Canada’s oil and gas industry “waking up” to AI’s benefits
March 20, 2019
After a slow start, Canadian oil and gas companies are ramping up investment in artificial intelligence and related digital technologies, spurred by venture capital and government innovation programs.
“We are actually overwhelmed by demand,” says Pavel Abdur-Rahman, partner and head data scientist at IBM. “We’re active with pretty much every big player in western Canada, in various stages of conversation or with deployment.”
“In the last year, there’s been a realization by Canadian companies and the global companies that have operations in Canada that analytics, AI, machine learning — digitization transformation — is the way of the future,” says Shak Parran, partner and energy and resources industry leader at Omnia AI, Deloitte Canada’s AI practice.
IBM Canada, through its Natural Resources Solutions Centre and innovation program in Calgary, helps resource companies build multi-layered "industry platforms": specific solutions that incorporate AI, machine learning and other digital technologies. Deloitte’s Omnia AI has more than 150 experts that assist companies through the entire digitization process, from defining strategy and transforming data, to training employees and building AI and other analytic capabilities within each company.
Oil and gas companies are applying AI and related technologies to optimize production, reduce operating costs, improve drilling success, predict equipment maintenance and repair, enhance worker safety and eliminate paper-based manual transactions.
“AI is a cross-cutting technology that can drive value in any industry that relies on data,” says John Shillington, president and CEO of the Alberta Machine Intelligence Institute, which collaborates with the University of Alberta and other education and research institutes. “AI and machine learning will become key drivers that can enable companies to be more effective with their operations and to increase efficiencies in their systems and teams.”
“Making better decisions faster”
IBM predicts that by 2020, 80% of large oil and gas companies will run their business with help from a cognitive or AI agent capable of learning, reasoning and solving complex problems.
The digital oilfield market is expected to reach $30.78 billion by 2020, with compound annual growth of 4.31% from 2015, according to Research and Markets, the world’s largest market research store. Accenture, a global management consulting and professional services firm, predicts the energy sector will need some 12,000 new data analysts across North America, and some 90% of new jobs in oil and gas will require superior digital skills.
A rising star in AI-related oilfield services is Ambyint, headquartered in Calgary. The company integrates AI, machine learning and secure data collection and wireless transmission to autonomously optimize pump operations and production at remotely located oil and gas wells. “The U.S. market when it comes to digital technologies is two or three years ahead of the Canadian market,” says Chris Robart, president of Ambyint, which also has a location in Houston. However, there are now 15 to 20 Canadian companies using Ambyint’s technology, Robart says.
Husky Energy has deployed the technology at dozens of wells in the Rainbow Lake area in northwest Alberta, mainly to better predict when equipment needs maintenance or replacement and to minimize workers’ visits to remote sites, says Glen McCrimmon, Husky’s innovation chief. “At the end of the day, the big benefits are making better decisions faster, keeping people out of harm’s way, and freeing up people’s time for more value-added tasks.”
Investors taking notice
As for what’s driving the recent interest, institutional investors are putting a lot of pressure on oil and gas companies’ boards and leadership to get onboard with AI and digital transformation, Abdur-Rahman says. There is also increasing proof, from actual deployments, of the benefits of AI and related technologies, he adds. “Investments are returning from four to 10 times (their value) over a three- to five-year horizon. People are waking up to that.” Digital technologies have led to production increases of 2% to 8%, cut operating costs by 5% to 25 %, and reduced capital expenditures by 1% to 10%, according to IHS Markit Ltd.
Investors are also tuning in. Ambyint is one of four leading digital oilfield companies (the other three are in the U.S.) partnered with Houston-based Cottonwood Venture Partners, which last year raised $32 million for its inaugural fund. Last October, Sustainable Development Technology Canada awarded Ambyint $3.4 million toward developing its technology
This February, Emissions Reduction Alberta invested $1.43 million in a $2.9-million project to deploy digital optimization in enhancing process control at Suncor Energy’s Firebag and MacKay River steam-assisted gravity drainage (SAGD) facilities (which inject steam underground to heat the tar-like bitumen so it can be pumped to the surface). The technology is expected to reduce production costs per barrel by up to 4% and cut greenhouse gas emissions by up to 4% per barrel.
Industry faces AI challenges
By some estimates, Canada boasts the third-largest concentration of AI experts in the world. From 2017 to 2018, there was a 28% increase in the number of AI-related startups, bringing the total number in the country to about 650, according to the “2018 Canadian AI Ecosystem” report.
Yet Omnia AI's Parran says he has seen many Canadian oil and gas companies’ piecemeal efforts in AI and digitization die at the proof-of-concept stage, because there’s no link to long-term business strategy and a path to production-level products.
There is a global shortage of skilled executives in analytics, AI and machine learning, Parran says. Also, many of the Canadian graduates in the field go to work in the U.S., where salaries are higher. Provincial education systems need to expose students earlier to analytical thinking and computer science, and also address the gender gap in Canada’s analytics and data space, he says, noting: “If I look at a hundred resumes that I receive, 97 of them will be males.”
The oil and gas industry in Canada, where oil is more difficult and costly to extract than in the U.S. and markets are farther away, has no choice but to become more innovative, Parran says. “If you’re not using machine learning, analytics and data, you’re just not going to be competitive.”
Husky’s McCrimmon agrees: “In this sort of volatile environment that the oil and gas industry is in, and in western Canada in particular, the more innovative and more efficient you can be, the better. These technologies are well suited to build on those efficiencies.”
“Canada is known to the world for natural resources. Canada is also known to the world for AI,” says IBM’s Abdur-Rahman. “I think it’s a wonderful opportunity for us to be the world’s best, both for Canadian clients as well as exporting these services to the world.”