Preparing a Business Case for Technology Investment in Production Operations
- J. Roger Hite (Business Fundamentals Group) | Kemal Farid (Merrick Systems) | M. Lee Blanton (Business Fundamentals Group) | Fred Gard (NSI Upstream) | Charles Crawley (Chevron Energy Technology Co.)
- Document ID
- Society of Petroleum Engineers
- Journal of Petroleum Technology
- Publication Date
- December 2006
- Document Type
- Journal Paper
- 42 - 44
- 2006. Copyright is retained by the author. This document is distributed by SPE with the permission of the author. Contact the author for permission to use material from this document.
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Broad support exists in the leadership of most large oil and gas companies for a version of the digital oil field as a strategic direction, but there is difficulty at the implementation level in building a convincing case for investment. Implementation seems slow, perhaps because generating a convincing business case for incremental investment is challenging.
Winning acceptance for new computing, automation, and communications technology* (CACT) in the oil patch is always a challenge, and one that begins and ends with a convincing business case. A good business case speaks to decision makers in a language they understand. It outlines in clear terms the benefits of the investment, its costs, and its risks. Each needs to be presented clearly, openly, and honestly.
A good business case is guided by five principles:
- Value is created only when good decisions are made and implemented. The value of an oil and gas asset derives from decisions made and implemented in the past—to drill wells, to complete them, to implement recovery processes, and to install facilities. Once decisions and investments are made, the assets are operated in a way to capture the intended value.
Oil fields do not exactly run themselves, of course, because numerous decisions are made every day to keep them running smoothly. Lift changes, new choke settings, changes in injection and production rates, and set-point adjustments are all designed to make sure the value of the original investment is achieved. Added value is created when decisions are made and implemented to add new assets, modify existing ones, or to change operating practices or procedures. It is important that these decisions be the right decisions made at the right time. Whether they are depends greatly on the quality of the information avail-able at the time.
- CACT investments affect decisions. Computers do not produce oil; they facilitate decisions. Thus, the value of investments in CACT derives from its ability to improve decision making or improve on the decisions that are made. Having more terabytes of data stored on a server does not help a bit. Rather, it adds cost. Likewise, storing production rates and pressures minute by minute does not add value. Faster communications, bigger computers, and more gadgets do not help unless they lead to better or more timely decisions.
- Real time is defined by the frequency of decisions that need to be made. Because the value of CACT investments comes from the decisions it influences, the frequency of data collection should be matched to the rate at which decisions can be made and implemented safely. The decision rate defines what “real time” really is. Information at time scales shorter than the rate at which decisions are made does not help because the information cannot be acted on that fast. Longer time scales may mean lost opportunities because decisions could be made faster if the information were there. Thus, “real time” is really “right time”—the right time for making decisions.
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