Technology Trends in Land Management Geographic Information Systems

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1 Technology Trends in Land Management Geographic Information Systems June 2014

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3 Overview The increasing proliferation of horizontal drilling and hydraulic fracturing coupled with the Securities and Exchange Commission s recent modernization of oil and gas reporting standards allowing for more favorable reporting of unconventional reserves have dramatically changed the dynamics of the energy industry. The relentless drive for reserves replacement and the abundance of commercially viable unconventional resources launched the so-called Fracking Revolution in the US onshore exploration and production sector. As some organizations place bets on their ability to capture process efficiencies through batch drilling programs for large numbers of unconventional wells, others are shifting their portfolios toward liquids in reaction to price weakness in the dry natural gas market due to oversupply. The resulting level of activity and diversity in unconventional resource development puts a strain on the land department. In the unconventional environment, land departments are challenged to manage an ever-growing number of leases and an expanding volume of data within their land systems while keeping pace with accelerated development plans, increased acquisition and divestiture activities, and changing reporting requirements. At the same time, land organizations are experiencing the crew change from an aging workforce of seasoned professionals to the next generation and are struggling to adapt. Both factors are driving the usage of increasingly sophisticated technology within the land function. In PwC s recent land benchmarking study, 40 surveyed energy companies of all sizes provided insight about their most pressing challenges and most exciting future developments in land. Overwhelmingly, the responses pointed toward technology, and information management challenges including 55% of companies who saw increased integration and leverage of Geographic Information Systems (GIS) data as a key enabling technology. Source: PwC Land Operations and Land Administration Benchmarking Study, May 2014 In this paper we will present a point of view on the benefits of GIS and why land is a great place to start. Technology Trends in Land Management: Geographic Information Systems 1

4 Land GIS Basics In the exploration and production sector, the land operations function focuses on acquiring land and mineral rights to promote development and production while land administration maintains lease and contract records for tracking and compliance. As in all real estate transactions, the most important considerations when acquiring land are location, location, and location. Mapping is fundamental to the land management process and a very straightforward application of GIS technology. An oil and gas lease will always include a legal description of the property and its location. Several variations exist from state to state or based on the age of the lease, but all will describe the specific size, shape, and location of the acreage covered by the lease agreement. Most will reference the Jeffersonian Public Land Survey System (PLSS), Texas survey/abstract system, or other established reference system while older leases may rely on less precise metes and bounds descriptions of distances between geographic landmarks. With leading land management software solutions, an automapping feature can generate polygons that outline lease boundaries on the map. However, the level of automation and accuracy can vary based on structure and formatting of legal descriptions and availability of up to date basemap information and survey data which are typically acquired through a subscription based service. Performing a quick visual quality check of the map is recommended to ensure accuracy and reliability. Third parties specializing in mapping and spatial processing typically perform these activities on an engagement basis for large acquisitions or on an ongoing basis for day to day land operations and property management. Figure 1: Example lease T40N, R81W, Sec 11, E2NW4 with well API Source: Ohio department of natural resources oil and gas well locator, Source: Ohio department of natural resources oil and gas well locator, 2 PwC

5 Spatially enabled GIS features A complete and accurate set of lease boundaries overlaid on a basemap with up to date geographic features, political borders, streets, and other cultural information forms the foundation of a valuable information asset that can benefit the entire organization. The true power of GIS extends the basic map to provide an interactive and dynamic experience with spatially enabled features that adapt to your current location or items you have selected on the map. These features can be broadly grouped into four categories: Map layers customize display of items and associated shapes, symbols, and labels on the map Analytics and reporting create mashups of data from disparate sources based on map selection Workflows initiate and track business processes for specific items selected on the map Enterprise integration search and drill down into enterprise systems containing additional information Figure 2: Spatially enabled GIS features Map layers Analytics and reporting Map layers Analytics and reporting Workflows Enterprise integration Source: Ohio department of natural resources oil and gas well locator, Source: Texas Railroad Commission Public GIS viewer, Workflows Enterprise integration Source: West Virginia Office of Oil and Gas, Resource Extraction Data Viewer, Source: Ohio department of natural resources oil and gas well locator, Technology Trends in Land Management: Geographic Information Systems 3

