54 OIL & GAS
Keeping Global
Oil and Gas Flowing
With oil and gas operators working hard to supply
the growing global appetite for hydrocarbons
and eager to improve their operating efficiencies
and carbon footprints, Siemens has responded
with a comprehensive suite of solutions tailored
to the industry that highlights its leadership in
holistic system solutions as well as in innovative
technology and engineering.
Tom Blades, CEO of Siemens
Energy Sector’s Oil & Gas
Division, based in Abu Dhabi,
explains why we are currently
in an era of “difficult” oil.
Text: Ward Pincus, Photos: Bahr Karim
When the future of the global oil and
gas industry is discussed, the focus
is almost always on the rate of demand
growth – with a particular eye to
emerging economies like China and
India. However, for some in the industry, the depletion rate of existing reserves is the real issue.
That’s because depletion occurs at
three times the rate of demand growth,
i.e., while annual global demand is
expected to grow by 1.5 percent, the
annual decline in output of existing
wells is 5 percent. Thus, in the next
ten years, the world will have to find
55 million barrels a day of new oil –
40 million barrels of which is just to
counter depletion – compared to
the 85 million barrels of oil currently
produced.
Operators are therefore continually
pressed to take steps to sustain or enhance the volume of oil coming from
their existing fields, and to bring to
market in a commercially viable way
both remotely located and “unconventional” hard-to-produce oil and gas.
All of this is expensive and extremely
difficult from a technology and engineering perspective.
To gain a deeper understanding of
this complex industry, as well as the
challenges for operators and Siemens’
leadership role, Living Energy had
the opportunity recently to talk with
Tom Blades, a 33-year veteran of the
energy industry, shortly before he
steps down as Chief Executive Officer
of Siemens Energy Sector’s Oil & Gas
Division. In the following interview,
Blades discusses why we are in an era
of “difficult” oil and how Siemens is
bringing its engineering expertise, its
distinctive competency in electrical
systems, and its holistic approach to
systems solutions that are helping oil
and gas operators address their biggest challenges.
Why do you say we are now in
a time of “difficult” oil?
Living Energy · Issue 6/February 2012
BLADES: In the last 100 years, we
produced 1 trillion barrels of oil; by
comparison, in just the next 30 years,
we’ll produce the next 1 trillion barrels. Demand is rising by 1.5 percent
a year. Meeting that demand is one
challenge. But the bigger challenge is
to counteract the effects of depletion.
Some of these reserves have been
around for years, and they are getting
old and tired. The pressure begins to
drop and the oil doesn’t flow as easily
as it once did. We now have to use
enhanced recovery methods to try to
convince the oil to flow.
The bottom line is that the depletion
effect on worldwide oil production
Living Energy · Issue 6/February 2012
is roughly 5 percent a year. That’s a
very big number, more than 4 million
barrels a day. So if you look ten years
ahead, we’re going to need 15 million
barrels a day to meet rising demand,
and 40 million barrels a day to meet the
depletion curve. That’s the challenge;
that’s what the industry is faced with
today.
How does this relate to “peak” oil?
BLADES: What this means is that over
the next ten years, we’re looking for
a combined total of 55 million barrels
of additional production over and
above the 85 million produced today.
That’s a horrific number! That’s like
swimming in water with the tide
against you. At some stage, the tide
will be stronger than we can swim.
When we get to the point where we
can no longer meet the demand of
depletion in such a way as to increase
overall net total oil production, that’s
where production will peak. It doesn’t
mean we’re running out of oil, it’s
just that the resources – of people,
equipment, technology – that we can
bring to bear are outpaced by the
fall in pressure of oil reservoirs.
So how quickly are oil companies
swimming against this tide?
BLADES: This figure, called the u
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OIL & GAS
low the seabed. That’s a lot of money
going into every barrel of production.
This is “difficult” oil; it shows that
there are possibilities to meet demand,
but they require much technology
and many dollars per barrel.
Tom Blades
Tom Blades, CEO of
Siemens Energy Sector’s Oil & Gas Division, at the Abu Dhabi
National Exhibition
Centre with the iconic
Capital Gate tower in
the background.
Background
A British citizen, Blades is a graduate of
SALFORD UNIVERSITY (UK) and ÉCOLE
CENTRALE, LYON (France), and has
a degree in electrical engineering.
Professional Experience
Blades has held senior management
positions at several prominent compa-
nies in the oil and gas industry
since 1978.
➔ Joined Siemens Energy Sector
in 2009.
➔ Has worked in Europe, Asia,
and North America.
➔ Based in Abu Dhabi
(United Arab Emirates).
“Siemens speaks
to the entire oil and gas
value chain.”
reserve replacement ratio, varies
among operators. Take three big international oil companies (IOCs):
ExxonMobil, BP, and Shell. In the last
five years or so, they have been able
to meet 95 to 98 percent of their production – in other words, they produce more oil than they can find in
terms of new reserves. And in order
for them to do that, they spent US$20
billion. So this expenditure lets three
large IOCs maintain the status quo.
On the other hand, you have some
strong national oil companies (NOCs),
such as Petrobras, that have discovered huge reserves – large deep-sea
reserves. They will increase their
production from 2.3 million to an expected 5.5 million barrels a day in
ten years. But to get there, they will
spend more than US$200 billion.
Why? Because it’s in deep water – water
6,000 to 10,000 feet deep and reservoirs that are 5,000 to 10,000 feet be-
How much of the oil out there is
“difficult” and how much is “easy”?
