Five ways technology will change the mining, oil and gas industries

Technological breakthroughs are producing sweeping changes throughout the economy, from manufacturing to your check-out lane at Wal-Mart, and from legal research to laser surgery.

Most people assumed, however, that certain industries would be relatively untouched by the present wave of technological breakthroughs. A case in point are the extractive industries such as mining, oil, and gas. While these are capital-intensive industries, they used to create millions of jobs, not only during the exploration and construction phases of major extractive projects, but also for production and maintenance.

Now all of that has changed. For instance, seismic testing of sites suspected of containing rich deposits used to be conducted with the aid of cables. Laying the exploration, let alone the exploitation, infrastructure used to be very labor intensive. But now sensors, wireless communication, and computers can do the job more quickly, cheaply, and accurately, or they can at least help companies plan more thoroughly and avoid unnecessary delays. Another example is well drilling, which used to be manual. Nowadays, computers are replacing blue-collar workers.

One reason why oil extractors, especially smaller ones, are attracted to new technology is that it lowers the break-even price per barrel. Thus, profit margins increase, and they can avoid going out of business whenever there is a glut in the global market and prices collapse. The improvement can sometimes be as much as 30 or 40%.

Oil extractors can also drill faster thanks to new technology. The New York Times recently reported that Pioneer Natural Resources, a producer based in West Texas, can now drill nearly twice as many wells a year without the need to expand its payroll.

A third benefit is yield per well. New technology enables producers to drill more accurately, taking advantage of geological conditions and optimizing both the drilling process and the production process. This is made possible by computerized monitoring of all activities, and by centralizing knowledge at control centers, which then spread best practices across all of the firm’s operations.

One last, but by no means least important, benefit is enhanced safety, which is a major consideration in the accident-prone extractive industries. Not only are there fewer workers laboring on-site, but also new technologies reduce the number of exceptions and the constant need to undo and redo specific tasks through trial and error until the desired outcome is achieved. Many dangerous tasks used to involve workers going to hard-to-reach and dangerous corners of a mine, a well or a rig in order to check for noxious gases, pressure levels, or other critical parameters. Sensors and computers can now perform those tasks safely, effortlessly, and in real time.

These advantages from introducing new technology may pale by comparison to what artificial intelligence and machine learning might bring. Most of the lost jobs in the U.S. over the last 25 years have affected routine workers. While employment in non-routine manual and, especially, cognitive occupations has grown at double-digit rates, routine jobs are now scarcer than ever.

An oil rig lights up Cape Town harbour as the sun sets August 6, 2011.  REUTERS/Mike Hutchings/File Photo                      GLOBAL BUSINESS WEEK AHEAD - SEARCH

An oil rig lights up Cape Town harbour

Image: REUTERS/Mike Hutchings

The brave new world of technologically-advanced extraction of natural resources is not just about fancy gadgetry and smart software. A different set of worker-controllers is required to monitor and run operations. The journal Psychological Science recently reported that playing video games improves hand-eye coordination, a skill sorely needed by the hundreds of computer operators who now control extractive operations from hundreds or thousands of miles away. In a similar vein, Scientific American highlighted research that takes this effect one step further by noting that playing action video games improves learning abilities and cognitive function.

There is a fifth, and perhaps potentially even more revolutionary, way in which new technology is changing the face of extractive activities and their close cousins, the chemical and petrochemical industries Technological breakthroughs are also changing the way in which extractive companies approach their R&D function. Corporate labs are compiling libraries for specific areas of chemistry and conducting simulated experiments, thus making materials research and new product development cheaper and faster. The American Chemical Society reports that chemical engineering has been vastly accelerated and improved through the use of combinatorial methods. These techniques reduce the need for expensive and time-consuming pilot plants and scale-up projects.

The use of new technology will continue to transform the extractive industries. Until recently, automation mostly involved remotely-controlled machines. The next step was to add sensors and logics. Later came pre-programmed sequences with human and machine-based interventions to correct course as needed. More recently, we have witnessed the deployment of fully-automatic machines, or auto-drill and auto-trip systems. The next frontier is autonomous machines, i.e. equipment that can evaluate its environment and deviate from its pre-planned script as conditions evolve. These are intelligent machines that can plan in addition to execute, and can communicate with other machines. The future will surely bring other breakthroughs. It may well be that the race for natural resources will become much less contentious and costly as smart machines take over.

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