THE GE OIL & GAS ANNUAL MEETING SEES A REVIVAL OF THE LNG MARKET, THE LAUNCH OF TWO NEW GAS TURBINES AND THE GROWING INFLUENCE OF DIGITIZATION
By Drew Robb
At the start of this decade, Liquefied Natural Gas (LNG) was on its ascendancy. But for several years now, LNG has hardly merited a mention at the GE Oil & Gas Annual Meeting (AM). That changed this year with LNG very much back in the spotlight. A huge amount of LNG capacity is coming online over the coming year or so and optimism is running high.
A sign of that optimism is reflected in GE’s new LM9000 turbine, primarily designed for the LNG sector. In addition, the company announced the NovaLT12 gas turbine for various oil and gas applications (See pp 28 & 29).
Digitization, too, garnered plenty of attention at the meeting, with several discussions and panels devoted to it. GE is putting its weight behind this trend, and may even be betting the company on it. It announced multiple orders for its Predix digital platform.
Held each year in Florence, Italy, the AM sees over a thousand executives and engineers from the sector gather to discuss ongoing trends and the latest technologies. Lorenzo Simonelli, President & CEO, GE Oil & Gas, began the proceedings by charting a new course for productivity and growth in 2017. The announced merger between GE Oil & Gas and oil field services company Baker Hughes would transform the combined entity into one, he said, that would span the entire spectrum of the oil & gas value chain.
“We aim to be a disruptor in terms of technology, new approaches to manufacturing, and to create a digital revolution as a digital company,” said Simonelli. “The old relationship between OEM and operator is not working anymore. Innovation in isolation is being replaced by close collaboration.”
He named digitization as the single largest change coming to the sector. It could bring about a 20% drop in capital expenditure and up to a 5% drop in operating expenditure, he said, referencing a study by McKinsey. Currently, less than 5% of the oil & gas world is connected and only 1% of data is used for decision making. This data sits in data graveyards, said Simonelli.
Fatih Birol, Executive Director, International Energy Agency (IEA), spoke next of key factors that will shape global oil and gas markets. In the last quarter of a century, coal has been the top power generation source followed by natural gas and oil, he said. But for the next 25 years, coal will fall to last place, with natural gas and renewables being the largest areas of growth.
“Natural gas has high growth in all our scenarios, even those where there is heavy restriction placed on carbon emissions,” he said. More than half of all new capacity last year was from renewables, which he classified as no longer being a “romantic story,” but an “important business.”
As for oil and gas, Birol saw no falling off of oil demand. However, slower growth is on the horizon.
“Between now and 2040, less oil will be used in power generation and in buildings,” he said. “There will also be a small decline by 2040 in oil usage in vehicles mainly due to efficiency improvements in traditional cars and the rise in electric cars.”
The only increase in oil consumption will be in maritime, freight and aviation sectors where, he said, there is no viable substitute. Although there will be no fall off in oil demand, we are in for a period of market volatility. Approvals for new crude oil projects in the last two years have been the lowest in the previous 50 years. Further, oil discoveries were at their lowest levels in 70 years, as there was no money available for exploration.
“If approvals remain low in 2017, an unprecedented effort will be needed to avoid a supply-demand gap in a few years,” said Birol. “Even with shale oil from the U.S., it won’t close that gap.”
The good news is that world gas demand is growing in the industrial sector, manufacturing and in power generation. IEA said natural gas demand will grow by about 50% by 2040. “Power generation holds the key to global gas demand growth but competition from coal and renewables remains strong,” said Birol. “A new wave of LNG is a catalyst for a second gas revolution, following the shale gas revolution.”
Back in 2000 when there were 525 bcm per year of natural gas produced, LNG accounted for 26% of the total. By 2014, when 685 bcm were produced, LNG was up to 42% and by 2030, IEA predicts that LNG will be up to 53% of 1,150 bcm of natural gas. The U.S. and others are colliding with an already well-supplied market,” said Birol. “There is also strong competition between pipeline and LNG gas. But a new LNG wave is definitely coming.”
Contractual terms and pricing arrangements, for example, are being impacted by new LNG from Australia. Despite the growth of emissions reduction and climate change policies, the IEA believes substantial oil and gas upstream investment is needed.
Last year, $450 billion worldwide was invested, and Birol said $700 billion is required, even in the face of large-scale decarbonization, to satisfy demand through 2040 and to compensate for declines in output from existing fields.