6 Upstream GIS use cases The extensive capabilities of GIS provide a new and unique way to approach traditional land management activities and a wide variety of other business processes. The following section describes some example GIS use cases for the major functional areas of an upstream organization. GIS for land operations Within land operations, GIS is an indispensable tool for visualizing lease holdings. With increasingly segmented ownership and depth severance, tracts are often covered by multiple lease agreements. Overlapping acreage must be reconciled to accurately calculate true gross and company net acreage. GIS can also be used to chart lease acquisition activity, broker operations, developed and undeveloped acreage, divisions of interest, and other business processes related to a geographical area. By extending the GIS interface beyond the map through enterprise integration, users can view land records, division orders, and supporting documentation by clicking agreement polygons linked to the land system and land document repository. With workflows, a click on the map initiates a title opinion request, new contract setup, or balloting for Authorization for Expenditure (AFE) on a new well. Figure 3: Overlapping acreage Source: Texas Railroad Commission Public GIS viewer, 4 PwC

7 GIS for exploration GIS also provides a powerful tool for planning and tracking exploration activity. Map layers showing available leases and undeveloped acreage overlaid with known reservoirs and formation boundaries provide a visual snapshot of exploration prospects within the context of existing field assets and reserves. With enterprise integration, geologists and geophysicists can refer to the map to determine where subsurface data is available and simply click to view 2d and 3d seismic studies and interpretations, biostratigraphic and paleo data, check shots, and other geological and geophysical data within their native applications. Workflows can initiate an exploration plan, a seismic study, or a permit request. Figure 4: Seismic data integration Source: Academic Seismic Portal at University of Texas Institute for Geophysics, Marine Geoscience Data System, Technology Trends in Land Management: Geographic Information Systems 5

8 GIS for development Development includes establishing a drilling program to exploit proven reservoirs accessible through leased acreage within a given field, locating optimal well locations within those leases, designing and planning wells which may include numerous sidetracks and laterals, drilling and completing those wells, and putting them on production. Throughout this process as surface locations, well paths, completions, and bottom hole locations are planned and executed, all can be displayed on the map using standard symbology. As planned activities are completed and proposed locations are updated to show actual locations, the map provides a quick graphical status tracking tool for the entire drilling program. With enterprise integration, well information ranging from wellbore schematics, permits, and daily drilling reports to logs and core photos can be accessed from the map by establishing linkages to available corporate and external data sources. Workflows include AFE tracking, permitting, and regulatory reporting. Figure 5: Standard well symbology Source: Texas Railroad Commission Public GIS viewer, 6 PwC

9 GIS for production In the digital oil field, establishing a real time production surveillance infrastructure is a major strategic initiative beyond the scope of this article. However, data management tools and standards such as ProdML make it possible to extract and display real time data on the map with relatively little additional effort. By tapping the real time data stream, simple charting tools can be used to dynamically display operating status, production volume, and real time facility optimization statistics on the map. Linking the GIS map to hydrocarbon allocation, production reporting, and reservoir management systems through enterprise integration transforms a simple map interface into a powerful production surveillance dashboard. With workflows, an operator can initiate a routine work order request, generate an environmental report, or commission an enhanced recovery study directly from the dashboard based on observed data trends or marginal conditions. GIS for enterprise enabling functions GIS can provide benefits for many of the functions that enable and support the exploration and production business and for the enterprise as a whole. Applications range from finance and supply chain to commercial marketing and midstream. Upstream finance is tied closely to land and can leverage GIS to view and analyze production revenue data linked to mineral and royalty interests. With the appropriate linkages, the map becomes a joint venture accounting dashboard to chart working interest and Lease Operating Expenses (LOE) or generate well cost analysis and accounts payable reports for development properties. Workflows include AFE and Joint Interest Billing (JIB) approvals with links to supporting documents and invoice images. Figure 6: Joint venture accounting dashboard Source: Texas Railroad Commission Public GIS viewer, Technology Trends in Land Management: Geographic Information Systems 7

10 GIS enabled applications for Health, Environmental, and Safety (HES) compliance include emissions reporting, waste water management, and regulatory filings. Supply chain and procurement applications range from supplier management and logistics tracking to automated inventory control and purchase order tracking and fulfillment. Beyond exploration and production, GIS can provide linkage to the midstream and downstream segments. From gathering systems and pipeline transportation to midstream marketing to refined products and retail distribution, GIS can literally provide a map of the entire oil and gas value chain. Table 1: Extending GIS across upstream Land Exploration Development Production Enterprise Map Layers Lease acquisition activity Broker operations Developed and undeveloped acreage Divisions of interest Reservoirs Formation boundaries Exploration prospects Field assets Surface locations Well paths Completions Bottom hole locations Production facilities Gathering and storage systems Personnel tracking Corporate real estate Weather Spatial Analytics and Reports Acreage calculator Division of interest charting Lease expiration Pooled unit analysis Reservoir management Reserves analysis Commercial analysis Rig utilization Capital project management Joint venture accounting Hydrocarbon allocation Production surveillance Facility management and optimization Emergency operations Logistics tracking Waste water management Enterprise Integration Land records Division orders Owner information Supporting documentation Seismic surveys Biostratigraphic and paleo data Checkshots Geological and geophysical data Well design Drilling permits Daily reports Well testing Logs Core photos Reservoir analysis Production reporting Reservoir management Marketing and midstream Emissions reporting Supplier management Customer relationship management Workflows Title opinion requests New contract setup Balloting for AFEs Exploration planning Seismic studies Permit requests AFE tracking Permitting Regulatory reporting Procurement and logistics Environmental reporting Work order requests Enhanced recovery studies Regulatory filings Automated inventory control Purchase order tracking and fulfilment 8 PwC

