New and innovative advances have occurred in the mechanical technology of drilling, enabling BP to push the limits of its wells in terms of depth, pressure and overall distance. The wells can be curved and turned as desired and drilling crews no longer have to stand on top of the reservoir to drill into it.

A combination of fibre optics and software now allows operators to interpret seismic data actually ahead of the drill bit, and to take corrective action to steer the well safely through fault zones or potential hazards.

When drilling is completed the same systems have created so called "intelligent wells" - which can control flow rates and give the ability to manage what is happening downhole on a continuous basis.

These have great potential for use in deepwater, inhospitable, and sensitive environments which are now being increasingly explored.

In each case these advances have been assisted by a new technology relying on visual simulation - the ability to display information on a screen.

One of the most exciting innovations of the past year has been the concept of what are called HIVEs (Highly Immersive Visualization Environments). A HIVE is a workroom with a series of 3-dimensional digital projectors around which large teams of people can gather to manipulate data and pictures.

HIVEs give BP something it has never had before - the ability to give all the people involved in a project a common mental picture of the structure on which they are working. This helps create a rapid and common understanding of something they will never actually see.

BP has 15 HIVEs in operation around the world, and another three under construction. In every case they change the boundaries of teams, and bring together people of very different disciplines - all applying their skills to a common objective. As a result of the technology, decisions are able to be reached in a matter of days rather than weeks or months. Worldwide, HIVEs can add $300m a year to BP's bottom line - which is very exciting to the company , both technically and commercially.

There have also been advances in robotic and remote operating technologies for use underwater, this allows a continual extension of the oil prospecting frontier. Much of the earth's surface is covered with water and much of it is very deep - so exploration and development in very deep water is of great value if the world's future demand for oil is to be met. Twenty0 years ago 600 ft was considered to be the working limit. Now its 6,000 ft and that is by no means the limit.

In the 1980s, the well cost of finding and developing a barrel of oil was rising - in some cases to $12 or even $16 a barrel. That was unsustainable because crude prices were coming down and if unit costs had stayed at that level, private companies simply wouldn't have been able to compete with the OPEC producers.

The impact of the measures described, the improved capacity for digesting vast amounts of seismic data quickly, capacity to create a common understanding among teams of different disciplines combined with smart drilling capabilities often in deepwater has lead to lower costs, increased production, and more efficient recovery. The net result is that finding and development costs for a new field are now typically down to below $8 per barrel.

Substitution

This relates to technologies which have brought about a shift in the fuels that BP develops and sells over time and will sell in the future.

The world needs to diversify its sources of energy away from traditional petroleum products, and to begin a shift in the energy mix that will be as important as the shift from coal to fuel oil was nearly a century ago.

Some people believe that this coming shift will be and needs to be to directly to renewables and non-hydrocarbon based alternatives and indeed, one day, according to Peter, they may well play a major role.

In the meantime - and that could mean a period of 20 or 30 years - the major shift in the energy mix will be to natural gas. That is the next big step and it has already begun. Over the last decade global energy consumption has risen by 10 percent. Oil use has grown by 12 percent, while natural gas demand is up by 19 percent, and continues to rise some 2.5 to 3 percent a year. Again technology is driving the change. Turbine technology has dramatically increased the productivity of gas as a fuel in the power generation sector, and now liquification and pumping technology is changing the economics of long distance gas transportation.

That sort of development is fundamental because it means that gas can become an internationally traded fuel that does not depend on extensive pipeline networks. That in turn will change the scale and the pattern of supply and demand.

It means for instance that in China, natural gas can be imported - from Asia, from the Middle East and from Russia - and can offset or displace coal as a source of power generation as well as providing energy for the industries and people of China's great cities.

And of course that carries a great environmental benefit as well because gas produces 24 percent less carbon than oil and 41 percent less than coal.

Ten years ago gas accounted for just 15 percent of BP's daily production. Now it's 40 percent and that figure continues to rise.

So as technology drives efficiency and substitution, technical change is leading the change in the pattern of energy supply and demand on a global basis.

The range of technology being applied locally

Here in New Zealand much of BP's focus is in the areas of people safety and environmental protection.

Safe supply of oil

BP imports most of its crude oil from the Middle East. It arrives by large ships to the refinery at Marsden Point near Whangarei to be refined into petrol and diesel. Once refined, the fuel is taken in smaller ships to marine terminals around the country where it is put into storage tanks via a system of manifolds and pipelines. It is a potentially hazardous procedure involving billions of litres of fuel.

Safety is paramount and the safety ethic pervades the entire BP organisation. In order to safely manage the amount of fuel being discharged into each storage tank, computerised control and alarm systems have been installed at terminals. These warn when levels in tanks reach their limits during the discharge, which is largely automated. Once levels reach the maximum fill level, valves automatically close and the ship discharge is shut down or switched to the next tank. A computerised management system means that one person can manage the complex process of discharging many tons of fuel safely and efficiently.

Road transportation

Once fuel leaves the terminal, it is the turn of BP trucks to take it to service stations and commercial customers. Over the years, there have been a number of accidents involving oil trucks. Regardless of the cause, the potential consequences of an accident involving one of these vehicles laden with fuel are serious. A great deal of effort has gone into the design of the typical fuel tanker you see every day on the road and a number of new technologies have been incorporated into the design of the BP trucks to enhance safety.

The first of these is a computerized truck performance system -- called a '"silent witness". These systems provide useful data in case of an accident something like the "black boxes" of a plane. But besides forensic accident information, the data gathered also gives important information on the safest and most efficient way to drive - by monitoring gear changes, acceleration, deceleration, and braking. It also helps in the measurement of tyre wear and fuel efficiency. This data is used to better train drivers in good driving habits.

