Decarbonizing Supply Chains in Oilfield Services & Equipment (OFSE)

It is common knowledge that the energy landscape is changing, with a growing emphasis on sustainable sources of energy for both domestic and industrial consumption. While the spotlight on renewable sources of energy is necessary and commendable, it is important to recognize that fossil fuels will remain the relevant and prevalent source of energy for the foreseeable future.

Fossil Fuel Demand

• Oil demand is set to peak soon after 2025 at 97 million b/d and then fall by around 1 million b/d per year to 2050. By 2050, the world would still be consuming 77 million b/d, down from around 100 million b/d currently[1].
• Aggregate fossil fuel demand is set to peak in 2027, with oil peaking in 2029 and gas in 2037[2].
• Demand for oil is set to decline from 2020 onwards. Fossil fuels are tipped to fall from 85 per cent in 2018, to 70 per cent under the BAU plan and as little as 20 per cent under the net-zero strategy[3].
• Demand for fossil fuels is expected to grow 3.4 percent per annum to 2035[4].

To meet global energy demands along with an increasing population, the energy sector must not only invest in alternative sources but also review the optimization of how we source, produce and process fuels.

The role of Oilfield Services & Equipment (OFSE) companies, particularly market leaders such as Baker Hughes, Schlumberger, and Halliburton, can very simply be described as the driving force behind the exploration, production, and processing of hydrocarbons, and this has been the case for over a century.

OFSE companies hold technologies and patents which have historically changed the course of the industry. These include combined service tools such as ‘Logging-While-Drilling’, Directional Drilling for unconventional plays, Seismic-While-Drilling [5], remote operations, and rigless intervention solutions.

This suggests that the mandate to decarbonize the oil and gas industry and drive the energy transition must, at the very least, include the OFSE companies, if not be completely driven by them.

The focus is typically on OFSE companies creating energy-efficient solutions, such as machines and turbines that require less power usage and lighter rigless intervention solutions. These undoubtedly contribute to the decarbonizing of oilfield operations, and significant investment and attention have been placed there.

READ: The Making of a Successful Decarbonization Strategy with ARC Advisory

However, just like electric vehicles, the process of their production, including raw materials and manufacturing processes, must be considered if we are to truly achieve a sustainable energy transition for a cleaner earth.

There is ample opportunity, even before deploying several tools and equipment, to reduce the overall energy intensity of the product. This article highlights, on a high level, approaches that can and are being used to achieve net-zero products in and of out themselves.

Overview of the OFSE Supply Chain

_{Image: Author's own}

In OFSE, a close second to a market-focused technology, product or solutions roadmap is an impenetrable supply chain strategy.

The design of technology is extremely important and OFSE’s invest heavily in Research and Technology Development with Technology centres around the world.

There have been times, however, where a seamless design is not manufacturable, or not possible without cost prohibitive scrap rates. In some cases, engineers have come up with material selection for pipeline components which will address operators’ needs, but there is unavailability of raw material or the supplier not being qualified with the OFSE.

With the diversity of product and technology portfolios within the major OFSE players (SLB, Baker Hughes, NOV etc.), the need for a robust and flexible Supply Chain Management (SCM) program cannot be over emphasized. It is commonplace for one major supplier to be selected above another strictly based on deliverability, or proximity to the oilfield needing the tools and/or services. Tender selection processes, selecting EPC contractors or major suppliers for oilfield projects, or any other selection process has a fully exhaustive checklist for the verification of procurement, manufacturing, testing and delivery of the solutions.

Therefore, major players and within each product and technology group, supply chain (including procurement and manufacturing technology is an integral part of any successful strategy.

Even as part of Technology Development (TD) and Product Development Management (PDM) processes, supply chain readiness that covers a range of processes is a compulsory pre-requisite.

READ: Improving Methane Measurement Practices and Technology in Canada's Oil and Gas Industry

Sustainable Supply Chain Management

Before recent times, operators when conducting supply chain reviews for material and component suppliers to OEMs and OFSE’s, would assess factors such as quality (QA/QC), cost, deliverability, timelines, performance history. However, in the last few years, OFSEs, aiming to have technology approved within operator (client) organizations and deployed in the field, are now being asked to report energy intensity of the supply chain process and the carbon footprint for each product, including installation and intervention methods.

In 2022, TotalEnergies launched their Responsible Procurement Program, and alongside local economic development, they have sited specific focuses. These include integrating climate issues to their procurement decisions, as well as monitoring the ‘origin, extraction and refining conditions and the use of certain minerals, ores and raw materials are the subject of particular attention, given the potential risks to human rights and the environment’.

Firsthand experience with other operators shows their request for the carbon footprint in the manufacturing and supply chain processes of new technology. For OFSEs, as part of the value proposition for their technologies, products, and services, it has now become imperative to not only include the improvement in energy intensity for the operator using the product, but to also show that the product itself is realized through methods and processes with net-zero goals.