11 GIS roadmap While enterprise GIS implementation can be a significant investment, modular design makes it efficient to start small and scale incrementally at a pace that makes sense for the business. Land management activities occur early in the upstream development lifecycle and inform subsequent activities, making land an excellent place to start building a GIS foundation. For companies that have already begun to leverage GIS, incorporating reliable land information into the GIS deployment strategy improves information sharing and decision quality across the organization. In terms of what good looks like and how to get there, the relevant dimensions of maturity include usage guidelines, information management, technology infrastructure, and organizational capability. As with any information technology change, stakeholder engagement and communication are the keys to capturing the benefits of a mature GIS environment. Figure 7: GIS maturity model Level 1 Level 2 Level 3 Level 4 Level 5 Initial Repeatable Defined Managed Optimized Usage Guidelines Ad-hoc GIS usage GIS guidelines GIS standards GIS roadmap GIS enterprise strategy Information Management Minimal information sharing Departamental information sharing Cross functional quality management Information quality management Enterprise information governance Technology Infrastructure Unmanaged GIS tools Disparate GIS environment Shared GIS environment Managed GIS environment Enterprise GIS environment Organizational Capability Individual GIS gurus GIS power users GIS champions GIS communities of interest GIS centers of excellence Stakeholder engagement and communication Technology Trends in Land Management: Geographic Information Systems 9

12 GIS value proposition Ultimately, the purpose of any information technology investment is to improve business performance or reduce risk. GIS provides a unique interface to visualize relevant information graphically, allowing users to make the best possible business decisions based on the best available data from multiple disparate sources presented in a highly usable and intuitive format. Integrated GIS can drive collaboration and enable information sharing across the entire upstream value chain using architecture components and integration technologies that are readily available and easily supported. Whether the payoff is maintaining a lease that might have otherwise been lost due to a missed obligation, expediting title curing to keep pace with an aggressive drilling schedule, or reconciling acreage and working interest for reserves reporting, GIS can help. You can get there from here Table 2: GIS terminology Basemap Cultural Feature ESRI Feature Metes and Bounds Polygon Public Land Survey System (PLSS) Spatial Data Surveying Symbology Visualization A map depicting background reference information such as landforms, roads, landmarks, and political boundaries, onto which other thematic information is placed. A human-made feature represented on a map, such as a building, road, tower, or bridge. Environmental Systems Research Institute, a leading GIS solution provider A representation of a real-world object on a map. A surveying method in which the limits of a parcel are identified as relative distances and bearings from landmarks. Metes and bounds surveying often resulted in irregularly shaped areas. On a map, a closed shape defined by a connected sequence of x, y coordinate pairs, where the first and last coordinate pair are the same and all other pairs are unique. The description of the location of land in the United States using a survey system established by the federal government in Originally proposed by Thomas Jefferson, the PLSS is also referred to as the Jeffersonian system. Information about the locations and shapes of geographic features and the relationships between them, usually stored as coordinates and topology. Measuring physical or geometric characteristics of the earth. Surveys are often classified by the type of data studied or by the instruments or methods used. Examples include geodetic, geologic, topographic, hydrographic, land, geophysical, soil, mine, and engineering surveys. The set of conventions, rules, or encoding systems that define how geographic features are represented with symbols on a map. A characteristic of a map feature may influence the size, color, and shape of the symbol used. The representation of data in a viewable medium or format. In GIS, visualization is used to organize spatial data and related information into layers that can be analyzed or displayed as maps, three-dimensional scenes, summary charts, tables, time-based views, and schematics. Source: ESRI GIS Dictionary, 10 PwC

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14 To have a deeper conversation about land management, please contact: Reid Morrison Principal (713) [email protected] Leon Redelinghuys Director (713) [email protected] Gregg Ruben Manager (713) [email protected] 2014 PricewaterhouseCoopers LLP, a Delaware limited liability partnership. All rights reserved. PwC refers to the US member firm, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors. MW