The “Amazon Effect” Is Coming To Oil Markets (Oilprice.com)

The following article is published with permission from Oilprice.com (Original article here).

The “Amazon Effect” Is Coming To Oil Markets

While OPEC mulls over further steps to once again support falling oil prices, tech startups are quietly ushering in a new era in oil and gas: the era of the digital oil field.

Much talk has revolved around how software can completely transform the energy industry, but until recently, it was just talk. Now, things are beginning to change, and some observers, such as Cottonwood Venture Partners’ Mark P. Mills, believe we are on the verge of an oil industry transformation of proportions identical to the transformation that Amazon prompted in retail.

According to Mills, the three technological factors that actualized what he calls “the Amazon effect”, which changed the face of retail forever, are evidenced in oil and gas right now. These are cheap computing with industrial-application capabilities; ubiquitous communication networks; and, of course, cloud tech.

The Internet of Things is entering oil and gas, and so are analytics and artificial intelligence. These, Mills believes, will be among the main drivers of a second shale revolution, reinforcing the efficiency push prompted by the latest oil price crisis.

It seems that shale operators have been paying attention to what growing choirs of voices, including Oilprice, have been saying: they are talking more and more about the benefits that software solutions can bring to their business, potentially leveling the playing field for independents, a field that has been tipped in favor of Big Oil for decades.

Long-standing mistrust of technology is now dwindling as the benefits—including streamlining operations, maximizing the success rate of exploration, and optimizing production—make themselves increasingly evident, not least thanks to a trove of tech startups specifically targeting the oil and gas industry.

In a story for Forbes (“The Future For Oil Supply And Prices After The ‘Amazon Effect’ Stimulates Shale 2.0”), Mills notes several examples of such startups that are already disrupting the industry with cognitive software for horizontal drilling, an on-demand contractor network, and an AI-driven software platform for well planning, among many others. The common feature among them all is they are narrowly specializing in various segments of the oil industry to deliver solutions that promise to substantially reduce times, labor, and costs, while improving outcomes. What’s not to like?

Tech investments among oil independents are still much below the level already characteristic of other industries such as healthcare or financial services, to mention just a couple. Yet this will also change. In the not-too-distant future we may see a flurry of M&A in oil and gas software development.

The reason for this future consolidation is already evident: there are many oil and gas independents in the shale patch. Technology improvements will soon separate the winners from the losers, so it’s a pretty certain bet that more M&A—a lot more—will likely happen over the next few years.

But independents in the shale patch are already burdened with debts that they took on in order to expand their production, and not all will survive the digital disruption. And they don’t just have Big Oil to contend with; oil and gas independents also have renewable energy solution providers breathing down their necks every time oil prices rise—renewable energy that’s already married to software.

That should be strong enough motivation for shale boomers to make sure they catch up, and catch up fast.

Link to original article: http://oilprice.com/Energy/Crude-Oil/The-Amazon-Effect-Is-Coming-To-Oil-Markets.html

  • Guy Thomas

    Cheaper oil is the last thing we need.

    • Omega Z

      To late. Many shale oil fields can survive $20 a barrel oil. That’s why every time OPEC reduces production, the U.S. make up the difference.

      Oil prices collapsed when supply was 1.5 to 2 million barrels a day more then demand. Since that collapse, demand has increased by 2 million barrels a day, yet supply is still 1.5 to 2 million barrels a day above demand.

      In the meantime, U.S. producers have another 1 million barrels a day just waiting for final completion in reserve. OPEC will need to restrain production much longer then planned and may need to cut more to eliminate the excess.

      Note- Big Oil is now starting to incorporate the technology that the independents developed.

    • NCY

      The cheaper it is the less incentive to pump it out of the ground. That is a good thing.
      The cheaper it is the more incentive to use it. This is a bad thing (sort of).

      In the end, other forces like cheap solar/storage and efficient electric cars will make the *burning* of fossil fuels for energy obsolete (just like burning wood for energy is usually not efficient any more). This is what we have to aim for. Then fossil fuels will be used increasingly for other purposes like making plastics, expensive-to-extract fossil fuels will be difficult to justify removing from the ground.

  • Omega Z

    They will still be mining coal as well as pumping oil and gas in the 22nd century.

  • Simon de Boer

    Desperate last gasps of a dying industry. Solar pv plus storage will crush oil. We’re going to blow past grid parity, and EVs will flood the market in the early 2020s.Oil will be on life support by 2030.

    • Omega Z

      The cost of battery storage per kilowatt exceeds the cost of producing energy alone.

      • cashmemorz

        The battery cost is in the inputs during manufacture and then the upkeep. Solar input is virtually no cost, but the hardware is where the long term costs are. Add it up plus maintenence and you get the real cost of PV. Near parity with other forms of energy production so far. The cost of producing the PC sheets and batteries will have to drop to be truly competitive. Then there is Randell Mills Suncell that estimates at one cent per kilowatt-hour after leasing and other costs are calculated. Then the next generation of Suncell is estimated at one tenth of a cent per kilowat-hour and less. If the one cent per kilowat-hour version is to be leased in 2018 as Brilliant Light and Power expect then theer is no competiution with BLP. They will corner the first market entry. Quark X is the only one that could compete if the COP is over 100. COP of 10 is the basic to start competing with BLP.