To show the competitive advantage of non-metallic pipeline systems over traditional steel pipes, Baker Hughes, for instance, developed a cradle-to-grave, carbon footprint calculator of the new non-metallic piping system. This calculator accounts for CO2 emissions and the energy intensity of raw materials sourcing, the manufacturing process, shipping and handling, installation, commissioning requirements, and the frequency of maintenance and overhaul. This revealed potential reductions of up to 70% in CO2 emissions along the supply and value chain. Such analyses are not only conducted for competitive advantage but are also being applied in product and prioritization techniques within the OFSEs and OEMs.

In Practise: Decarbonising The Supply Chain

In actual terms, not every product deployed in the oilfield can contribute to the reduction in CO2 emissions. Therefore, there are products such as high-efficiency turbines, heat recovery solutions, flare recovery and re-use systems, directly and measurably improve the energy intensity of a field. However, given the complexity of oilfield services, from subsurface operations to complex topsides, the possibility, feasibility, and availability of these energy-efficient products are few and limited.

Nonetheless, it is possible to apply a sustainability consciousness in the supply chain process as new products and technologies are being launched, and older products are reevaluated. Some methods that could support the continuous improvement and permanently decarbonising supply chains are listed below.

Design for Sustainability – Considerations in Product and Technology Design

When measuring the environmental benefit of tools, products, and technology, – the industry now extends these assessments upstream in the value chain, including the sourcing, extraction, and processing of raw materials. It should now be common practice, if not imperative, to consider the energy intensity of each component, the manufacturing, packaging, distribution and the entire life cycle of the product or material.

_{Image: Life Cycle Assessment}

_{Image: Design for Sustainability: A Step-by-Step Approach}

Going beyond eco-design, Design for Sustainability is the concept of ‘Design for Sustainability’ (D4S) requires that the design process and resulting product consider not only environmental concerns but social and economic concerns[6].

As OFSEs take ownership of the whole process, not just the final use or ‘jobs-to-be-done’, we begin to encourage the responsibility of achieving net-zero across the organisation. D4S also incorporates manufacturing processes and manufacturability, continuing through to the end of life (cradle-to-grave) considerations.

By addressing intensity of each aspect of the supply chain (See Figure 1) early in design phase, it can be determined whether to remove some material or optimise the design for energy-intense manufacturing, transport, or end-of-life considerations.

In a lot of scenarios, the transition to a low- carbon tooling and equipment is material intensive. It is not always possible to have a carbon- neutral supply chain. A leading Product & Technology leader with an OFSE Major explains the dichotomy of creating products that not only reduces power consumption in the oilfield but can also can be sustainably sourced. One such product is the application of Permanent Magnet Motors in Electrical Submersible pumps. This improves energy efficiency by up to 30%are reduces weight, making installation less complex. Improving power consumption in an oilfield, particularly one relying on these artificial lift technologies, is an important focus for oilfield operators. The sourcing of rare-earth magnets for these purposes has become increasingly important for these low- carbon applications and requires energy-intensive mining and manufacturing techniques[7].

Similarly, and fortunately, activities upstream in the value chain of non-metallic piping systems reduce environmental costs significantly, particularly energy intensity. However, end-of-life considerations become imperative in these applications. The types and components of thermoplastics applied in product development stages should consider disposal or, at the very least, re-use at the end of life.

READ: 4 Ways Oil & Gas Companies Are Electrifying Operations to Reduce Emissions

Investing in Manufacturing Engineering Technology

In product development practice, manufacturability is a key consideration for Research and Technology teams on OFSE organizations. This has historically been a cost issue, but it also helps address environmental concerns. Some leading-edge technologies require manufacturing techniques which result in a high-scrap rate, increasing costs and generating waste.

Modern manufacturing technologies are innovations that improve the productivity and sustainability of production processes. Some examples include industrial automation, smart factories, additive manufacturing, and artificial intelligence.

The advent of Industry 4.0 is providing opportunities for OFSEs and Heavy Industrials to improve the manufacturing experience and thus approach net-zero faster. For heavy tools, such as additive manufacturing (3D Printing), significantly shortens the supply chain by enabling local ‘on-site’ production of parts and spares, reducing waste and associated carbon footprint. When tools and products don’t need to be packaged and shipped, significant savings in costs and CO2 emissions occur, along with a decrease in the materials required for packaging and preservation.

Employing new methods and processes in manufacturing allows OFSEs to reduce the environmental burden stemming from their supply chains. Other modern manufacturing techniques that can support the journey to net-zero and beyond include digital twins, robotics, automated assembly, and AI for predictive and preventative maintenance, where machines can be fixed before they fail[8]. Intervention for maintenance and replacement not only incurs cost but also contributes to environmental impacts in throughout the supply chain.

Deployment and Maintenance Technologies:
Focus on rig-less deployment, light intervention and no intervention solutions

For subsurface technologies and services, such as seismic, logging, drilling and in-well or seabed production systems, the ease of deployment is a major selling point for OFSEs and a significant cost bucket for operators.

