Rethinking the oil and gas organization 0

December 2016, McKinsey & Company, www.mckinsey.com. Copyright (c) 2018 McKinsey & Company. All rights reserved. Reprinted by permission.

Organizational choices made during a time of resource scarcity need reexamination when the cycle turns.

When business cycles turn, cyclical industries can struggle to retool their organizations for the new environment. For instance, today’s oil and gas companies were developed in a time of resource scarcity. To get at those hard-to-find, difficult-to-develop resources, companies greatly expanded the role of their central functions—mandating them to set common standards, make technical design decisions, track company-wide metrics, and disseminate best practices. This worked well during a decade of high growth and high prices but created complexity that added costs, stifled innovation, and slowed down decision making. As these central teams expanded, general and administrative costs grew fivefold, hitting nearly $5 per barrel in 2014 (exhibit), with the biggest increases coming from technical functions such as engineering, geosciences, and health and safety.

Oil companies have cut support functions since 2014 but must consider more radical organizational changes as prices remain weak.

With prices now below $50 a barrel, that organizational blueprint is no longer sustainable. While companies have cut their support functions since 2014, the overall organizations supported by these functions are also smaller. This suggests further reductions in corporate functions will be needed, as well as new organizational models.

A more agile organization, with fluid teams and looser hierarchies, can lower costs and create greater responsiveness to today’s vastly different markets—ranging from megaprojects to less asset-heavy unconventional shale-oil and renewable-asset plays. Technologies such as networked sensors that generate and share data can help optimize production processes, while digitally enabled automation of routine manual activity can reduce human risk and spur productivity. Critically, the structures built to manage scarce talent and large-scale megaprojects will need to be fundamentally redesigned. We see two models arising: for lower-risk assets such as tight oil, a very lean corporate center with highly autonomous asset teams will suffice, while higher-risk, more capital-intensive assets will need a comparatively stronger center with deeper functional and risk-management capabilities.

For additional insights, see “The oil and gas organization of the future.”

About the author(s)

Christopher Handscomb is a partner in McKinsey’s London office, Scott Sharabura is an associate partner in the Calgary office, and Jannik Woxholth is a consultant in the Oslo office.

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Recommended Lighting Practices Collaboration 0

FORT DAVIS, Texas — The University of Texas at Austin’s McDonald Observatory has collaborated with the Permian Basin Petroleum Association (PBPA) and the Texas Oil and Gas Association (TXOGA) to reduce light shining into the sky from drilling rigs and related activities in West Texas. The excess light has the potential to drown out the light from stars and galaxies and threatens to reduce the effectiveness of the observatory’s research telescopes to study the mysteries of the universe.

“This partnership of PBPA and TXOGA with McDonald Observatory to protect dark skies in its vicinity is vital to the research of the universe taking place at McDonald,” said Taft Armandroff, director of the observatory.

The collaboration’s Recommended Lighting Practices document details best lighting practices for drilling rigs and other oilfield structures, including what types of lighting work best and how to reduce glare and improve visibility. These practices will increase the amount of light shining down on worksites, thus increasing safety while decreasing the amount of light pollution in the sky. Reducing excess light helps the observatory and also decreases electricity costs for the oil and gas producers.

The document specifically targets oil and gas operations in the seven counties with existing outdoor lighting ordinances surrounding the McDonald Observatory: Brewster, Culberson, Hudspeth, Jeff Davis, Pecos, Presidio and Reeves. However, the recommendations can be beneficial across the industry.

A new video that helps to introduce the recommendations to oil and gas companies is now available. It features the observatory’s Bill Wren explaining the importance of dark skies, and how lighting practices can both preserve dark skies and improve safety for oilfield workers. The video was produced with the support of the Apache Corporation, following the company’s extensive collaboration with observatory staff and implementation of these practices with their assets in the area. It is available to watch and share at: https://youtu.be/UnmwnO6CIR4

“For years, the PBPA and the McDonald Observatory have worked together on educating members of the Permian Basin oil and gas community about the Dark Skies Initiative and the possible impact lighting practices can have on the observatory’s work,” said PBPA President Ben Shepperd. “About two years ago, the PBPA board of directors agreed to support the creation of lighting recommendations. We decided a great way to educate members of the industry on how they could provide a positive impact on this issue was through the utilization of such recommended practices.

