Performance Intermediates Stephen Bowers Marl, March 2018 1
Disclaimer This presentation contains forward-looking statements and opinions concerning the general global economic condition and that of the oil, gas and light olefines industry. Evonik Industries AG does not warrant the reliability, accuracy or completeness of any information contained in this presentation and, to the extent permitted by the applicable law, disclaims any and all responsibility for any loss or damage (including without limitation consequential, indirect or economic losses and damages) arising in any way, including by reason of negligence for errors or omissions in this presentation. You should therefore seek independent verification of any information presented herein that you intend to rely on, and consult your professional advisors to determine the course of action appropriate to you. Where possible this information has been gained from public sources that are widely available free of charge and to the best of our knowledge has not infringed any terms of use or copyright. 2
Agenda for Today Digitalisation Initiatives Change Digitalisation of Oil and Gas Production The Digital Twin 3
Digitalisation - Initiatives Internet of Things * (IIC -mainly US 1999) Industry 4.0 ( Europe mainly Germany 2011) Made In China 2025 ( China -2013) *Internet of Things - Kevin Ashton P&G 4
Digitalisation some of the technologies Artificial Intelligence Cloud Computing Blockchain Technologies Edge Computing Digitalisation has been occurring for years in the energy and chemical sectors. It has and will remain an evolutionary process rather than revolutionary. The latest iterations will involve convergence of the virtual and real worlds and loop based analytics to achieve better productivity, flexibility and efficiency 5
Change is inevitable Change - we always overestimate change that will occur in the next two years and underestimate the change that will occur in the next ten. Don't let yourself be lulled into inaction. Bill Gates Nokia 2007 Market Capitalisation $290 billion - 40% handset market Nokia 2018 Market Capitalisation $33 billion 0% of handset market 6
Underestimating 10 year change for example US 2004 High Cost Ethylene Declining US oil and gas production Declining US petchem exports US 2014 Low cost ethylene Expanding US oil and gas production Expanding US petchem exports 7
Underestimating sudden Change for example US Early 2014 Low cost ethylene Low cost feedstocks Huge investment inflow in chemicals Rapidly growing exports US Late 2014 Crude price drops from US Late 2014 $100 -$50 bbl in 4 months Naphtha and LPG more attractive as feedstocks EU and Asia cost structure improves US re-evaluates some projects 8
Digitalisation of Oil and Gas Production Seismic 3-4 D imaging Logging Whilst Drilling (LWD) Measurement Whilst Drilling (MWD) Enabled visualisation and targeting of trapped and bypassed reserves Enabled better understanding of reservoir Steerable drill bits for extended lateral completions Selective placement of hydraulic fracturing clusters 9
Saudi Super Giant Ghawar Oil Field maximising oil recovery Saudi Arabia s Giant Ghawar oil field is 65 years old Advanced 3D seismic imaging and long multi-lateral well completions are used to optimise recovery. On the left is an image of the reservoir trap. Red indicates oil On the right is a map of the producing wells and water injections wells in the Haradh III region Smart valves can control water breakthrough This technology has permitted exceptional rates of recovery. The technology improvements were evolutionary over decades 10
Rotary Steerable Smart Drill Bits LWD and MWD Smart drill bit. The driller sits is a control cabin, similar to an aircraft cockpit. A dashboard provides real time data of the well progress. A data link can transmit the data in real time to the client. Placement of the drill bit can be to within metres of the target. Push or Point drill steering enables complex deviated boreholes. This technology was developed by evolution over decades 11
US Shale Oil and Gas optimising fracture placement Hydraulic fracturing is evolving Latest designs select optimum points along the well bore to create fractures. Clusters of shorter fractures are now preferred to maximise reservoir contact.(fracture volume) Without smart technology many shale resources would not be economic. Even so recovery factors are still low. 12 http://www.halliburton.com/en-us/ps/wireline-perforating/wireline-and-perforating/formationreservoir-solutions/fracture-modeling-fracxpert-software.page#
Shale Resources Enable a US Petrochemical Renaissance (AEO 2018) US shale light tight oil and gas projection out to 2050 Most noticeable is the plateau in oil production within the next decade Gas output growth is concentrated in the East with no plateau effect forecasted. 13
New Technologies have boosted the oil and gas supply - but not profits Currently the global demand for liquid hydrocarbons is approaching 100 million barrels per day New supply from the US shale resources has doubled liquids production in the US, adding 5+ million barrels of supply to the global market. New technologies, aided by better data collection and processing techniques enable this feat.. But in 2016 The Top 150 US Oil and Gas producers earned $477 billion Collectively lost $47 billion 24 made a profit of $13 billion Exxon made a profit of $8 billion 14
Digitalisation in the Refinery and Petrochemical Sector Most refineries and Petrochemical plants are already well run Digitalisation will focus on improving efficiency in these key areas Supply Chain Optimisation Refinery/ Petrochemical Plant Optimisation Skills Training Operations Management Decision Support Tools Sales Order Management CRM 15 No two refineries or petrochemical facilities are the same but requirements will be similar Many applications will require some bespoke element Progress will be evolutionary rather than revolutionary
The Digital Twin Approach Real and Virtual plants Support Services Engineering Simulation Management of Data Knowledge & Information Generation Services Analytics Productivity Efficiency Flexibility 16
Some Points to Consider Think evolutionary not revolutionary remember the dot.com boom ( and bust) Governments have a poor track record of project execution - learn Management consultants are all experts in this field choose wisely Vast amounts of data will need to be processed. Is the capacity in place to handle this data Edge computing will help Set realistic project goals and expand them as learning improves 17
Conclusions the opportunties are huge Digitalisation will progress with evolutionary change Identifying the processes and methodology will be key to success People skills will be an important resource to ensure success The digital virtual twin approach will enable scenario testing to maximise productivity, flexibility, efficiency and availability. 18 And finally- at the recent IP week forum OPEC estimated that $10 trillion investment is required to meet future oil and gas demand by 2040 repeat of 2015
19