Oil & Gas
Enabling cost efficiency and safety
Early signs of stability and cautious optimism returned to the oil and gas industry in 2017. In this improving climate, DNV GL assisted customers to become more cost-effective while enhancing the safety and sustainability of their operations.
According to DNV GL research, cost containment remained a top or high priority for 85% of senior oil and gas industry professionals in 2017.
While Brent spot prices were USD 26-55/b in 2016, they were in a narrower, though still broad, band of USD 44–67/b in 2017. Gas spot price averages for NBP and Henry Hub were respectively 24.1% and 18.4% higher last year than in 2016.
Despite this increased stability compared to previous years, there was no rebound in capital expenditure within the market, and operating expenditure remained constrained as market conditions continued to be volatile.
Encouragingly though, signs of longer-term thinking emerged as the industry began adjusting to ensure cost efficiency and grow margins in an environment – the ‘new normal’ – where oil prices will likely remain lower for much longer. Our research indicated an increasing appetite for industry collaboration, standardization and digitalization: three areas core to DNV GL’s strategy and value proposition.
During the year, our customers started to rebalance their business portfolios to ensure long-term growth. Around a quarter of senior oil and gas professionals expected their business to invest or increase investments in energy from less carbonintensive sources in 2017. More than three-quarters believed gas will become increasingly important in the global energy mix over the next decade, as the transition to a less carbonintensive mix gathers pace.
This sentiment was supported by DNV GL’s first-ever Energy Transition Outlook, our independent model of world energy supply and demand. It forecasts that oil and gas will continue to play a crucial role in meeting world energy demand through to the middle of the century; that gas will become the largest energy source towards 2050; and that significant investment in new oil and gas production capacity will be needed.
Some stability returned to DNV GL’s Oil & Gas business area in 2017 as resizing and restructuring efforts that started in 2016 began to bear fruit. Our external revenue was ahead of forecast across all quarters. Chargeability was at its highest since 2014.
We focused our efforts on increasing efficiency while maintaining technical expertise, and did not need any further significant resizing or restructuring in 2017.
We reinforced our business strategy by growing our position in midstream and downstream sectors and continuing to support customers upstream.
Seventy per cent of our employees reported that their units were using digitalization to improve ways of working with customers, demonstrating progress as we increase our strategic focus on this area.
We also increased our focus on developing services to support the industry’s digital transformation, aided by our commitment to invest 5% of revenue in research and innovation. Our digital innovations and services are changing how the industry innovates so that data-driven technologies such as real-time barrier management, automated emission monitoring and predictive maintenance become valuable and cost-effective realities.
We further developed our quantitative risk assessment (QRA) visualization tool MyQRA to allow users to conduct near-instantaneous online sensitivity simulations for assets, based on scenarios. Results can now be visualized in minutes. In September, the Chinese Chemical Safety Authority (CCSA) recognized DNV GL and its MyQRA services with an Excellent Achievement Award for safety in the industry. The CCSA commented: “MyQRA upgrades traditional QRA services to digital services, which can make QRA more efficient and convenient, and improve the understanding of risk.”
The global demand for our technical expertise in the oil and gas and other industries was highlighted by DNV GL signing a Memorandum of Understanding with parties in Singapore to collaborate on developing disruptive applications in additive manufacturing (3D printing), drone, and digital twin technologies. The focus is on technology that could revolutionize solutions for that country’s offshore and marine sector and boost its global competitiveness.
The safety of information has moved up the global agenda. As the result of a DNV GL-led joint industry project (JIP), we launched Recommended Practice (RP) DNVGL-RP-G108 Cyber security in the oil and gas industry based on IEC 62443 to outline a tailored approach for the industry on how to build cyber security. Crucially, it emphasizes a combination of operational technology and IT.
To enhance our digital services, we have chosen the widely used Siemens’ Teamcenter® portfolio of product lifecycle management (PLM) software to help our customers manage the performance and safety of all information over an asset’s lifecycle. This collaboration combines DNV GL’s deep technical domain knowledge from oil and gas projects and operations with Siemens’ PLM technology to create a powerful digital asset model.
In another example of how we use digital technologies to enhance our services, we started conducting verification surveys applying remote witnessing to help reduce compliance-related costs. This involves equipping a technician onsite with a camera or smartphone and dedicated software to enable remote, real-time support from a DNV GL surveyor to execute an independent verification survey.