“Continued investment in oil & gas remains an important component of a smooth and least-cost energy transition,” said Birol. The theme of disruption continued with the introduction of Arnaud Breuillac, President of Exploration & Production, Total.
His company has adopted a climate change agenda as a central part of its strategy. “We are prioritizing gas, exiting coal and growing our role in renewables,” he said. “Operating safe, environmentally responsible and cost-effective projects is our goal.”
Digital technology can be a game changer, he said. It can help achieve better representations of subsurface and seismic data to gain more recovery, greater efficiency and cost reduction. Total initiated no new projects last year, but will greenlight some this year if costs are acceptable, said Breuillac.
His company is working hard to reduce project time in places, such as West Africa where drill time non-production is down from 18% to 13%. The company has 10 new platforms under construction in 2017.
Total’s Russia connection
Total is heavily involved in the Yamal LNG project in Russia and the Ichthys LNG project in Australia, both due to come online this year. Yamal is located deep in the Russian Arctic, and is ice-bound for seven to nine months during the year.
More than 200 wells will be drilled to supply three liquefaction trains, each of which offers an annual capacity of 5.5 million metric tons. The trains feature 86 MW Frame 7E gas turbines, two mixed refrigerants and one propane centrifugal compressors for each train, a 24 MW variable speed drive starter/helper and waste heat recovery units (WHRUs).
Ichthys LNG will conduct preliminary processing offshore to remove water, impurities and extract condensate. The gas will then be exported to onshore processing facilities in Darwin via an 889 km pipeline. It is expected to produce 8.4 million tons of LNG and 1.6 million tons of LPG per annum, along with about 100,000 barrels of condensate per day. It will use four GE frame 7EA gas turbines and eight MR/PR compressors, 10 PGT25+G4 gas turbines and 10 compressors for upstream facilities.
Further Total projects in the works include a new hub in the West of the Shetland Isles off the coast of Scotland, and an increase in ownership in Barnet shale in the U.S.
“We are confident in the growth of gas,” said Breuillac. “New LNG terminals are becoming available at an incredible pace.”
On the digital front, Total has deployed a remote assistance intervention and diagnosis system with the help of GE. It has identified 270 malfunctions to vital equipment since its creation. In addition, 3,500 remote monitoring sensors are to be installed by 2018.
“Hydrocarbons will remain at the heart of the energy world in the coming decades,” said Breuillac.
The recently published Energy Outlook from BP concurs with the Total view. It found that fossil fuels remain the dominant form of energy, providing around 60% of the additional energy and accounting for almost 80% of total energy supplies in 2035. Gas is the fastest growing fossil fuel supported by strong supply growth, particularly of U.S. shale gas and LNG. Oil demand will increase by almost 20 Mb/d by 2035.
Robert Dudley, Group Chief Executive of BP, briefed the gathering that the OPEC meeting last November had stabilized the price of oil at around $55 per barrel. He also stressed digitization, but felt the oil & gas sector was way behind other fields.
“We have a pilot project on oil platforms in the Gulf of Mexico to help personnel work in real time rather than having to send all the data back to the control room to study,” said Dudley.
He added that BP is investing heavily in Egyptian offshore gas in the West Shetland and returning to the Gulf of Mexico. Martin Houston, Executive Vice Chairman, Tellurian Investments continued the LNG revival chorus, with “The world needs a lot of LNG.”
Tellurian has 15 trains being developed in conjunction with Bechtel and GE. Its goal is to better understand the market, and produce LNG cheaper and more efficiently than others. For example, the company is developing an LNG production and export terminal on the west bank of the Calcasieu River, south of Lake Charles, Louisiana. Once complete, the terminal will be able to export up to twenty-six million m.t. of LNG per year.
“You have to only build what you need, fit the design to the purpose, and replicate instead of engineering everything from scratch,” said Houston. “We are using the LM6000 in our projects.”
Marco Alverà, Chief Executive Officer of Italian company Snam Group, is another believer in LNG, as well as compressed natural gas (CNG). Europe is transitioning from 27 different natural gas markets to one integrated market, he said, which would facilitate LNG market growth.
He also sees an opportunity in small-scale LNG, especially for maritime transportation. This will require infrastructure such as mini LNG terminals or coastal natural gas deposits, a market that could add up to 30 bcm of demand by 2025. He noted how CNG was displacing diesel in some transportation markets due to its lower emissions. Italy currently has 900,000 CNG cars and 1,000 filling stations. He predicted 2.5 million cars and 1,800 stations by 2025.
