David Womack

Director, Strategy & Business Development, IBM Chemicals & Petroleum

September, 2010

Let’s Build a Smarter Planet:

Oil and Gas

1 © 2010 IBM Corporation

Let’s build a smarter planet: Oil and Gas

The world is smaller and flatter.

2 © 2010 IBM Corporation

Let’s build a smarter planet: Oil and Gas

The reality of living in a globally integrated world is upon us.

Frozen credit markets and limited access to capital.

Economic downturn and future uncertainty.

Growing concern about the effects of climate change.

Volatility in price and demand for energy worldwide.

The world is connected:

economically, socially and technically.

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 Let’s build a smarter planet: Oil and Gas

Total world consumption of energy is projected to increase by 50

percent from 2005 to 2030

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 Let’s build a smarter planet: Oil and Gas

40% of the industry’s skilled professionals

will reach retirement age by 2010, while
petroleum engineering program enrollment
in universities is down 85% from its peak in
1982 in some areas

In other areas companies contend with the

need to achieve a 50% compression of the
the typical 7 year cycle time required to get a
university graduate to productive engineer

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Let’s build a smarter planet: Oil and Gas

Petroleum and Chemical companies are the

most asset intensive in the world by more
than a factor of 2

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Let’s build a smarter planet: Oil and Gas
There are over 1000 Refineries
in the world & more than
10,000 Chemical plants

More than 50% of Typical Plant

Operating Expense is consumed by
energy cost

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 Let’s build a smarter planet: Oil and Gas

The world consumes 400 EJ today projected to

increase to 1400 by the year 2100

Climate, Health, Economic & Technical issues may be

substantial operating at these levels

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Let’s build a smarter planet: Oil and Gas

The need for progress is clear

1 terabyte 33% 50,000

An oil field can Amount of oil, on Man-hours, on

generate one terabyte, average, that is average, required to
or 200 DVDs’ worth, of recovered from an execute turnaround
data daily. An oil and existing reservoir.2 effort every two
gas engineer can years on an offshore
spend up to 60% of platform.3
their time mining this
data.1

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Let’s build a smarter planet: Oil and Gas

The opportunity for progress is clear.

85%
10%
reduction in 1.5% improved
seismic increase in asset
processing oil recovery utilization
New technologies and A 1.5% increase in recovery Adopting best-in-class
mathematical algorithms from existing wells, on asset management
exist to significantly average, would yield
strategies can reduce
reduce the time to enough oil for half a year’s
analyze oilfield data to global consumption.2
asset downtime by
find, map and understand 10%.3
oil & gas reservoirs,
thereby speeding time to
recovery.1

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Let’s build a smarter planet: Oil and Gas

The way the world works is changing—

and leaders must lead through the unknown.

8 in 10
C&P CEOs anticipate turbulent
change and bold moves.

19%
gap between the degree of change
required and C&P CEOs’ ability to
manage it.

Source: 2008 IBM CEO Study

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Let’s build a smarter planet: Oil and Gas

This mandate for change is a mandate for smart.

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Let’s build a smarter planet: Oil and Gas

For oil and gas organizations, this means finding a way to lead in a
new environment shaped by three key factors.

ENERGY AVAILABILITY TO MEET THE WORLD’S GROWING NEEDS

Projections show energy consumption increasing by 50% by 2030.1 Yet a great deal is still
unknown about the world’s oil and natural gas supplies: where to find it, how much is in which
reservoirs, how to extract more of it and even how best to distribute it once it is pumped out of
the ground or ocean.

ENERGY AFFORDABILITY—PRICE, VOLATILITY—OF DIRECT AND INDIRECT GOODS

TO CONSUMERS
Hit-or-miss exploration methods and an unreliable supply can and do impact the price of oil and
gas. Given the enormous price tag of drilling a new well—which can cost over $100 million—
and the complexity of managing production facilities, even modest increases in oil exploration
and production efficiency can tremendously improve energy affordability.

ENVIRONMENTAL IMPACT
Failure to implement new technologies and capabilities that minimize drilling footprint or
improve the safety and reliability of operations can lead to increased environmental risk due to
unnecessary drilling and oil production accidents (explosions, spills, etc.).

13 © 2010 IBM Corporation

Let’s build a smarter planet: Oil and Gas

New technologies need to be applied to continuously absorb and

apply the sea of information generated across their value chains and
beyond – transforming raw data into actionable insight

DATA INSIGHT ACTION

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Let’s build a smarter planet: Oil and Gas

Today, smart oil and gas organizations are working to make better
use of data in order to…

ENHANCE EXPLORATION IMPROVE ASSET

AND PRODUCTION MANAGEMENT
Capture and process a variety Boost asset availability, flexibility
of data to identify previously and reliability to achieve greater
inaccessible reserves and SMART OIL responsiveness to market
improve well performance. AND GAS fluctuations.