BLADES: Let’s look at 2020, where we
expect demand of 100 million barrels
a day. Roughly half will come from
OPEC; another 20 million barrels will
come from other “easy” oil sources,
and 10 million more will come from
the former Soviet Union. This is all
“easy” oil. The remaining 20 million
barrels will be “difficult” oil – deepwater production, production from the
Arctic, enhanced oil recovery, biofuels, shale gas, oil sands – a cocktail
of difficult and really unconventional
sources.
How does Siemens support oil
and gas operators?
BLADES: What is really unique about
Siemens is that we speak to the entire
oil and gas value chain; we are one of
the only companies with a complete
portfolio. The Siemens Energy Oil & Gas
Division was assembled in 2007, when
it was decided that Siemens needed to
make a statement in this industry. We
not only have our own products, but we
bundle them and also provide system
solutions and after-sales service, maintenance, and upgrades.
What specific customer concerns
is Siemens helping to address?
BLADES: Like our customers, we are
focused on the challenges of depletion, production in difficult terrain,
unconventional oil and gas, CO2 mitigation and energy efficiency.
More specifically, being able to make
“difficult” oil easier is the first challenge for IOCs and select NOCs such
as Petrobras. The challenge of meeting depletion is greater for NOCs.
Efficient operations and lower CO2
emissions are challenges for every operator. As such, our all-electric approach is designed for any and every
Living Energy · Issue 6/February 2012
operator to reduce their costs and
reduce their emissions.
What is the all-electric approach?
BLADES: One major concern for operators is how to address the industry’s
voracious energy appetite. Of the
energy produced, 20 percent is used
by the industry itself. It consumes
more energy than any other industry
on the planet. In the past, the industry was not focused on efficiencies, but
that’s changing.
For example, a low-efficiency environment would see an operator running
many gas turbines across a field. These
turbines operate with efficiency in
the low 20 percent range. If we replace
those turbines with electric motors,
with efficiencies touching 60 percent,
that not only means energy savings,
but also, the whole operation becomes
more commercially viable and at the
same time produces fewer CO2 emissions. This is what we call the all-electric approach.
That’s the holistic approach that customers come to Siemens for, and it
reflects one of our strengths: to look at
a whole system, model it, and then
suggest the optimal ways to use energy
to be more efficient.
What other Siemens innovations
are currently being developed
or have recently been launched?
BLADES: We are serving our customers by leveraging our strength in
electrical expertise, a strength that
is really unparalleled on the planet.
All-electric systems are one thing;
another example is EMSAGD, or electromagnetic steam-assisted gravity
depletion, designed to address the
challenge of heavy oil in Canada in a
more sustainable way than conventional techniques. For offshore fields
we are offering integrated floating,
production, storage, and offloading
(FPSO) systems that guarantee to
operators the performance of both
the components and the entire system.
Another recent product addition is
the SGT-750 industrial gas turbine,
which addresses energy consumption
Living Energy · Issue 6/February 2012
concerns by delivering 40 percent
efficiency as mechanical drive.
Another area of research that builds
on our existing expertise is carbon
capture and storage, including the oxyfuel process that uses pure oxygen,
rather than air, in combustion. The
resulting exhaust is steam and almost
pure CO2, which can then be captured,
compressed, and injected underground
for storage or use in aging oil fields
to enhance recovery.
How is this expertise reflected
in other areas, such as deep-sea
operations?
BLADES: The all-electric approach
also has major advantages for operators in deep water. While land-based
reservoirs have a 5 percent depletion
rate, subsea reservoirs give up much,
much earlier because of the hydrostatic pressure, so depletion rates are
20 percent. Therefore, in addition to
today’s investment to get oil flowing
from these deep-water environments,
operators will need a lot of pump
power down the road to really extract
the oil required from the reservoirs
to make them commercially viable and
to keep the oil flowing in the long
term. All of these pumps require electrical power.
To deal with this, at Siemens we are
marinizing the components (turbocompressors, transformers, switchgear,
variable speed drives, control systems,
etc.) in a subsea power grid that works
on the seabed; then we call on all the
other parts of Siemens Energy to access
transmission technology to get power
from land out to sea, as well as to get
the oil and gas back to land. Getting
power to the deep-sea fields requires
technology that is available within
Siemens. We are a world leader in highvoltage DC transmission, which is
what’s required for efficient transmission of power over long distances.
How will this change the way
offshore production is done?
BLADES: Today, we see lots of surface
activity with FPSO facilities, but the
vision of the future is that you will see
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nothing. Power comes from land via
a cable, and pipelines bring hydrocarbons back to land.
This is not only less capital-intensive
from an initial capital outlay perspective, it also has lower costs operationally. The third advantage is that it is
inherently safer. No longer will we have
3 kilometers of umbilicals – flexible
pipes that carry the oil from the seafloor to the floating installations –
snaking their way through the water;
no longer will we have expensive
structures exposed to hurricane winds.
Everything is nicely on the seabed,
contained and electrically controlled.
It all mitigates the chance of mishaps.
The CEO of Siemens’ Oil & Gas
Division is primarily based in the
UAE, not in Europe. Why is that?
BLADES: The Oil & Gas Division evolution is to decentralize our global
facilities. We’re building our factories
in areas where we generate revenues,
and we are globalizing our salespeople, our technology people, and our
project management people. We want
to be close to our customers, to be
part of our customers’ strategic thinking, and to be involved early in their
project planning. But the only way to
be involved early is to be in a local
office. You have to be able to drop by
when a customer wants to bounce or
share ideas. Globalization and regionalization are important to our strategy and part of the added value that we
provide to our customers. p
Ward Pincus writes on energy, green technologies, healthcare, banking, and finance for
publications in North America, Europe, and the
Middle East. He is a former correspondent for
the Associated Press.
Further Information
www.siemens.com/energy/oil-gas