Happy Friday and welcome to Energized, your weekly look into the geopolitics, news, and happenings of energy markets.
Today, we are releasing our very first Spotlight issue! Spotlight issues will circulate on the 3rd Friday of every month. The focus will be on a particular conference, exhibit, or subject matter occurring or buzzing around the industry that month. For the month of May, we are discussing the Offshore Technology Conference, what it is, some press surrounding it, takeaways, and my experience as a first time OTC-goer. Most of the links in this issue will be directed at the Houston Chronicle because, well, they cover OTC better than anyone else.
Fast Facts – Houston Chronicle Fuel Fix
Light, sweet crude (dollars per barrel): $61.66
- Last Week: $61.94
Natural Gas (dollars per million British thermal units): $2.619
- Last Week: $2.567
Rig count (United States): 988
- Last Week: 990
May Spotlight Issue: Offshore Technology Conference
May 6-9, 2019
The Offshore Technology Conference (OTC) is the largest oil and gas trade show in the world. 2019 was the 50th anniversary of the event. Traveling to Houston from all around the world are over 1,000 companies and 60,000 guests. Executives and industry experts host panels on various trends and challenges. Networking events, technical sessions, white papers, and seminars occur all 4 days of the conference.
OTC reminded me of a science fair. But not just any science fair, the largest and most ambitious science fair in the world.
I attended on Wednesday and Thursday for the second half of the conference. Major companies like Siemens, Caterpillar, Emerson, Schlumberger, Baker Hughes, NOV, Sinopec, and FMC dominated the skyline inside Houston’s NRG Center.
There was so much experience. As someone relatively new to the industry, and even newer to the offshore side, I could feel the high-powered AC cool my already “wet behind the ears” as soon as I walked in.
The conference is just huge. You could spend all 4 days there and still not cover it all. I found myself stopping at a booth, reading everything I could, looking up at larger-than-life iron, going on simulated tours, trying on VR headsets to check out a Siemens SGT-750 industrial gas turbine or two, and then realizing I had covered less than 5% of the conference in 3 hours. Talk about humbling.
You get a lot of bang for your buck at OTC. When I introduced myself, I made it clear that I was unfamiliar with many aspects of Offshore, but I was curious to learn more. This approach made me nervous at first. I expected many companies wouldn’t want to waste time talking to someone so naïve. To my surprise, they embraced me with open arms. In fact, I think that many of them were rather eager to share their latest technologies and products with the younger generation.
There’s an advantage to going to OTC with nothing to lose and everything to learn. On the last day of the conference, I went with my friend, Augie Streatfeild, who is a media magician. Augie was looking to learn more about the ways in which oil and gas companies convert complicated engineering projects into easy to understand and visually appealing videos.
Augie and I spent our Thursday talking to all sorts of companies. He commented that I was “competently ignorant”, sporting a rare ability to start out knowing nothing but ask the right questions to walk away with something. Hopefully next year I’ll simply be “competent”.
Highlights and Takeaways
- Lowering breakeven levels for offshore investment and decreasing emissions
I attended a Baker Hughes (BH) luncheon on Wednesday. The speaker discussed BH’s goals related to offshore from now until 2050. The company wants its offshore projects to be profitable at $25-30 per barrel by 2040. They expect oil prices to continue to be neutral or even fall as unconventional oil becomes mainstream.
Offshore investment wise, BH predicts the next 3-year Compounded Annual Growth Rate (CAGR) to average 9%, with a high of 12.5% and a low of 3%. That means that offshore investments are expected to return 9% per year over the next 3 years. That’s a healthy profit.
Increased investment typically means increased capital expenditures (CAPEX). CAPEX bottomed in 2017-2018 and is rising in 2019. It currently sits at around $150 billion and is estimated to reach $200 billion by 2022.
- The industry is desperately trying to catch up to the digital age. In many cases, they are succeeding.
The pace and nature of change for offshore lags onshore because the scale of offshore is so much larger. It’s like steering a sailboat versus an aircraft carrier.
Emerson and Caterpillar both touted new digital tools designed to save time in the field. Well sensors save time and maintenance costs by allowing technicians to check the status of their wells from a mobile app instead of driving out to check on each well. Both companies are able to remotely monitor their assets. Caterpillar makes engines, pumps, generators, transmissions, etc. Their products are worldwide. Being able to visualize an entire fleet of active assets from a single dashboard is truly game-changing for operators looking to leverage the latest digital-based automated solutions.
Digital twins, which are basically carbon-copies of active assets in the field, are now widespread across many facets of offshore. Almost every company has them. Digital twins are unique to more than just a make and model. They can exist for each piece of equipment to provide more accurate readings on the environment and characteristics surrounding a particular asset.
- Concern for recruiting the next generation of the oil and gas workforce
The industry is trying to appeal to college and post-college-aged professionals. This is typically being done with a reinforced commitment to emissions reductions, as well as touting the curiosity, adventure, and challenges that young people can enjoy if they work in the industry. A focus on the limitless opportunity for renewables, and the commitment that many oil and gas firms are now devoting to them, also took center-stage.