OPTIMIZE GLOBAL OPERATIONS

Increase visibility, mitigate risk and lower
costs across the supply chain.

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Let’s build a smarter planet: Oil and Gas

They are doing so by becoming

instrumented, interconnected and intelligent.

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Let’s build a smarter planet: Oil and Gas

INSTRUMENTED
We now have the ability to measure, sense
and see the exact condition of everything.

Today, there are 1 billion transistors for each

person on the planet.

By 2010, 30 billion RFID tags will be embedded
into our world and across entire ecosystems.

Oil-well monitoring systems can analyze reservoirs that are
over 3 miles below the earth’s surface.

Remote well-monitoring systems can improve

asset utilization—for example, by identifying
signs of wear before breakdowns occur—and can
reduce risk by allowing people to monitor and
control operations, such as pump speed, from a
safe location.

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Let’s build a smarter planet: Oil and Gas

INTERCONNECTED
People, systems and objects can
communicate and interact with each
other in entirely new ways.

The Internet of people is 1 billion strong. Almost

one third of the world’s population will be on the
web by 2011.

There are an estimated 4 billion mobile phone
subscribers worldwide.

One oil company manages, in real-time, the flow of oil from
over 100 fields, nearly 50 gas-oil separators and 11,000
miles of pipelines into 7 refineries and chemical plants—
with just 2 dozen people in a remote operations center.

Connecting offshore and onshore support centers

for real-time collaboration across the globe
speeds decision-making and increases
productivity.

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Let’s build a smarter planet: Oil and Gas

INTELLIGENT
We can respond to changes quickly and
accurately, and get better results by
predicting and optimizing for future events.

Every day, 15 petabytes of new information are

being generated. This is 8x more than the information
in all U.S. libraries.

An average company with 1,000 employees spends
$5.3 million a year to find information stored on
its servers.

Increased use of digital oil field capabilities could boost
world oil reserves by 125 million barrels over the next 5-10
years.

New intelligence transforms the way oil and gas

companies operate: increased field recovery,
lower costs and higher production rates.

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Let’s build a smarter planet: Oil and Gas

+ + =
An opportunity for oil and gas companies
to think and act in new ways.

Enhancing Improving asset Optimizing global

exploration and management. operations.
production.

20 © 2010 IBM Corporation

Let’s build a smarter planet: Oil and Gas
Smarter oil and gas:
Enhancing exploration and production.
SMART IS
Using supercomputing and advanced data
modeling to find, map and analyze reservoirs that
previously were inaccessible.
SMART IS
Implementing advanced sensors and integrating
operational data to optimize production and
increase the oil and gas extracted from current
reserves.
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SMART IS
Reducing risks to people and the environment
by having the ability to sense and adjust
operations automatically before problems
occur.
SMART IS
Using data mining to manage operations that
maximize well life and optimize equipment
production.
© 2010 IBM Corporation
Let’s build a smarter planet: Oil and Gas
Smarter oil and gas:
Enhancing exploration and production.
Repsol: Breaking new ground in improving the
accuracy of deep-sea oil exploration by reducing by
85% the time required to run the highly accurate—and
compute-intensive—seismic algorithms.
Statoil: Links advanced real-time sensing capabilities in
the field to collaborate and analyze resources across the
enterprise for Enhanced Oil Recovery (EOH) resulting in
significant increased production and improved operational
efficiency at reduced cost.
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Landmark: Revolutionizes petroleum frontier
exploration in Texas by integrating data sources to
increase the likelihood of finding profitable sources
of oil.
International Oil Company: Integrated asset
management solution that keeps production levels
high and downtime low resulting in greater efficiency,
lower costs, improved safety and overall improved oil
recovery rates.
© 2010 IBM Corporation
Let’s build a smarter planet: Oil and Gas

Smarter oil and gas:

Improving asset management.

SMART IS SMART IS
Enhancing production flexibility and Leveraging new information and forms for
responsiveness to supply and demand rending this information (visualization,
fluctuations in the market. dashboards) for improved decision support.

SMART IS SMART IS
Improving asset availability and reliability based Enabling operations to monitor themselves and
on predictive analytics. be run largely by a “virtual” team of experts.

23 © 2010 IBM Corporation

Let’s build a smarter planet: Oil and Gas

Smarter oil and gas:

Improving asset management.

International Oil Company: Implementing capability to International Oil Company: First-of-a-kind

visualize their entire operation, call and retrieve emergency solution that translates real-time RFID data
information about production effortlessly and seamlessly, into actionable, visual information for new plant safety
and collaborate with effectiveness and consistency across procedures.
the entire enterprise.

PetroChemical Refinery: Integrated asset management

solution to create one central data repository to track more
than 28,000 assets that resulted in six-figure dollar cost
savings.

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Let’s build a smarter planet: Oil and Gas

Smarter oil and gas:

Optimizing global operations.

