Lorenzo Simonelli, Chairman and CEO of Baker Hughes, a GE company spoke to Pipeline Magazine in the lead up to ADIPEC about bringing the new merged company for the first time to ADIPEC and why in its new form it can take advantage of the disruptive change facing the industry.
What does the merger of Baker Hughes Inc. and GE Oil & Gas mean for the industry as a whole?
The merger of Baker Hughes and GE Oil & Gas is the blending of two leading companies to create a fullstream company that covers the entire value chain of the oil and gas sector. Disruptive change is the oil and gas industry’s new normal. We saw an opportunity in the market for a fullstream company and the combination of two historic and innovative companies could be a truly differentiated offering; one that enables us to weather industry cycles and volatility even better. We believe this can help us to also better partner with customers – helping to accelerate innovation together, partner on integrated projects, bring digital capabilities and ultimately to help enhance productivity.
What are your personal goals in your new role?
Our main focus is on integrating products, services and processes quickly and seamlessly so we can improve productivity and project economics for our customers and start building long-term value for our shareholders. Merging companies takes time, but we are moving with speed. It is also important to ensure we support a strong company culture and maintain our world-recognised commitments to integrity, invention, global growth, simplification and diversity.
In your role of Chairman and CEO what innovations will you be bringing to the company?
We already have a rich history of leading innovations, software solutions and leading equipment and technology. BHGE brings advanced technologies that are relevant to our customers and we are working with them to co-create solutions that best meet their requirements. We are harnessing the power of data and analytics to optimise operations and streamline processes for real-time decision-making and asset management. For example, capturing data while drilling provides a clearer picture of the subsurface to more accurately drill and place the well. It also helps us make more informed decisions around the overall completion and production strategy. These things are driving efficiencies and productivity gains for our customers.
We also leverage innovation from our sister companies across GE – such as 3-D printing and additive materials as well as innovations from Power and Aviation’s monitoring and bring it all into the oil and gas space. We are breaking down institutional barriers to facilitate and empower collaboration across work streams. We have over 15 ongoing long-term research and development projects that address fullstream industry challenges in Saudi Arabia, and our multi-stage pumping technology has been instrumental for the execution of the first CO2 reservoir injection application for enhanced oil recovery in the Middle East. We continue to mark breakthrough successes with our regional partners. We recently announced a great success story on how BHGE’s TerrAdapt™ adaptive drill bit has achieved the highest rate of penetration (ROP) ever achieved in Kuwait’s North field. Our TransCoil™ rigless deployed electrical submersible pump system is being installed in the region for the first time. Developed in partnership with Saudi Aramco, this next-generation, coiled tubing-deployed electrical submersible pump (ESP) system eliminates the need for a rig to install and retrieve ESPs–dramatically reducing intervention costs and downtime.
Your company is currently emphasising smart technology. How can this improve operational efficiency and benefit clients?
Digital industrial solutions are a game changer for the industry, and we deliver cloud-based digital technologies that break down silos to reduce risk, increase uptime and enhance productivity. By combining our industry expertise with software innovation, we optimise production improving top-line performance for the oil and gas industry. Big Data can drive big outcomes. One percent reduced NPT is equivalent to tens of millions of dollars in some cases. And yet, even today, less than 5 percent of oil and gas equipment is actually digitally connected and used to make key operational decisions.
This is an astounding amount of unused but potentially essential information – and we are working to put that data to work. An example, we can monitor the performance of our electrical submersible pumps, and we combine that with the information from the reservoir. We’ve been able to increase the recovery rates and increase production by five to six percent in some fields in the Middle East.
Which areas of the world are you concentrating on and where do you see the greatest potential for growth?
As a fullstream organisation, we see potential across the value chain around the world. We have a large global network and operate in more than 120 countries globally, so we are able to stay diverse and compete for projects all over.
The Middle East has great projects we are excited about – in a wide range of countries.
There has been a lot of talk about the US of course. And we’re optimistic seeing some increased attention in the North Sea. We have also seen Asia-Pacific successes.
For instance, our recently announced agreement with Twinza Oil Limited. This first fullstream agreement covers the development of a gas condensate field in offshore Papua New Guinea. The merger gives us more power on a global level, and allows us to give a dedicated, local level of care to these types of operations while being a single-source provider.
The key is to be nimble and be able to bring together the right integrated offerings. BHGE was just awarded a contract for the engineering, fabrication and construction of a subsea production system in offshore Egypt. The Zohr Gas Field is one of world’s largest gas discoveries, and will guarantee Egypt’s energy independence for years to come. The project perfectly demonstrates how we can leverage our global scale with local capabilities. Equipment will be manufactured in Alexandria in Egypt, supporting local employment in North Africa, as well as the UK, Norway and Italy. Project management services will also be supported in Egypt from Cairo and Alexandria, and from the UK.
You once said “disruptive change is the new normal for oil and gas”. How can companies turn this to their advantage?
Digital industrial is the ultimate game changer for our industry. And this is not uncommon in other industries. Yet today the oil and gas industry is still two to three times more inefficient than other industries. Our customers need partners who can help bring down the cost per barrel – which means we must find efficiencies and bring new technologies to bear that will help do that. By interconnecting operations and collaborating with customers upfront, we can provide tailored, outcome-based solutions. We believe that through greater collaboration we can help drive and partner to advance this change and enhance productivity.
How important is ADIPEC to the industry, both regionally and worldwide?
ADIPEC is a strategic global platform that brings together industry stake holders from across the world to one of the most dynamic oil and gas regions. From my visits to ADIPEC, I have seen the significant focus on innovation and collaboration, and how the event is at the forefront in showcasing the latest technologies and solutions. I always enjoy participating in ADIPEC.
What are you hoping for at this year’s event?
This is our first participation at ADIPEC as the merged company - BHGE, and we are excited to help continue to share more about our new company toour customers and partners. We have over 125 years of talent and experience in the industry and this allows us the opportunity to show our great history of innovation but also the great advances and opportunities ahead. We are very active in both the strategic and technical aspects of the conference, and introducing our full suite of technologies at our booth including our Virtual Reality Customer Training simulation. We have also been shortlisted in two award categories at this years’ ADIPEC Awards; The first is in “Technological Innovation and Research of the Year” for the Cable Deployed Electric Submersible Pump (TransCoil™)with Saudi Aramco, and the second in “Young ADIPEC Engineer” for Design and Manufacturing Validation through Virtual Reality Technology. We’re looking forward to participate in the various sessions and contribute to the discussion with our industry peers.
How do you see the short, medium and long-term future of oil and gas?
The oil and gas industry still plays a critical role in powering the world’s economy and its collective livelihood. Recent data shows fossil fuels still account for more than three-quarters of world energy consumption through 2040, and natural gas is the fastest growing fossil fuel in the outlook. But we must continue to leverage new technologies and develop new ones to improve unit drilling and completion costs, increase recovery efficiencies, lower operating costs, reduce environmental footprint and total risk. As more diverse energy sources improve their economics, increased efficiencies and sustainable offerings will be critical.