Singapore Markets close in 29 mins

At Chevron, Digital Technology Spouts Gusher of Savings

David Hatch

Some Fortune 500 companies wait years to learn whether their expenditures on newfangled technologies translate into cost savings and increased efficiencies. That's not the case with Chevron. The San Ramon, Calif.-based oil and gas giant is already saving several hundred million dollars in annual operating costs, thanks to its version of a digital oil field, the "i-field," shorthand for "intelligent field." And the company is on track to save up to a billion dollars a year when the i-field and a broader operational overhaul are fully implemented in 2016.

Chevron's i-field harnesses advanced technology and communications to improve performance at 40 strategic assets throughout the world, including some of its biggest and most productive oil and gas fields. The company is rolling out six to eight mission-control centers focused on separate business areas, ranging from machinery to drilling to wells and reservoirs, that monitor those assets in real-time and rely on sophisticated computer algorithms for early detection of problems. From Chevron's perspective, the i-field is now essential to its global operations, which span six continents.

[See Technology Fuels Energy Sector's Rapid Evolution.]

"There's been a technology explosion of things that have been referred to variously as digital oil field, intelligent field [and] intelligent well," says Paul Siegele, president of Chevron Energy Technology Company. The concept of a digital oil field has been evolving for a decade, but "it's really been over the last couple years where it's all come together," Siegele says.

In addition to Chevron, other companies viewed as industry pioneers for implementing their own versions of digital oil fields are Shell and ConocoPhillips. Chevron, named by U.S. News as one of America's "Most Connected" energy companies, is often heralded as the gold standard for its emphasis on NASA-style nerve centers.

Chevron's profile was raised considerably in May when the prestigious MIT Technology Review featured the company in an article about digital oil fields.

"One of the really unique things about oil and gas is simply the remoteness of the operations," says Judson Jacobs, research director at IHS CERA, an energy analysis firm. The challenge for fuel producers, he says, is to tether everything together in a way that optimizes performance.

[See From Microgrids to Smart Meters, Sempra Pushes Energy Tech.]

To overcome such hurdles, Chevron has deployed thousands of tiny sensors, only millimeters or centimeters in size, that monitor field operations and transmit data, both wired and wirelessly, back to central locations. The sensors instantaneously track pressure, temperature, and other readouts and aid with the mapping of underground fuel deposits, allowing the company to maximize production. Chevron also employs analytics to evaluate data streams in real-time from oil wells, drill rigs, ships, and elsewhere.

Chevron already has two state-of-the-art mission control facilities in Houston that specialize in drilling and machinery support, and two more, based in Lagos, Nigeria, and Covington, La., that oversee deepwater drilling.

High above Houston in an office tower, a tech-savvy team at Chevron's machinery support hub monitors thousands of pieces of equipment, in real-time, across every continent except Antarctica. Using software to analyze data transmitted by sensors, it conducts "predictive intelligence" to pinpoint when equipment, such as rotating devices called compressors, needs maintenance "so we can change out parts before they break down," Siegele says.

The team also relies on "artificial intelligence" that recognizes recurring patterns in Chevron's business operations and flags inconsistencies that might indicate signs of trouble.

[See Duke Energy Uses Charlotte as its Living Lab.]

Siegele says its mission control has already remotely identified and corrected critical problems as a result of the i-field. The machinery support center suspected that a compressor in one of the company's Asian business units was malfunctioning due to a valve failure. Diagnostics conducted on-site confirmed the breakdown, prompting work to be halted as the valve was fixed, a move that averted further damage, which Siegele concedes would have been costly.

"That single example is probably about a $4 million savings," he says. "And this kind of thing happens over and over and over again."

In a similar situation, when machinery at the company's enormous Sanha oil and gas field off the coast of Angola in Africa showed subtle signs of an irregularity, a Houston support team was the first to notice. Once again, the savings from potential damage and lost production were in the millions. There's also a safety aspect to the technology, which enables Chevron to quickly identify hazards that personnel on the ground might not see.

The combination of falling sensor prices and improved computer processing power and bandwidth has made the technology more cost-effective and attractive, Chevron's Siegele notes. As digital oil fields progress, sensors are being added to more types of equipment and are being used to gather a wider range of information, resulting in higher-quality statistics, says Jacobs, the analyst.

There has also been a marked improvement in the transmission of this content from the field to central offices, as fuel companies shift from satellite transmission, which can be sluggish due to limited bandwidth and latency, to fiber optics, which is more "reliable and robust," Jacobs adds. By comparison, in the pre-digital oil field days, less information was available, and the data that could be gathered was often assessed on-site based on experience and hunches, "rather than bringing this back and looking at it more holistically," he says.

For now, the i-field remains a work in progress. While Chevron already conducts computer simulations with employees, Siegele says it's developing a prototype based on computer games that could take the experience to another level. "This is more virtual walking through a three-dimensional space, and opening and closing valves, reading gauges," he says. Oil rig operators could train on new platforms before they've been built.

Also under consideration is the use of cameras at remote Chevron facilities to zoom in with precision on gauges, pipes, and tanks to conduct quick diagnostics when employees are not readily available. For now, these ideas are in their infancy--a lot like the digital oil field was a decade ago.

More From US News & World Report