“So we began work with the observatory to publish recommended lighting practices and have since worked to educate our members and those outside the oil and gas industry on the recommendations through presentations, seminars, articles in magazines and newspapers, and even one-on-one conversations,” Shepperd said.

Recently, the Texas Oil and Gas Association joined the collaboration.

“The Texas Oil and Gas Association recognizes that production practices and protecting the environment are in no way mutually exclusive,” TXOGA President Todd Staples said. “The Recommended Lighting Practices collaborative effort allows for the oil and natural gas industry to continue the work vital to our economy and our future, and for the simultaneous reduction to our ecological footprint.”

In April, the observatory’s Dark Skies Initiative was named one of six Texan by Nature Conservation Wrangler projects for 2018. Texan by Nature, a Texas-led conservation nonprofit founded by former first lady Laura Bush, brings business and conservation together through select programs that engage Texans in the stewardship of land and communities.

The award will provide the observatory connections to technical expertise, industry support, publicity, and more for its Dark Skies Initiative.

“Our Conservation Wrangler program recognizes innovative and transformative conservation projects across the state of Texas,” said Joni Carswell, the organization’s executive director. “Each Conservation Wrangler project positively impacts people, prosperity and natural resources.”

— END —

Media Contacts:
Rebecca Johnson, Communications Manager
McDonald Observatory
The University of Texas at Austin
512-475-6763

Stephen Robertson, Executive VP
Permian Basin Petroleum Association
432-684-6345

Kate Zaykowski, Communications Director
Texas Oil and Gas Association
325-660-2274

Taylor Keys, Program Manager
Texan by Nature
512-284-7482

Castlen Kennedy, VP of Public Affairs
Apache Corporation
713-296-7189

Study: Filtration a Viable Option for Produced Water from the Marcellus Shale 0

The rising production of natural gas from hydraulically fractured wells in Appalachia generates along with it contaminated produced water that must be carefully disposed of. Researchers at Pennsylvania State University say that producers would be wise to consider the environmental risks associated with the most commonly used disposal practice of underground injection, and instead adopt more environmentally friendly and sustainable innovations in water filtration.

The study, Sustainability in Marcellus Shale Development, published by Penn State’s College of Engineering in conjunction with Chevron, notes that produced and flowback water from the prolific Marcellus Shale in Pennsylvania is most commonly disposed of through injection into saltwater injection wells drilled far below the deepest known aquifer.

But although this method is the cheapest available and most frequently used, it brings with it the potential for surface spills and casing leaks that can contaminate freshwater, as well as the risk of activating dormant faults and causing earthquakes.

Disposing Fracked Water

“During the hydraulic fracturing process, water and chemicals are used to stimulate the fissures in the rock in order to extract the natural gas. Water is mixed with sand and other chemicals and then injected into the well. After creating cracks in the Marcellus Shale, flowback water, a brine solution with heavy metals and chemicals, quickly comes back. Typically, this flowback water is stored in tanks or pits before treatment, recycling, or disposal,” according to the report, co-written by Kyle Bambu, Mike Spero, and Harry Polychronopoulos.

The most common way to dispose of this produced water is by pumping it into saltwater disposal wells that are drilled hundreds below the deepest known aquifers. But Pennsylvania’s unique geology is not well suited for such wells. At the time the study was published in Fall 2016, there were 144,000 Class II injection wells in the US and only eight of them were Class II salt water disposal wells in Pennsylvania. These eight wells combined accepted 8,667 barrels per day of brine, while similar wells operated in Texas can each dispose of more than 26,000 b/d of brine.

According to the report, the average cost to dispose of one bbl of fluid can range from as low as 25¢/bbl if the oil company operates its own disposal well, to anywhere from 50¢/bbl to $2.50/bbl if a commercial saltwater disposal well is used. The cost of using disposal is further increased by the cost of transportation.