More soundproofing has been introduced to quieten the cabs on the trucks so to help prevent industrial deafness. Time has been spent looking at the ergonomics of the cab and to avoid back strains, more comfortable seating has been installed and dashboards redesigned so instruments are within easy reach to make it easier for drivers to do their work.

Truck drivers can drive up to 12 hour days and often work shifts, so fatigue while driving is a large and under rated risk factor. BP ensures all its drivers undergo a thorough fatigue management programme which takes into account the whole of their lifestyle diet, sleep habits, family situation, and health issues.In order to boost flagging returns BP has become a convenience retailer selling groceries and convenience foods at its service stations in direct competition with supermarkets and coffee shops.

Simplifying administrative procedures

One of the best uses of technology has to be in simplifying complex administrative processes. More and more of the daily orders for fuel are now coming via the Internet and a process is currently being introduced to allow commercial customers to put their order directly into an Xtranet - a password protected website.

The order would go straight into the database and the information then collated into the OVC - "On Vehicle Computer" - a brick-sized computer on the fuel trucks which determines which deliveries a driver will make on any given day. Today, all the BP tankers you see on our roads have OVCs with the schedule information for drivers.

Once their shift is over, they simply remove the computer from the truck and leave it on a cradle at the terminal. At the push of a button, all the information about who they delivered what to on that trip is downloaded into BP's main system, giving performance data and sales information for invoicing customers.

BP service stations

The service station is the final point in the supply chain. Since late last year, BP in New Zealand has been working on a programme to open a network of state-of-the-art service stations throughout the country.

These service stations are called BP Connect and today there are 21 of them in New Zealand. By the end of next year there will be 60 or so.

BP Connect is BP's creative solution to the very real problem of dwindling margins on fuel.

In order to boost flagging returns BP has become a convenience retailer selling groceries and convenience foods at its service stations in direct competition with supermarkets and coffee shops.

Another innovative feature of many of the BP Connect stores is that they are partially powered by the sun. Solar panels, which form a transparent canopy above the fuel pumps, capture sunlight and turn it into electricity for the service station.

World-wide there are more than 300 BP service stations that get some of their power directly from the sun, making BP the largest private consumer of solar energy in the world. New Zealand already has six of these solar-powered service stations and by the end of the year that number should have increased to 10. Next year it is planned to add another 10 more. Solar panels provide up to a third of the site's electricity needs in sunny weather helping reduce power demand, lower electricity bills, and also saving on carbon emissions. However, with each solar canopy costing around $250,000 - it's an expensive investment.

Oil spills at service stations are an ever-present risk for a company such as BP. To reduce the likelihood of spills occurring, the company has a programme to progressively replace all aging steel fuel tanks at its service stations with double skinned fiberglass tanks - basically a tank within a tank, giving twice the security of steel tanks. Dyed water between the tanks automatically shows in the fuel if the tank is leaking.

Where spills have occurred in the past, biotechnology is now being employed to remediate the soil. The addition of microbes, which have an enhanced ability to digest oil and convert it into biomass, has been successfully used in a number of locations around the country.

Digital technology

Digital technology is another area, which has had enormous impact on BP's business worldwide. It enables individuals doing comparable jobs in different places to share learning. These peer groups share experience and ideas. And there are many other examples of the technology improving the quality of dialogue within the company.

Webcasts, video conferences, live online chats with senior executives, and the increasing use of technology enables BP staff around the world to keep in touch and be part of discussions and decision making.

Knowledge and people

Peter believes that this is not about finding thousands of people capable of doing the same thing - it is fundamentally about diversity. He considers that global companies like BP need a diverse range of skills in every sense.

And that in every case, performance and productivity come from tapping the inherent skills of people.

Trade-offs

First he mentioned the apparent trade-off on the environment. Can BP supply oil to meet its customers' needs without damaging the natural environment?

Peter believes they can -- and that's why cleaner fuels have been introduced into New Zealand. Last year BP introduced a low sulphur diesel into Christchurch - a city with a serious smog problem. Sulphur in diesel can cause health problems so BP is putting its weight behind selling diesel with no sulphur at all, and have publicly committed to investing in the Marsden Point refinery to begin to make this happen. The company is also determined to lower its emissions of greenhouses gas by 10 percent from a 1990 base by 2010 - a commitment which exceeds the requirements of the Kyoto Protocol. This explains why BP is getting more into renewable energy through solar, fuel cell technology which uses hydrogen as an energy source, and wind technology.

Environmental challenges

Peter concedes that it is impossible to predict the future, but what seems clear to him is that technology has not yet found a frontier which can't be crossed and that the secret of success is the combination of science and business. He believes the competitive challenge for companies is to access and apply that knowledge.

Ideas for classroom use

The implications of this increase in energy demand could be explored by students.

In this country much of BP's focus is in the areas of people safety and environmental protection. Fatigue while driving has been specifically identified as a large and under rated risk factor. BP has addressed this issue by ensuring that all its drivers undergo a thorough fatigue management programme.

Other technological activity where fatigue is a major risk factor could be identified and potential solutions explored.

BP has been working on a programme to open a network of state-of-the-art service stations throughout New Zealand.

This change in focus could be investigated in more detail and the challenges explored with a view to identifying potential needs and opportunities.

Biotechnology is now being employed in the process of soil remediation. How is this process carried out? Where else is this type of biotechnology being applied? Are there needs or opportunities to extend its useage?

These trade-offs are discussed in terms of the impact of BP's activity on both the environment and the communities in which they operate. This concept of trade-offs could be explored further in the context of specific local examples of technological activity.

Issues for debate

In making these statements, Peter has been able to provide supportive examples from within his own industry. These viewpoints could be usefully debated by student exploration and consideration of a wider range of examples of technological development and technological activity.