SMART IS
Integrating supply chain planning information
(production, inventory, logistics) across
disparate operations (locations and systems) to
manage costs and increase customer
satisfaction.
SMART IS
Using predictive weather models to decrease
storm-related damages and minimize
disruptions to supply.

25 © 2010 IBM Corporation

Let’s build a smarter planet: Oil and Gas

Smarter oil and gas:

Optimizing global operations.

HPCL: Deploying RFID for tracking LPG cylinders to

automate the bottling and distribution process while also
monitoring end-to-end asset movements for safety and
supply chain optimization benefits.

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Let’s build a smarter planet: Oil and Gas

Oil and gas companies have always gathered and managed

data and expertise across their value chains, but this
information has largely remained siloed and static.

EXPLORATION

RETAIL PRODUCTION

DISTRIBUTION SHIPPING

STORAGE REFINING
Proprietary real-time data
Historical data and expertise

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Let’s build a smarter planet: Oil and Gas

Through extensive instrumentation, a smart organization will

aggregate all of this data, along with data from many external
sources, to achieve real-time visibility of its entire system.

EXPLORATION

RETAIL PRODUCTION

DISTRIBUTION SHIPPING

STORAGE REFINING
Proprietary real-time data
Historical data and expertise
External real-time data

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Let’s build a smarter planet: Oil and Gas

It will use this data to generate insights that will be shared

within units and throughout the organization—driving targeted
actions to ensure efficient, safe and environmentally sound
operations.

EXPLORATION

RETAIL PRODUCTION

DISTRIBUTION SHIPPING

STORAGE REFINING
Proprietary real-time data
Historical data and expertise
External real-time data
Insights
Actions
29 © 2010 IBM Corporation
Let’s build a smarter planet: Oil and Gas

Why take action now?

TO ENSURE GLOBAL SUPPLY

The Energy Information Administration estimates that by 2015, the oil and gas industry will be
unable to meet global demand based on existing sources alone.

TO RETAIN DECADES WORTH OF EXPERTISE

As much as 50% of the oil and gas workforce is expected to leave the industry within the next
five years. It is imperative that we capture and begin to apply its accumulated knowledge
before it is too late.

BECAUSE, FOR THE FIRST TIME, WE CAN

The ability to instrument and interconnect billions of discrete data sources at all levels of global
activity—within the industry and without—has finally enabled us to create the intelligence
necessary to turn the vision of smart oil and gas into a reality.

30 © 2010 IBM Corporation

Let’s build a smarter planet: Oil and Gas

The imperative for oil and gas organizations today is threefold.

FOCUS ON VALUE EXPLOIT OPPORTUNITIES ACT WITH SPEED

Do more with less Build future capabilities Manage change

Cash/capital focus
Protect and acquire assets
Clearly communicate

Flexibility and talent simple goals

Initiatives
Seek and leverage
Focus on the core experience

Business process Transform your industry

Strategic initiatives
Bold moves Leadership

Position nationally and
Get the information to act
Re-align relationships globally, where appropriate
Set the agenda

Financial solidity
of suppliers, partners Risk and transparency
and customers
Business performance

Revisit/renegotiate management and analytics

Collaborate
Risk management

31 © 2010 IBM Corporation

Let’s build a smarter planet: Oil and Gas

IBM’s solution strategy is aligned with the needs of oil and gas
companies.
ORGANIZATIONS ARE FOCUSED ON… IBM IS DELIVERING…

Enhancing exploration and
Smarter Exploration

production - Seismic Processing
- Reservoir Modeling
- Virtualization

Integrated Operations
- Rotating & Static Equipment Monitoring
- Well Performance Monitoring
- Production Target Monitoring
- Data Validation

IBM C&P Integrated Information Framework

Advanced R&D Capabilities

Improving asset management
Smarter Manufacturing

- Rotating & Static Equipment Monitoring
- Data Validation

Enterprise Asset Management

Turnaround Optimization

IBM C&P Integrated Information Framework

RFID Strategies and Technologies

Asset Lifecycle Management

Optimizing global operations
Enterprise Asset Management

Health, Safety & Environment strategies

Business Performance Management

Supply Chain Optimization
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Workforce Development © 2010 IBM Corporation
Let’s build a smarter planet: Oil and Gas

We’ve only just begun

to uncover what is possible
on a smarter planet.

The world will continue to become smaller, flatter
and smarter. We are moving into the age of the
globally integrated and intelligent economy,
society and planet.

There’s no better time to start building smarter
petroleum organizations—focused on providing
energy affordably and safely. And there’s no
better time to invest in creating the kind of society
we all desire.

Let’s work together to drive real

progress in our world.

33 © 2010 IBM Corporation

Let’s build a smarter planet: Oil and Gas

For more information, contact:

David M. Womack, Director

WW Chemicals & Petroleum
dmwomack@us.ibm.com

34 © 2010 IBM Corporation