The moves toward 'zero-manning' in oil & gas

Bemused frustration at this counter-intention.  Canadian article, but the point getting poked about "zero-manning" goals rings true.

Why do we listen to oil execs when they talk about jobs?

Representatives of Canada’s oil and gas industry like to talk about jobs and all the people they employ. In particular, Tim McMillan, who represents all the oil and gas industry as CEO of the Canadian Association of Petroleum Producers, seems to talk about jobs at every opportunity. Jobs his industry has created. Jobs supposedly at risk from government policy. And yet oil companies are working hard to eliminate work done by actual people.

There’s even a term for it, popularized by Cenovus Energy executive-VP Kiron McFadyen : “de-man” the sector to achieve “zero manning.” In other words, Cenovus and other companies want to get rid of as many employees as possible in order to maximize profits.

... The end result is that despite continuously expanding oil production in Canada and corporate profits rising with the price of oil, many of the 100,000 jobs lost in the oil and gas over the last three to four years are not coming back. 

 

@Ian Austin

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bbbbbut think about all the indirect jobs this will create.

Valeting jobs on the Oil Execs super-yacht Gin Palaces  parked up in Vancouver Marina!

 

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Tom,

it is definitely something to keep track of. Honestly, a great deal of Canadian oilfield workers have Stockholm Syndrome and would believe the sky was purple if told so by CAPP, even if it’s to their downfall.

The large companies may move toward it. However, there are a couple of things to watch again

- they’ve laid off most who are capable of figuring out the practicality of de-manning, and

- the big companies account for maybe 30% of Activity. The rest is spread amongst smaller producers, who have no real desire to go that route (don’t have the size to realize benefits of automation etc)

Canada has a lot of problems right now. The most discussed are political/division. However, equally problematic is the lack of tact and leadership in our Corporate World - it’s more like a black hole where leadership used to exist...

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(edited)

@Tom Kirkman

Advancements in automation increase efficiency and companies should not be penalized for decreasing the number of workers to perform a specific task.  

I don't see automation as form of job killing, but rather a form of reducing the density of people required per task.  This helps the industry stay competitive, allowing it to hire more people as the industry grows. 

Let's say it requires 200 people to develop an oilfield of a specific size with a break even cost of $55 per barrel.  Automation is then implemented, reducing the workforce by half and creating a new break even cost of $45 per barrel. 

More than twice as many 100-person teams will be hired with a break even of $45 per barrel compared to the number of 200-person teams hired with a break even of $55 per barrel.  

Edited by GeoSciGuy
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9 minutes ago, GeoSciGuy said:

 I don't see automation as form of job killing, but rather a form of reducing the density of people required per task.  This helps the industry stay competitive, allowing it to hire more people as the industry grows. 

Understood what you are saying, but I do not agree.  

From what I can see, maybe around half of the oil & gas jobs lost during the last oil crash a few years ago have simply not returned during this current oil & gas recovery.

One step forward, two steps back.

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@Tom Kirkman 

But that's the thing; we have yet to fully recover.

You are comparing a time when oil was above $100 for four years (2010 - 2013) to now, where oil is between $65 and $80, but after the worst oil price crash in a generation.  

Without automation and digitalization, even less people would have jobs right now and many more companies would have gone bankrupt.  

Company A automates and retains half its employees after the price crash. 

Company B didn't automate and all its employees lose their jobs after the price crash.  

I'd rather be Company A.

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@GeoSciGuy

We appear to be on mostly opposite sides of the spectrum about automation and jobs.

Here's an old article from 2 years ago.  It's more about the consequences of mandatory increasing minimum wage to $15 - people get replaced by automation.

McDonalds Responds To Minimum Wage Hikes, Launches McCafe Coffee Kiosk

When it comes to jobs growth in the US, all one can say is thank god for waiters and bartenders: after all, a Starbucks barista is precisely what a recently fired oil chemical engineer making half a million dollars really wants to do with their life.

waiter mfg workers 2015.jpg

However, the days of easy job gains for the BLS may be coming to an end (even if on a seasonally adjusted, goalseeked basis the trend has a long way to go).

According to Brand Eating, fast food king McDonald's has been spotted testing a self-serve McCafe coffee station/kiosk out in downtown Chicago. The station is located in the restaurant but apart from the counter and looks to be a theoretically more convenient way for those who just want a cup of coffee to skip the regular line (while also freeing employees from having to make each drink in the back).

In essence, this is the company's latest venture to make employees responsible for one less task as corporate HQ slowly but surely responds to minimum wage hikes sweeping all states, and in the process, outsource its minimum wage workers to simple machines which will never unionize or have any demands aside from being cleaned occasionally. ...