        • Omega Z

          Elon Musk’s Power Wall 7KWh battery(the gold standard) has a storage cost of about 25 cents per kilowatt hour excluding the energy that is stored in the battery. Note the Power Wall 7KWh battery is actually 6.4KWh and less over time.

          Solar- Average of 6 solar hours of sun light available requires 4KWh of solar panels for every 1KWh fossil power plant production capability. Average also doesn’t account for when days, even weeks on end of cloudy overcast with reduced energy collection requires a substantial investment in battery storage capacity and additional solar panels.

      • CharlesSWVA

        .
        Omega, add the time factor to kilowatt (hour) and you will be nearing correct.
        .

  • Omega Z

    Why, Because they have far more uses then just fuel.
    200 Million tons of fertilizer per year, mostly from N-gas(can be extracted from all them) and expected to double in the next 20 years. Each is made of 100’s of building blocks for chemical stock and so much more. All have a part in metal processing some not possible without them without a major reduction in quality and higher cost.

    • cashmemorz

      All industries depend on energy to do anything. With extremely cheap power then the cost of mining coal transporting storage can all be replace by cheap power using anything close to hand, including garbage for chemical conversion. Steel can be made by arc melting using cheap power, and a few additives for the alloying part.

      Those aqdditives can be mostly gotten from recycling old alloys. New iron from mines will be used to top up the steel arc furnace. High grade ore will be mostly mined on asteroids once suncell and quark x are used to power the rockets. Mills is already collaborating with Massey University on developing the anti-gravity drive. 500 wattsv of pseudo-electrons lifts one thousand tons mass attached to the device. Details about the form of the pseudo-electrons and how they are made by shooting cosmic rays at normal electrons is on the Massey University lecture

      http://webcast.massey.ac.nz/Mediasite/Play/8ef7e03e26fc458b8eb7f351738f26811d

      Credentials of the above lecturer:

      http://www.massey.ac.nz/massey/expertise/profile.cfm?stref=944130

      A lecture by Dr. Mills at Fresno State U Smittcamp Honors College Colloquium.Introduced by Eric Tilton:

      https://www.youtube.com/watch?v=8dCzVUnnL00

      Eric Tilton(profile from LinkedIn)

      “Owner and CEO

      Company Name MJT Technologies LLC

      Dates Employed Sep 2013 – Present

      Employment Duration 4 yrs 1 mo

      Location Clovis, CA

      MJT Technologies is an engineering, design, and consulting services company, blended with a business and product development arm. We also mentor and work with a software startup with six founders. The younger entrepreneurs keep us stimulated, challenged,
      and up on all the latest cool trends.

      Currently, MJT Technologies is also involved in application-specific business development for Brilliant Light Power SunCells(R), revolutionary new
      primary power sources. We focus on the use of SunCells(R) in powering: small, medium and large SWRO facilities (Sea Water Reverse Osmosis); Industrial RO for high-purity water needs; Agricultural ground water and runoff treatment; and high volume pumping. We also
      have several Information Technology Services consulting clients. “

      • Omega Z

        Yes, because metallurgy is just that simple,

        That is why China and India have spent over 30 years trying to develop high quality high strength steel for high performance jet engines and haven’t yet succeeded.

        Your talking of raw materials and completely overlook refined materials that adding old alloys and such are of no use. Do you think really they do these additional processes if it was obtainable by modifying the raw material recipe. That only provides a uniform product. Many products require they not be uniform. Things such as bearings have many structural variations through out purposely. As to ores being mined off world, that is decades away, You allow your imagination get way a head of real time advances which don’t happen with point click.

        • cashmemorz

          LENR is also long term. That is the context, just to be clear.

          • Omega Z

            “LENR is also long term.” We can hope.

            The issue is so many people see oil, gas and coal only as fossil fuels. Reality is oil & gas are used for over 6000 products and coal would likely add a couple 1000 more. Modern society wouldn’t be possible without them. Would never have happened. Even so called green energies are highly dependent on them. Thus, a very good reason to find alternative energy in order to conserve oil, gas and coal.

            I only have issues in how those in charge are going about it.

  • Omega Z

    “Prices at pumps should be sky high due to overtaxation”

    So another form of subsidy. A good alternative to fossil energy should stand on it’s own. Otherwise, you’re forcing up the cost of living and lowering living standards of the masses. People will have to decide what to sacrifice. The 1st sacrifices are usually medical care and food.

  • CharlesSWVA

    The sun is always shining in about 1/2 of the world so solar is present 24 hours per day. A world wide grid, or regional intercontinental grids, whatever its nature may be, is the ultimate answer. Ergo, no storage required.

    • Bohem FromCz

      Nonsense.
      One terorista can destroy it!

  • Omega Z

    I done did the math.
    Elon Musk Power Wall 7KWh(the gold standard) times number of lifetime recharges possible divided into the battery cost is 18 cents per kilowatt hour energy storage. Use real world recharge expectations and the fact that the Power Wall 7KWh battery is really 6.4KWh and your at about 25 cents per kilowatt hour energy storage. This does not include the cost of producing the electricity and the losses involved in charging the batteries nor the fact that with each recharge the battery will hold less and less energy.

  • Charles Davis

    Once ecat home goes into production solar energy companies will wither and die!