The use of rigs and intervention vessels leave a large carbon footprint. In many cases, these may not be avoidable all together. However, there is significant advancement in light intervention work and modularization of tools and equipment, which reduce the complexity and environmental impact of deployment and field intervention.

For example, Schlumberger, Baker Hughes and Novomet, all boast of in-well ESPs that can be deployed and retracted by means of slickline or coiled tubing, significantly reducing the offshore pull and installation time from approximately 5 days to 24 hours at most. This saves both OFSEs and operators significant costs in rigs (which in some offshore regions can cost up to $10Million a day to run). It also reduces emissions through power generators required to keep the rigs active. Similarly, with fewer personnel required in the field, the impact of travel and logistics is reduced.

Apart from well intervention, investments are being made in Smart Well technology to achieve zero-intervention goals[9]. Smart wells is an umbrella term referring to the systemic integration of emerging down-hole measurement, communication, control and processing technologies into well and asset design[10].

Smart well technologies ensure efficient and economical solutions for most drilling and production issues and reduce the OPEX cost for intervention operations in the wells significantly. There are several smart technologies that can be applied, depending on properties such as pressure, temperature, fluid composition, and characterization. They also depend on the operators’ objectives, such as water shutoff, gas shutoff, eliminating conning effects, or maintaining pressure. Generally, smart wells have the ability to monitor performance, collect and analyze downhole data[12] without intervention. When investment are made early in field development, they make the field more economical and environmentally friendly.

_{Image: Oilfield Emissions Data}

Figure 4 illustrates the CO2 emissions from oilfield operations. Significant reductions in CO2 emissions can be achieved by avoiding unnecessary interventions.

Remote operations are an excellent way to reduce intervention costs, which include transportation of personnel and tools. OFSE’s have invested heavily in remote and also hybrid simultaneous operation technologies which mitigate the environmental impact of intervention and field operations by benefitting from economies of scale. Services such as remote monitoring of production wells and wireline services for remote logging have played a crucial role in this effort.

Collaboration and Transparency

As all roads lead to a carbon neutral future and the only way through for the oil and gas Industry is by collaboration. Oilfield operators like ExxonMobil, Shell and TotalEnergies are being held accountable for leading the industry towards a net-positive transition. However, this cannot be achieved without all the players in the industry being in collaboration. OFSEs have assumed the responsibility of developing technologies that can drive the industry towards carbon neutrality. Regulators, operators, OFSEs and upstream suppliers need each other’s efforts, consequently transparency. It is common practice for operators to collaborate with OFSEs on technology development projects. Therefore, as we progress towards a net-zero future, it is expected that OFSEs will cooperate with operators to assess the carbon intensity of the supply chain and explore solutions for end-of-life constraints on their products and technologies.

One OFSE major, in need of developing Artificially Intelligent Predictive Software for ESP operated fields, partnered with a major operator, who shared field performance data that fed into the development of models, enabling tests and trials, ultimately leading to the creation of this product. When OFSE’s are transparent with their employees, the market, as well as regulators, regarding their practices and the sourcing of raw materials, performance data of their tools, products, and services, they have a better chance of improving the value chain of our products and technologies through reciprocity.

READ: Electrifying Oilfield Operations to Reduce Emissions at BPX

Continuous Education of Workforce

It is undeniable that employees across all departments and product groups are the lifeblood of the OFSE organisation. Efforts to cascade strategic imperatives and steps throughout the organisation cannot be overstated. Instead of the need for ‘upskilling’ an already technically proficient and business-savvy workforce, OFSEs may focus on methods to broaden the applicability of the knowledge and intangible assets already inherent within their personnel.

It's also important to note that, rather than seeking external education or training, a peer-to-peer education approach is more suitable. Many of the challenges related to design, manufacturing, deployment, operation, and maintenance of tools and products are known more naturally to frontline workers. Consequesntly, a knowledge exchange initiative conducted through conferences, workshops, and webinars can significantly contribute to accelerating efforts to decarbonize the OFSE supply chain and, by extension, the oil and gas value chain.

_{[1] Global fossil fuel demand set for 2025 peak under net-zero pledges: IEA}

_{[2] McKinsey: aggregate fossil fuel demand to peak in 2027}

_{[3] ‘Unsustainable path’: BP forecasts falling fossil-fuel demand}

_{[4] Global gas outlook to 2050}

_{[5] SeismicTrak seismic-while-drilling service}

_{[6] Design for Sustainability: A Step-by-Step Approach} 

_{[7] Design for Sustainability: A Step-by-Step Approach} 

_{[8] Towards sustainable extraction of technology materials through integrated approaches} 

_{[9] The 10 Biggest Future Trends In Manufacturing} 

_{[10] Well intervention using rigless techniques}

_{[12] Smart Well Technologies Implementation in PDO for Production & Reservoir Management & Control.}

_{[13] Introduction to Smart Oil and Gas Wells: Drilling Completions and Monitoring Solutions}