+ Young talent needed to create tools for oil and gas firms –Houston Chronicle
- Lower emissions and less environmental impact
From the BH luncheon I mentioned earlier, I discovered that the company decreased its CO2 emissions by 26% since 2012.
Their goal is to decrease emissions by 50% between 2012 and 2030 and 100% by 2050.
They currently emit 700,000 metric tons of CO2 equivalent each year. Half of that is from the electricity they purchase to run their operations.
Decommissioning efforts, usually done out of necessity and with the lowest cost, are undergoing increased scrutiny. It’s important that decommissioning is done correctly and with the utmost care to return the environment to its pre-hydrocarbon-extraction state.
- Changing the landscape of power generation
From my visit to the Siemens booth on Wednesday, and then my return on Thursday, I have to say this was my favorite booth. This company is totally responsive to the changing landscape of power generation. Siemens is the epitome of German engineering excellence. I spent the majority of my time talking gas turbines with Matthew Rickert and Stefan Jansson.
United States power generation used to rely heavily on coal. Now, the industry has transitioned to natural gas-fired power plants and renewables like solar, wind, and hydropower. Siemens is the largest manufacturers of industrial gas turbines, whose use case is split 50/50 between power generation and gas compression needs for the oil and gas industry.
The power generation industry is laser-focused on renewables. Baseload power in states like California is now almost entirely supplied by renewables, replacing combined cycle gas-fired power plants and coal. Peaking power is now supplied by simple cycle gas-fired power plants, who must be able to start and stop to provide power for the highest energy demanded times throughout the day. Siemens’ aeroderivative gas turbines, like the SGT-A65, are able to cold-start to full power in under 5 minutes, providing a perfect solution to the changing power generation needs of the renewable age.
Combined cycle power plants achieve up to 50% greater efficiency than simple cycle plants. These plants use the exhaust from gas turbines to heat a boiler to produce steam that then feeds through a steam turbine, effectively harnessing what would be a polluting by-product to run an additional power generating process.
Combined cycle plants will continue to replace coal plants. In windy and sunny places, renewables will likely continue to provide a greater percentage of baseload power. For peaking power and for backup power, simple cycle gas-fired plants with the ability to start and stop almost instantly will give the power generation the stability and extra kick it needs to embrace renewables with open arms. Siemens aeroderivative gas turbines provide over 60MW and 41.3-43.8% simple cycle efficiency.
Offshore wind turbines are growing in popularity. These turbines can power offshore generators instead of an engine, saving on fuel and emissions.
There were a record number of technical sessions involving renewables at this year’s OTC.
+ Marine renewables get focus at OTC – Houston Chronicle
+ Renewable energy part of offshore technology event in Texas – Houston Chronicle
- Increased compression needs
Siemens sees a need for more compression in places like the Permian. This means replacing gas, diesel, and dual-fuel engines with gas turbines.
Compressor stations that will be built along the new pipelines from the Permian to the gulf will likely be outfitted with gas turbines instead of engines.
In general, the industry is seeing a need for more compression due to greater production of natural gas, length of pipelines, the volume of pipeline traffic, and energy demands.
- More video, less iron
After seeing a 17,000 horsepower at only 1,000 RPM frac trailer and various engines, pumps, and compressors throughout the conference, I thought that OTC had an excellent variety of media and physical iron. But after talking to other visitors, I found that OTC used to have much more iron and much less video. This explains why technology is now considered the star at OTC.
My friend Augie, who I mentioned earlier, noticed that the production value of the videos was quite high, although he commented that some of it was clearly a ploy to lure in a younger audience.
For me personally, I got more out of the physical models and iron at the show. I’ll go online if I want to watch videos, that’s not why I’m at OTC.
- Lower attendance
This year’s conference saw declining rates of attendees, hitting the lowest level since 2014. In my opinion, it’s simply a result of the internet providing such a wide array of information there’s less incentive to go to trade shows. The Spears brothers but it a little more eloquently in their latest newsletter.
- Focus on safety
This year marked the 50th anniversary of OTC. It also marked the 9-year anniversary of the Deepwater Horizon Oil Spill. From the numerous technical sessions on well control safety and the massive Blow Out Preventer (BOP) stacks on display at the conference, it’s reassuring to know the industry is proactive on their push for safety.
+ Offshore safety updates etc. –Offshore Daily Newsletter
Most of you are already familiar with our Oil 101 course, at least the free version. Did you know that we have companies that license the course to use as internal training for sales, IT and operations teams? If your group needs this, let’s talk.
Have a great weekend!
EKT Interactive Contributing Editor
Head Writer | Eau Claire Writing
Houston-based freelance writing company specializing in gas compression, turbomachinery, onshore and offshore drilling, and well service content for the oil and gas industry.
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