The effect of Oil Prices and Automation spending

With oil and gas activities growing like gangbusters, process automation and instrumentation companies are understandably calling a lot of attention to those activities, emphasizing their capabilities in a burgeoning industry including the industrial roll off services to transport the material. But at so many of the latest user group meetings that have filled my fall travel schedule, there’s also been an increasing amount of talk about oil producers struggling with exploration costs and falling prices in a competitive market.

Automation execs point to concerns about mega projects becoming perhaps a little too prevalent. At Emerson Exchange last month in Orlando, Fla., Steve Sonnenberg, president of Emerson Process Management, talked about how today’s projects are getting bigger and more complex than every before. “In the oil and gas industry, the number of projects over a billion dollars has quadrupled in the last 10 years,” he said.

But can that be sustained? At the Yokogawa Users Conference a couple months ago in Houston, Chet Mroz, president and CEO of Yokogawa America, mentioned that Chevron was cutting way back on it capital expenditure. The major oil producer just had too many mega projects going on all at once and realized they needed to scale back. Chevron announced last month that it was delaying the development of the second phase of a deepwater natural gas project off Indonesia. Yokogawa certainly feels the effects of such cutbacks.

Honeywell, GE and Emerson have all indicated that they expect near-term oil industry spending to remain constant, but extended low oil prices will affect 2015 O&G revenues.

At the same time, conversations about falling gas prices often lead to the reasons why exploration companies need to pursue automation all the more—to improve efficiencies and get the most out of the drilling operations. At GE Intelligent Platforms’ User Summit just last week in Orlando, I spoke with an engineer from one of the largest onshore drilling companies who was very excited at the prospects of applying what he’d learned to his operation’s shale efforts.

Whatever the anecdotal evidence is, Global Automation Research contends that its predicted five-year growth rate for process instrumentation and automation in oil and gas will not decline, despite a drop in crude oil prices from a high of $113 in June to about $85 in October. “We were naturally concerned that a price-related cutback in oil production spending would impact our forecast,” said Paul Rasmusson, president of Global Automation Research, in a report, noting that was not the case.

Oil prices have been dropping because of an oversupply caused not only by a worldwide drop in demand but also increased production from U.S. shale and also in Libya and Iraq. Saudi Arabia also plans to maintain its production rather than push prices back up with OPEC’s usual tactics of reducing production.

According to the International Energy Agency, only a small portion of U.S. oil production will be affected by the lower prices. Most U.S. shale production costs range from $65 to $75, letting them maintain moderate growth with the selling price at $85. There is more risk for oil sands production in Canada, where the breakeven price is $100.

Global Automation Research expects oil industry spending on process instrumentation and automation to continue at its current rate through the end of this year and into the next. “Oil companies will finish projects near completion, continue drilling and production activities to maintain trained crews, and press suppliers for efficiency improvements,” the report said.

However, continued low oil prices would likely mean a drop in industry spending, the report continued. “Both Shell and ConocoPhillips have said that lower oil prices will drive the 2015 capital expenditures lower,” the authors said. “Honeywell, GE and Emerson have all indicated that they expect near-term oil industry spending to remain constant, but extended low oil prices will affect 2015 O&G revenues.”

The recovery of European, Chinese and Indian economies over the five-year forecast period would drive oil demand to levels that support higher oil prices, leading to the recovery of automation spending.


Oil and Gas automation – engineering – spare parts

offshore jack up rig

Jack-up rig powered by SIEMENS PLCs in the Black Sea

For decades, the fossil fuels industry – with emphasis on oil and gas production has relied on automation to provide safety and availability for their plants. Our equipment is used in exploration platforms, pipelines and refineries.

With a focus on up time, our products are globally proven in a wide range of applications including emergency shutdown, fire and gas, automation and asset management systems.

We offer industrial equipment for:

  • Petroleum refining
  • Natural gas exploration
  • Natural gas production
  • Crude oil refining, we even have the best scrs for water tube boilers
  • Offshore oil rigs
  • Oil wells
  • Oil tankers
  • Oil refineries

Drilling Industry – Cost effective petroleum extraction

In today’s global environment, the efficient and cost effective process of drilling is critical no matter if it is offshore or onshore. At Industrial Control we understand this process and we are able to provide the right products to meet the needs of this important industry. From offshore oil rigs in the Gulf of Mexico to the tar sands in northern Canada, our products are relied upon to bring this critical resource to market.

Oil and Gas pipelines – Increased demand for energy

With the increase in energy demand, it is more important than ever to deliver hydrocarbon fuels efficiently and cost effectively to their markets. Industrial Control satisfies this market application with products to improve throughput and quality. From wellheads and compressor stations to final blending and tank farm storage, our industrial automation equipment is used extensively in this fossil fuel market segment.

Industrial Control has been supplying in the last 2 years a lot of the following equipment to onshore and offshore drilling rigs and drilling companies around the world:

  • Circuit Boards
  • Drives
  • Encoders ( Ex and non Ex proof )
  • Gauges
  • Monitors/PC’s
  • Industrial Computers for harsh environment ( ea. Driller Cabin , LER / LIR , Mud Logging Units)
  • Motors and Drives
  • Panel meters
  • PLC’s ( Siemens S7 300 and 400 , ABB , Allen Bradley, Schneider and many more )
  • Pneumatics
  • Power Supplies ( Ex Proof 24V included )
  • Pressure Controls including Standpipe and Choke manifold pressure transduceres
  • Process Controls
  • Recorders
  • Safety Controls
  • SCR Controls
  • Sensors ( VEGA level sensors , ultrasonic level measurement, pressure measurement, density )
  • Temperature Controls
  • Test Equipment
  • Timers/Counters
  • Valves and servo valves
  • Calibration for existing sensors
  • Project management and software development for existing equipment onboard
  • Electrical drawings design and load calculation

However, oil and gas companies own and manage major pieces of critical infrastructure that are vital not only to company operations but also to the nation’s economic well-being. Due to the critical nature of these facilities, oil and gas companies also face stringent cybersecurity regulations. In case In a case like this, you could look here to find ways on how to protect these critical infrastructure and assets against cyber threats.