In addition, our Inspection Services Division conducted its first offshore drone survey in 2017 – on a semi-submersible vessel offshore Norway. The survey proved the ability of drones to check the condition of remote external components in challenging conditions. We continue to work on developing guidelines and updating our rule set to reflect remote inspection techniques.
We continued to widen our involvement with the oil and gas transmission, refining, petrochemical and gas-distribution sectors in line with our strategy to enhance our footprint in markets with the strongest growth opportunities.
Key projects included a study showing huge potential for liquefied natural gas as a marine fuel in the Iberian Peninsula. UK regulator OFGEM awarded National Grid and DNV GL a major innovation contract to enable consumer use of lowercarbon gas and improve gas-bill calculations.
The international HYREADY JIP led by DNV GL was launched to help the gas industry explore the introduction of new, lowercarbon gas compositions in the energy transition. HYREADY will develop practical processes and procedures for introducing hydrogen to grids. Our decarbonization work was recognized by French natural gas transmission system operator GRTgaz, which awarded our low-carbon emission solution for pipeline purging operations first place in its annual innovation competition.
Significant innovation and business impact have been achieved in our midstream business in North America. For example, experts based at our specialist pipelines laboratory in Ohio, US, are conducting a preparatory study drawing upon our previous pipeline failure investigations for operators in order to support safer, more reliable pipeline projects and operations. This study validates that using DNV GL as an independent custodian of multiple operators’ data on historical pipeline failures can enable the reliable analysis of causes and trends to help optimize line pipe manufacture and the design, construction and operation of pipelines.
Our continued drive to develop and publish best practices in the offshore pipeline sector included launching a new RP, DNVGL-RP-F114 Pipe-soil interaction for submarine pipelines. We updated the most used and recognized offshore pipeline standard in the world — now called DNVGL-ST-F101 — and the widely-used DNVGL-RP-F105 for solving issues related to free spans in offshore pipeline design and operation.
In China’s refining and petrochemical sector, we assisted companies such as Wanhua Chemical Group to benchmark health, safety, environmental and quality (HSEQ) performance against international standards using our International Safety Rating System (ISRS). Identifying gaps in HSEQ management allows companies to plan how to enhance their safety management, safety culture and risk assessment.
We continued to support new and existing operators to achieve their goals of safe, efficient, cost-effective upstream operations.
Among new contracts, OneSubsea awarded our Offshore Technology and Approval Center in Houston, US a project for the independent third-party verification of 20,000-psi subsea equipment for the Gulf of Mexico. In Europe, we secured a combined engineering services agreement with Chrysaor Holdings, a leading independent exploration and production company in the UK.
Our support for operational efficiency and sustainability in the North Sea also included working with Lundin Norway to develop the first step in a solution for predicting unplanned shutdowns of the operator’s Edvard Grieg production platform offshore Norway. In our continuing work with new operators in Norway, DEA Norge, the first operator to implement DNVGL-RP-O101 Technical documentation for subsea projects, publicly validated the recommended practice’s value in reducing the cost of – and time spent on – such documentation.
In an example of collaboration across DNV GL’s activities, the Oil & Gas and Maritime business areas together provided BP with a broad range of technical skills for the challenging conditions in which the Glen Lyon FPSO vessel will operate west of Shetland. This vessel is classed by DNV GL.
Collaboration and innovation to produce and update best practice guidelines and standards that enable cost-efficient and sustainable operations were also evident. Thousands of professionals in the marine and offshore sector engaged with DNV GL’s updated standards DNVGL-ST-N001: Warranty approval of marine operations and DNVGL-ST-N002 Site specific assessment of mobile offshore units in 2017.
The updated standards are the first to be available from our online Noble Denton marine services’ Standards Wizard. This allows users to input details about asset types, operations and structural codes to receive simple, clear documents detailing elements of the standards most pertinent to their projects and operations.
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Enabling large-scale decarbonisation of the UK gas network
DNV GL is working with gas transmission and distribution system operators on innovation projects to introduce lower-carbon gas mixes into the British gas network and improve consumers’ gas bill calculations.
Supporting China’s petrochemical and refining industry to raise HSEQ standards
DNV GL’s International Safety Rating System is helping China’s downstream sector benchmark its safety, environmental and quality performance against international standards.
Developing best practice in carbon capture and storage
We developed a framework for certifying the geological storage of carbon dioxide (CO2) and a recommended practice for the design and operation of CO2 pipelines. The certification framework serves to improve stakeholder dialogue and investor predictability, and the recommended practice provides a recipe for the safe transportation of CO2.