The Oil Rig of the Future, Sans Human Roughnecks

There has been a furry of executive orders this past week, including the reinstallation of the Keystone XL and Dakota Access pipelines. Many are wondering if this new administration (especially with the former Exxon CEO at State) will be a boom for the Energy sector. Since falling off its high of $115 dollars a barrel in June 2014, the oil and gas industry has been forced to reassess its over-bloated costs by embracing automation to replace jobs that are just too dangerous for humans.

While it took a decrease of margin to implement these technologies, many of the innovations happened in response to the catastrophic explosion on Deepwater Horizon in April 2010. The fire that could be seen forty miles away, led to deaths of 11 crewmen and the largest oil spill in U.S. history. According to the White House report following the disaster, the incident happened because the parties involved “did not have adequate controls in place to ensure that key decisions in the months leading up to the blow-out were safe or sound from an engineering perspective.”

Béla Lipták, Yale Professor of Process Control states that Horizon, along with Three Mile Island, Chernobyl and Fukushima meltdowns, could have been avoided by “providing automatic override controls (AOC)” which were deactivated at the time of the explosion. Lipták further states, “The safety of the operation should not be left to manual control. In the case of the BP accident, even the actuation of the BOP [blowout preventer] was under manual control. As the forces of wind, waves and water currents change, the controls should anticipate their consequences and should act before they evolve.” He suggests the entire rig should be integrated into a “single, dynamic control system” with an “envelope algorithm” that monitors everything. Lipták says that “Unfortunately, even the best offshore drilling safety controls have evolved from a manual safety culture. Until state-of-the-art automatic control practices are understood and implemented by the hydrocarbon drilling industry, pipes will buckle, BOPs will fail, and oil spills will occur.”

At the University of Texas in Austin, Professor Eric van Oort stated in 2013 that “you can be an environmentalist and join the oil and gas industry.” In his lab, his students are doing just that by building “automation technologies” to make drilling safer for both human workers and the environment. “The oil and gas industry has been lagging behind other industries in terms of adopting automation, mechanization and robotization,” van Oort explains. “If you look at rigs in the field, you will still see people working in high-exposure areas such as the drill floor. We need to be better at taking people out of harm’s way, and making operations safer and more efficient at the same time.”

U of T has three labs housed in the basement of the Chemical & Petroleum Engineering building, including a Real-time Operations Center, the Drilling Automation Lab and the Zonal Isolation Lab. The Real-time Operations Center has the capability to process around-the-clock data from operational offshore or onshore wells. The Drilling Automation Lab boasts what is believed to be the first-of-its-kind drilling simulator in a university setting. The Zonal Isolation Lab, often referred to as the cement lab, gives researchers the opportunity to test new methods and materials for improving onshore and offshore drilling.

“The goal is to have undergraduate students looking at and analyzing data, seeking out meaningful patterns, to help industry become safer,” van Oort said. “Graduate students will supervise them and also be conducting sophisticated research and development on this particular data.”

Now might be the time to implement the visions of van Oort and Lipták, as the global oil industry is beginning to crawl out of its collapse that took 440,000 job, a third of which will never return (see chart above). Today in the Gulf of Mexico, miles from where Deepwater Horizon sank, a new type of rig is being deployed with an Iron Roughneck to automate the repetitive and dangerous tasks of connecting hundreds of segments of drill pipe as its plunges through miles of ocean water and into the oil-bearing rock.

“It used to be you had a toolbox full of wrenches and tubing benders,” says Donald McLain, chairman of the industrial-programs department at Victoria College.“Now your main tool is a laptop.” McLain, who worked as a rig hand for 25 years, is helping to retrain laid-off oil workers for more technical jobs.

It is not only academics that are advocating automation, it is coming from the industry itself. James West of Evorcore Investment Bank, says five years ago oil companies “were too busy pumping oil and gas to worry about head count” and “got fat and bloated.” Now, after two and half years of oil prices plummeting below $50, executives are implementing strategies that combine human labor with automated machinery in the fields. More robotic drilling ultimately means lower labor costs and fewer workers near some of the most dangerous tasks.

Across the industry, traditional oil and shale rigs have gotten much more efficient than at the height of the boom in 2014. A recent UBS report claimed that Nabors Industries, the world’s largest onshore driller, anticipates that it will reduce its human labor staff by two-thirds, relegating dangerous tasks to robots. This has led to a huge hiring demand by the oil industry for software engineers.

BP today is not the same company it was during Deepwater Horizon; it is now looking like a Silicon Valley startup. Ahmed Hashmi, head of upstream technology for BP, told Bloomberg News, “it’s not just about automating the rig, it’s about automating everything upstream of the rig. The biggest thing will be the systems.”

Hashmi is now charged with implementing in the field what van Oort has built in the lab, a remote control station whereby an oil engineer can sit at a desk and with the press of a button, an automated system would identify the equipment needed from a supplier, create a 3D model and send instructions for building it out into the field. Hashmi says, “that is automation.”