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@Tom Kirkman

Yes, increasing minimum wage incentivizes automation.  Don't blame businesses for finding creative ways to cut costs.  

I'm actually looking forward to automated kitchens in fast food restaurants.  Go up to the touch screen kiosk, put in a customized order, and have robotic machines quickly make your food without making mistakes or spitting in your food.  

The next job they need to automate is cashiers at grocery stores.  They have ten check out lanes but only three are open and they've gotten slower and slower every year.  They can definitely develop some robotic arms that scan and bag faster than any human, and use AI to not place potatoes on top of eggs or sandwich bread.  Amazon Go actually has stores that track you with cameras throughout the store and monitor the items you pick up or put back; you pay with NFC on the way out the door.  

Anyway, the majority of jobs being replaced by automation are low-skill, low-pay with a high turnover rate.  It gets expensive if you have to train a new employee every week or two, when those trainees are least efficient as they're just being taught.  What's wrong with robots replacing the jobs people don't even want?  

 

The example you're using of Waiter/Bartender vs. Manufacturing Jobs in 2015 does not take into account an important factor.  

Technology has advanced further and more factories are implementing automation, yet there are more manufacturing jobs in 2018 than in 2015.  The reason?  Regulation!  Trump has removed much of the burdensome regulation Obama put in place and manufacturing jobs have started coming back to the US.  As we build more factories, there might be less workers per factory, but the number of factories continue to grow.  

All that chart shows is that in Obama's "economic recovery", restaurants and bars recovered at a faster rate than the manufacturing industry.  

 

Chemical engineers are highly-educated, highly-skilled workers that are not going to be replaced by automation anytime soon, and they definitely aren't going to have to work as baristas at Starbucks.  If an oil chemical engineer is making half a million a year, he or she should be very well insulated in the case of an oil price crash.  If not, plenty of other industries can make use of chemical engineering skills.  It might not pay as well as the oil industry, but it isn't going to be low paying either.  

 

Automation is actually incentivizing humans to increase and improve their skills, as the more skilled you are, the less likely you are to be replaced by a robot.  Robots will always need programmers, technicians, mechanics, electricians, scientists, and engineers.  Humans with STEM skills will always be in demand.  

 

I'm finishing up my geology degree right now.  Let's say it was my job to geologically map an area that was 4 sq km, draw in all the contacts, and identify all the exposed faults, along with 9 other geologists.  Every geologist comes up with a different interpretation.  The best aspects of each interpretation are then put into a finished product.

The next time I go to an area of the same size, but with only 4 other geologists.  A drone joins us, and does the job ten times faster than we can.  The drone's map still has to be analyzed and corrections have to be made where the computer misidentified contacts and faults, but the drone can also identify faults we completely missed.  This time, our maps and the drone's map are used to create a finished product.  

Did any geologists lose jobs to drones?  No!  There are plenty of places that need to be mapped.  It's just now that fewer geologists are needed per map, and maps can be produced at a faster rate.

Edited by GeoSciGuy
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2 hours ago, GeoSciGuy said:

Did any geologists lose jobs to drones?  No!  There are plenty of places that need to be mapped.  It's just now that fewer geologists are needed per map, and maps can be produced at a faster rate.

@Ian Austin to the white courtesy phone please.  Fact checking / reality checking requested.

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3 hours ago, Tom Kirkman said:

@Ian Austin to the white courtesy phone please.  Fact checking / reality checking requested.

He’s partly correct, partly not - lots of educated people are losing jobs, just not where the poster lives

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51 minutes ago, Ian Austin said:

He’s partly correct, partly not - lots of educated people are losing jobs, just not where the poster lives

People educated in what? 

From my experience (anecdotal as it is) I see a lot of people with degrees who are losing jobs/struggling to find jobs, but not STEM workers. The vast majority of STEM workers I see are automating away the most menial parts of their work and then getting pay raises/promotions to take on additional responsibilities and increase automation of their jobs and their coworkers.

I'd be really interested to see the actual data around this if anyone can point me in the right direction.

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3 hours ago, Otis11 said:

People educated in what? 

From my experience (anecdotal as it is) I see a lot of people with degrees who are losing jobs/struggling to find jobs, but not STEM workers. The vast majority of STEM workers I see are automating away the most menial parts of their work and then getting pay raises/promotions to take on additional responsibilities and increase automation of their jobs and their coworkers.

I'd be really interested to see the actual data around this if anyone can point me in the right direction.