Nelson Silva, Chief Strategy and Performance Officer, Petrobras Petróleo Brasileiro, said that under new management the company was recovering, despite uncertainties in the economy, the impact of shale gas, the past corruption scandal, a challenging regulatory framework and high debt.
It was also streamlining operations to concentrate on core strengths.
“Petrobras is going to focus on deep water, and is divesting most onshore asserts and projects,” said Silva.
GE has been beating the digitization drum for a couple of years now. But this year’s annual meeting seemed to indicate that it was finally gaining serious traction. Colin Parris, Vice President, Software Research, General Electric Global Research Center (GRC), gave a presentation on what is possible through digitization.
He covered how digital twins of turbomachinery assets can help increase productivity and efficiency. A digital twin is a representation of a physical asset, which can take advantage of analytics to drive specific outcomes.
“Digital models of assets can be constantly tuned and updated to give you a living adaptable twin,” said Parris.
Oil wells in Oklahoma use this system to provide early warnings of problems, to predict the potential impact of changes and to optimize actions to solve issues. In other words, this system lays out the many options available and the consequences of each.
“We were able to view a problem that would appear in one well in three months that would result in a 20% drop in production,” said Parris.
In this case, the digital twin could provide over 500 simulations of various scenarios. Out of these, two primary options were available, as well as their consequences, costs and timelines. This data is given to the operator to determine the right course.
GE claims to have deployed 661,000 digital twins that have generated over $300 million in value to date. Most of these are in the power generation field. GE then rolled out several speakers who extolled the virtues of digitization.
Manoj Chouthai, Chief Information Officer of Indian textile and petrochemical firm, Reliance Industries, detailed how the technology is being implemented in the world’s largest integrated refining complex. At 1.24 MMBPD, the system gathers 550 TB of data per day from 250 wells and 2,000 pipelines. A combination of the GE Predix platform, GE’s Asset Performance Management (APM) system, and tools from Schneider Electric, Honeywell, Siemens and Emerson are used to crunch the numbers and bring about better overall management.
Similarly, Bruno Chabas, CEO of SBM Offshore said his company has every system and every piece of equipment on a Floating Production, Storage and Offloading (FPSO) platform supplying data for analysis as a way to improve operations. This is particularly important in the FPSO marketplace as he noted that only 15 out of 50 FPSOs delivered worldwide in the past few years arrived on time. SBM is in the midst of digitizing its know-how and best practices to ensure timely delivery.
“We are building an integrated engineering environment so that we can bring this data to the operations phase to learn from what we do, break down information silos and deliver on time,” said Chabas. Datuk Wan Zulkiflee Wan Ariffin, President & Group Chief Executive Officer, Petronas, plans to use digitization to reduce his fleet of vessels from 132 to 80, while at the same time slashing inventory in half by moving to a just-in-time model for parts management. Petronas has eliminated 28% of its reports by going digital. Meantime, Shaun Gregory, Senior Vice President and Chief Technology Officer of Woodside in Australia, told a story of a plant that tripped and was down for several weeks. He said the data was there that could have prevented the
Datuk Wan Zulkiflee Wan Ariffin, President & Group Chief Executive Officer, Petronas, plans to use digitization to reduce his fleet of vessels from 132 to 80, while at the same time slashing inventory in half by moving to a just-in-time model for parts management. Petronas has eliminated 28% of its reports by going digital.
Meantime, Shaun Gregory, Senior Vice President and Chief Technology Officer of Woodside in Australia, told a story of a plant that tripped and was down for several weeks. He said the data was there that could have prevented the shutdown but it was not spotted by existing systems. Woodside is integrating its systems to prevent a recurrence. This involves the establishment of a central “data lake” to remove information silos, rolling out 300,000 sensors and building a data science division to enable access to all the data across corporate assets using digital twins. And RasGas is using Predix as well as software from Iridium and SAP to further increase reliability, and to eliminate non-predicted events that bring down oil & gas systems.
SAP, well known for building systems that manage financial accounts, order entry, manufacturing and other areas of the business, is collaborating with GE. SAP will provide software to run the enterprise, while GE will operate and digitize industrial assets. The goal is to integrate both systems to accomplish such things as triggering the right technician and spare parts at the right moment, then getting them to where they are needed to improve overall service levels.