Effects of Lower Crude Oil and Gas Prices on the Automation Sector for Upstream Production and Downstream Refining and Petrochemical Industries

May 14, 2015 at 9:12 am  •  Posted in Oil and Gas  •  0 Comments

Based on the current picture of the oil and gas industry crude oil and gas pricing both producers and suppliers need to transform their production and costing models. Suppliers to the oil and gas industry will need to address the return on investment scenarios and analysis of benefits for implementation of new and improved technologies such as upgrading to wireless monitoring, control and automation, adoption of new internal operational strategies and integration of existing and new solutions based on the effects of lower crude oil prices on the automation and communications sector for Upstream Production and Downstream Refining and Petrochemical Industries. The impact of lower crude pricing presents owner/operators with opportunities and challenges on both sides of the industry; upstream (onshore) and downstream. On the upstream side the threat to the business is that the rig count will go down drastically and the new well count will be substantially reduced. This will have a negative on all the panel shops and system integrators that support this industry with well pad control and automation systems. On the downstream side low feedstock pricing is creating a profitable refinery and petrochemical industry sector which will spawn new projects, expansions and modernizations; including DCS upgrades and revamps which are long overdue.

In the past on the upstream production side of the industry with high crude prices, maximizing well performance was not a priority.  At the 100 dollar price-level, there was no real urgency to optimize performance. Now well performance and operational efficiency are high on the agenda. The two key factors to achieve this higher level of efficiency are to reduce manpower and downtime. To reach these goals producers will need to utilize additional and higher level of instrumentation and automation to optimize production and increase efficiency. Examples of technology that can address efficiency, reliability, downtime and manpower issues are:

  • Providing higher reliability factor with high reliability power solutions.
  • Providing surge and voltage protection with remote maintenance and monitoring.
  • Providing low cost high value data collection solutions.
  • Wireless versus wired for lower cost and speed of installation.
  • Cyber Security which relates to downtime.

In this new business case owner the system integrators need to address upstream producer’s lower cost operating models based on their technology, products and solutions. They must address economic and operational benefits in order to get the attention and approval of a project by management.

On the downstream side of the industry with lower priced feedstock and lower energy costs for refiners and petrochemical manufacturers we have the situation of improved margins and available capital. This industry sector can now undertake the long overdue task of upgrading and modernizing their control and analytical systems which have been neglected for years due to lack of investment capital. Here we will also see new grass roots projects on the petrochemical side. Also as long as there is an export ban existing refineries need new capacity to process more oil, especially the ultra-light type of crude that is pumped in some parts of Texas and North Dakota.Employee_withOilPump

  • DCS control system modernizations and our unique cabling solutions.
  • Wireless versus wired for lower cost and speed of installation for data acquisition.
  • Retrofitting for Cyber Security.

Any investment in automation in both sectors must address the following key parameters and meet the requirements of a cost versus benefit analysis.

  • 5-10% improvement in operational productivity
  • Increased reliability
  • Improved Supply Chain Management
  • Improved Operational Efficiency
  • Improved Safety and Regulatory Compliance
  • Ease of Maintenance and Configuration Control

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