In Calgary the CSPG (Society of Pereoleum Geologists) is running a 65% unemployment rate. The engineering profession is about 30%. That doesn’t count people doing jobs not related to their training

I'd call an Engineer a pretty high end STEM education

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On 9/7/2018 at 1:47 PM, Ian Austin said:

In Calgary the CSPG (Society of Pereoleum Geologists) is running a 65% unemployment rate. The engineering profession is about 30%. That doesn’t count people doing jobs not related to their training

I'd call an Engineer a pretty high end STEM education

Wow - yes, Engineering is definitely STEM. I'd include Geologists in that too.

That's really shocking the numbers are that drastic, definitely very different from what I'm seeing here. Where I am the limiting factor on growth is qualified candidates - hence why we are automating anything we can. (And they pay keeps going up...)

Is there a reason Calgary is struggling? Is it Calgary that's the outlier or is it my experience? (Though, I've seen this same trend in both major geographies I've been recently, it could be selection bias on my part?)

 

Thanks for the information Ian!

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On 9/6/2018 at 10:51 PM, Tom Kirkman said:

Understood what you are saying, but I do not agree.  

From what I can see, maybe around half of the oil & gas jobs lost during the last oil crash a few years ago have simply not returned during this current oil & gas recovery.

One step forward, two steps back. 

Automation is going to happen, and companies have no choice but to adopt it.  Now suppose that instead of dragging their heels for political reasons, Canadian producers choose to excel at automation.  Automation drops their break even points - possibly low enough to steal market share from OPEC.  There would be fewer jobs in the world- which was inevitable - but the remaining jobs end up in Canada.  That contributes to Canada's long-term well being.  Also, increasing market share in a liberal, Western country makes the Western world that much more secure.  Finally, lowering the break-even price on extensive reserves of oil contributes to lowering the global price of oil, which is good for everyone. 

Canadian producers may not be returning to historical employment levels, but I don't think we have room to complain about them. 

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9 hours ago, mthebold said:

Now suppose that instead of dragging their heels for political reasons, Canadian producers choose to excel at automation.  Automation drops their break even points - possibly low enough to steal market share from OPEC. 

What if OPEC increase automation as well? All you are going to have is less jobs everywhere. OPEC countries are very keen on low cost options in my experience.

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(edited)

5 hours ago, jaycee said:

What if OPEC increase automation as well? All you are going to have is less jobs everywhere. OPEC countries are very keen on low cost options in my experience. 

Ah, but OPEC already has the lowest cost production in the world, and there's zero chance of anyone matching them.  As it turns out, OPEC's break even points are not set by production costs.  They're set by the cost of sustaining the vast welfare states necessary to keep dictators in power.  Automation doesn't touch that. 

More importantly, consider that prices are set on the margin.  I.e. the price of oil is set by the last, most expensive barrel of oil produced.  Saudi Arabia may be able to produce at $12/bbl, but if the 99 millionth barrel of oil costs $50/bbl to extract, all 99 million barrels get sold for at least $50/bbl.  The implication is that it doesn't matter if Saudi Arabia reduces its costs.  Saudi Arabia's production costs have zero effect on the price of oil.  Shale, on the other hand, tends to be the most expensive oil produced.  If you lower its cost from $50/bbl to $45/bbl, you have the potential of lowering the market price of oil. 

Now consider that the quantity of oil available for extraction is a function of how economically we can extract it.  If you lower extraction costs enough, oil becomes effectively unlimited.  At that point, we don't need OPEC.  We could let the entire Middle East glass itself and happily produce all the oil we need at home - employing our own people and avoiding military expenses while we do it.  That is why automation matters. 

Edited by mthebold
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(edited)

22 hours ago, mthebold said:

Ah, but OPEC already has the lowest cost production in the world, and there's zero chance of anyone matching them.  As it turns out, OPEC's break even points are not set by production costs.  They're set by the cost of sustaining the vast welfare states necessary to keep dictators in power.  Automation doesn't touch that. 

Why does it not touch that? Lower costs are lower costs savings are made. The West puts their oil taxes into their tax system which supports thier welfare states  to prevent the poor from rising up so not seeing the problem here.

 

22 hours ago, mthebold said:

  Saudi Arabia's production costs have zero effect on the price of oil.  Shale, on the other hand, tends to be the most expensive oil produced.  If you lower its cost from $50/bbl to $45/bbl, you have the potential of lowering the market price of oil. 

So oil gets cheaper but with lower costs to Saudis so they still get the same money if they have to sell cheaper they can.

