Automation Trends

1
Automation Trends Solutions in the Oil Gas
Industry

• Larry OBrien
• Research Director
• ARC Advisory Group
• lobrien_at_arcweb.com

2
Agenda

• Oil and Gas Industry Definition Trends
• Size, Scope, and Automation Spending in the Oil
  Gas Industry
• Automation Suppliers as Service Providers for the
  Oil Gas Industry
• Summary Conclusions

3
Agenda

• Oil and Gas Industry Definition Trends
• Size, Scope, and Automation Spending in the Oil
  Gas Industry
• Automation Suppliers as Service Providers for the
  Oil Gas Industry
• Summary and Conclusions

4
The Oil Gas Industry as ARC Defines It

• Largely Upstream
• Exploration, Production, Transportation,
  Processing
• Includes Pipeline SCADA Applications

(Figure Courtesy of Rolls-Royce)
5
Key Trends Affecting the Oil Gas Industry

• Cost of Energy Over 118 a Barrel and Counting
• Simple Dynamics of Supply Demand Unprecedented
  Demand Meets Increasingly Restricted Supplies
• Rapidly Growing Economies of Asia, Eastern
  Europe, Latin America are Fueling Demand
• Middle East is in the Middle of the Second Oil
  Boom
• Companies Need to Get More Out of the Ground,
  More Efficiently, At Less Cost, and Without
  Unplanned Downtime or Waste
• Companies are Looking for and Producing Oil Gas
  in Increasingly Hostile Environments
• Industry is Increasingly Vulnerable to
  Environment (Natural Disasters, Hurricanes,
  Floods, Etc.)
• Many plants and Facilities Have an Aging
  Infrastructure that Needs to be Replaced

6
Trends The Cost, Need we Say More?

• Capital Expenditures Focused on Upstream
• Despite record Oil Company Profits, Refining is
  not very Profitable

7
ROI for Upstream Operations Consistently Tops 10
Percent
8
Contrast that with the ROI on Refining!
9
Trends Supply Demand, China Leads the Way
10
How Much is Left to Go Around?
11
Trends Middle East Hydrocarbon Investments in a
Boom Cycle
Middle East and Libya account for 20 of world
projects adding productive capacity between 2007
and 2011, according to CERA. Significantly, it is
also the region requiring the most manpower for
design and project management ..with 35 of the
world's projected total
12
Trends More Efficient Production, Digital Oil
Field of the Future
13
Trends Finding New Sources of Production, The
Challenge of the 21st Century

• Canadian Oil Sands
• Arctic Circle
• Deepwater Drilling
• Oil from Coal
• Harsher Environments
• Smaller Footprint

14
Trends Oil Gas Industry Increasingly
Vulnerable to the Environment

• Hurricanes, Floods, Extreme Weather
• Terrorist Threats
• Cyber Security
• Corrosion
• Major Portions of Production and Refining
  Capacity can be Wiped out at a Moments Notice
• Cost to Producers can be Staggering

15
Trends Oil Infrastructure Needs Modernization

• ARC Estimates Total of 65 Billion in Installed
  Process Automation Systems are Reaching the end
  of their Useful Life
• The Majority of this is in the Hydrocarbons
  Sector in North America, Europe, and Middle East

16
Agenda

• Oil and Gas Industry Definition Trends
• Size, Scope, and Automation Spending in the Oil
  Gas Industry
• Automation Suppliers as Service Providers for the
  Oil Gas Industry
• Summary and Conclusions

17
Automation Market Observations

• Increasing Plant Utilization
• Increasing Capital Investment in Automation
• Large Investments in Advanced Applications
• Increasing use of Smart Field Devices and
  Measurement Information
• Increasing Importance of Automation Systems
  Supporting Regulatory Compliance
• Increasing Emphasis on Critical Condition
  Detection and Incident Prevention
• Aging Legacy Automation Infrastructure
• Major Concerns over Plant and Cyber Security

Outlook for Automation Growth Never Brighter
18
Size and Scope of Automation in the Oil Gas
Industry
Upstream Oil Gas Alone is About 12 Percent of
Total Process Industry Spending on Automation
19
Automation Spending in the Oil Gas Industry
20
Automation Spending in the Oil Gas Industry
Oil Gas Industry is Number One Growth Industry
for DCS
21
ABB is the Leading DCS Supplier to the Upstream
Oil and Gas Industry
22
Agenda

• Oil and Gas Industry Definition Trends
• Size, Scope, and Automation Spending in the Oil
  Gas Industry
• Automation Suppliers as Service Providers for the
  Oil Gas Industry
• Summary and Conclusions

23
Why Demand Is Increasing for Service Providers to
Serve the Oil Gas Industry

• According to the US Journal of Petroleum
  Technology, 60 percent of oil and gas industry
  engineers currently employed are going to retire
  by 2010.
• Large Central Engineering Groups Among Many Major
  Manufacturers Have Disbanded
• Many Groups Have Been Spun Off Into Separate
  Companies (Bayer Technology Services)
• Smaller Number of Personnel Responsible for More
  Areas of the Plant

24
The People Challenge Aging Workforce

• US Bureau of Labor Statistics
• By 2010 more than 25 of working population will
  reach retirement age
• Trend will continue into foreseeable future
• Globally Workers are Getting Older
• Largest Group of Workers over age 45 and will
  double in next ten years
• Fastest Shrinking Age Group of Workers between 35
  and 44 arguably the most productive
• Europe is expected to lose 1 million jobs
  annually for the next 25 to 30 years
• Severe shortage of skilled workers and engineers!
• Oil Gas Industry
• 50 of its production engineers will reach
  retirement age by 2010

Exodus of Workers is Reducing Companies Ability
to Sustain Operational Excellence
25
Loss of People and Knowledge
The Degree of Difficulty in Retaining People and
Knowledge
Its Hard to Keep Good People, Even Harder to
Replace Them
26
Plants Are Outsourcing More Services to
Automation Suppliers
ARC User Survey Who do you Currently Purchase
Services From, Today and in Three Years
27
Automation Suppliers Service Revenues are
Growing Faster than Third Parties
Systems Integrators Want to do Projects and Move
On
28
What Advantages do Automation Suppliers Have Over
Third Parties?
29
Automation Suppliers Become MACs Main Automation
Contractors
Single Point of Responsibility Lower Cost For
End User
30
Main Automation Contractor (MAC) Approach Can
Result in Significant Cost Savings To Users
Traditional Approach
MAC Approach
31
Thank You.
For more information, contact the authors at
lobrien_at_arcweb.com , or visit our web pages
at www.arcweb.com