“In northern Pennsylvania, where commercial disposal wells aren’t plentiful, the brine water may have to be transported to Ohio or West Virginia. This can increase costs by $4.00 to $6.00 a barrel, bringing the net cost of disposal in the Marcellus Shale region to $4.50/bbl to $8.50/bbl,” the study said.

The use of underground disposal wells is not without risk, and frequent concerns include the potential for groundwater contamination and induced seismic activity. In Youngstown, Ohio, the researchers noted that a Class II disposal well for fracking wastewater was linked to seismic activity after it activated a previously unknown fault line. That well was blamed for 10 minor earthquakes, the largest of which is a magnitude of 3.9. A spate of earthquakes in Oklahoma in recent years has likewise been linked to the increased injection of water into disposal wells.

The need to dispose of produced water in Pennsylvania has become more pressing in recent years as natural gas production from the prolific Marcellus and neighboring Utica shales has taken off.  Data from the federal Energy Information (EIA) Administration show that output from the shale formations more than tripled Appalachian gas production from 7.8 billion cubic feet per day in 2012 to 23.8 Bcf/d in 2017 (EIA). These plays are credited for driving growth in US natural gas production since 2012 and have played a critical role in enabling low domestic prices and increasing exports.

The Water Filtration Alternative

Researchers note that a number of alternatives to disposal wells are emerging at varying levels of cost. These largely involve treating the produced water to remove its various contaminants, which can include radioactive substances, heavy metals, and high concentrations of salt. Traditional wastewater treatment plants cannot be used because they lack the sufficient processes needed to clean this water.

The most cost competitive alternative to underground injection highlighted by researchers is the option of using a membrane to clean the brine produced water. The company Oasys Water offers a system that drives the brine solution through a series of semi-permeable membranes at a cost of nearly $2/bbl of water. The water that emerges from this process is clean enough to be discharged into streams or drainage systems.

Other potential treatments on the horizon that require further research include the option of boiling the water. However, researchers note that the cost of using this process can run upwards of $17/bbl and the heavy salt causes extreme wear and tear to the requisite industrial boilers, resulting in massive equipment replacement costs.

Lastly, the study says the process of electrodialysis could be used to separate water from contaminants. Researchers at the Massachusetts Institute of Technology have found that an electrical current can be used to separate fresh water from a salty solution. Salt is an effective conductor of electricity and successive stages of electrodialysis can remove most contaminates. But this process has not been tested in the oil and gas industry and there are not commercial treatment options available.

Researchers ultimately concluded that while the common practice of injecting produced water into disposal wells is relatively cheap, this practice comes with high environmental risks. These risks include the potential for groundwater contamination that is caused by surface spills or breaks in the tubing for saltwater disposal wells and even induced seismic activity.

At present, the impetus for improving produced water disposal practices is driven primarily by the sustainability practices of each producer and not government regulations. Researchers found that the oil and gas industry is exempt from some of the most stringent federal environmental regulations, like the Safe Drinking Water Act the Clean Water Act, but noted that states have been working to impose their own rules to address areas of concern. For instance, Pennsylvania in recent years adopted new guidelines intended to prevent spills and releases of harmful substances.

Today’s Best Option

The study ultimately recommends Oasys Water’s membrane filtration as the best option for disposing of produced water today. Researchers said that while using this method can result in slightly higher costs for water treatment and transportation, it appears to be the most sustainable solution until other technological advances are advanced in the future.

“This (membrane) system was recommended because of its relatively cheap cost yet adherence to sustainability and environmentally friendly concerns,” the study said.

To read a PDF of the Penn State study, click here.

Drill cuttings and oil waste plant installed directly at the oilfield 0

TDP-2 pyrolysis plant designed for drilling waste treatment was installed at oilfield of oil and gas company. The plant is capable to obtain the valuable products from oil sludge thus there is no need in waste depositing. More details: http://tdplant.com/ Музыка: No Copyright Free Music GENERIC MUSIC https://youtu.be/X-ZwX5lyyy4?list=PLI…

Published on Feb 7, 2017

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