 

22 hours ago, mthebold said:

Now consider that the quantity of oil available for extraction is a function of how economically we can extract it.  If you lower extraction costs enough, oil becomes effectively unlimited.  At that point, we don't need OPEC.  We could let the entire Middle East glass itself and happily produce all the oil we need at home - employing our own people and avoiding military expenses while we do it.  That is why automation matters. 

Lower extraction costs will help monetise easy to reach fields not the difficult ones which is where I suggest the oil that sets the PoO is extracted. Automation from my experience only helps where tasks are standard and straight forward. My job is designing control systems for oil installations eg oil rig, refineries etc so have some knowledge of designing such systems. As for letting the Middle East turn to glass you may find the PoO round the world will shoot up due to lack of supply, I dont think America can ever supply the amount the Middle East supplies, so it will bring the whole world including America into a depression. 

Edited by jaycee

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On 9/6/2018 at 1:29 AM, Tom Kirkman said:

Bemused frustration at this counter-intention.  Canadian article, but the point getting poked about "zero-manning" goals rings true.

Why do we listen to oil execs when they talk about jobs?

Representatives of Canada’s oil and gas industry like to talk about jobs and all the people they employ. In particular, Tim McMillan, who represents all the oil and gas industry as CEO of the Canadian Association of Petroleum Producers, seems to talk about jobs at every opportunity. Jobs his industry has created. Jobs supposedly at risk from government policy. And yet oil companies are working hard to eliminate work done by actual people.

There’s even a term for it, popularized by Cenovus Energy executive-VP Kiron McFadyen : “de-man” the sector to achieve “zero manning.” In other words, Cenovus and other companies want to get rid of as many employees as possible in order to maximize profits.

... The end result is that despite continuously expanding oil production in Canada and corporate profits rising with the price of oil, many of the 100,000 jobs lost in the oil and gas over the last three to four years are not coming back. 

 

@Ian Austin

Fracking robots in the works as Halliburton ‘digitises’ oil field

Written by Bloomberg - 22/08/2018 9:42 am

Bots already are used to vacuum floors, build cars and do heart surgery. Now, Halliburton Co. wants to add fracking to the to-do list.

The world’s biggest provider of the technique that unlocks oil and natural gas from shale rock has a vision of push-button fracking that’s still years in the making. But for now, the Houston-based contractor unveiled a new service that will help move in that direction.

Tested in fields globally including the Permian Basin of West Texas and New Mexico, Halliburton’s Prodigi AB service uses data and computer coding to automatically crank up the pumps to the necessary level in order to blast water, sand and chemicals underground to released trapped hydrocarbons.

 

“This is new territory for the industry,” Scott Gale, who oversees the new fracking service at Halliburton, said in an interview on the sidelines of Halliburton’s annual technology conference in Houston. “We recognize that digital technologies are descending on our industry, so expectations are high.”

Typically, workers have to rev up the pumps manually, which can lead to inefficiency and delays, Gale said. Before wells are fracked, automated rigs are already being used to drill them.

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On 9/6/2018 at 2:29 AM, Tom Kirkman said:

Bemused frustration at this counter-intention.  Canadian article, but the point getting poked about "zero-manning" goals rings true.

Why do we listen to oil execs when they talk about jobs?

Representatives of Canada’s oil and gas industry like to talk about jobs and all the people they employ. In particular, Tim McMillan, who represents all the oil and gas industry as CEO of the Canadian Association of Petroleum Producers, seems to talk about jobs at every opportunity. Jobs his industry has created. Jobs supposedly at risk from government policy. And yet oil companies are working hard to eliminate work done by actual people.

There’s even a term for it, popularized by Cenovus Energy executive-VP Kiron McFadyen : “de-man” the sector to achieve “zero manning.” In other words, Cenovus and other companies want to get rid of as many employees as possible in order to maximize profits.

... The end result is that despite continuously expanding oil production in Canada and corporate profits rising with the price of oil, many of the 100,000 jobs lost in the oil and gas over the last three to four years are not coming back. 

 

@Ian Austin

You do not want to translate de-man to German.... And the proponent just has been too much on the personal safety side of HSE, where eliminating the risk means eliminating the people..... Whereas the process safety risk goes through the roof in this case. (Why am I not surprised...) Drones crash more frequent than manned aircraft, because there is no pilot to cater for the unforeseen: The United States Air Force UAV accident rate at 0.9 per 10,000 hours is much worse than 0.2 per 10,000 hours for manned aircraft. The US Army, the biggest user, is around 2 per 10,000 flight hours, so 10 times worse than manned. And so is our business at least in drilling, where we deal with a lot of non-reduce-able uncertainty.

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