A smarter approach to extracting natural resources in Canada

A smarter approach to extracting natural resources in Canada Data is the industry s untapped resource Highligbhts In many cases, information technology assets are underutilized in the Canadian natural resources industries, but can be a key to solving many challenges organizations confront on a daily basis. IBM believes that natural resources companies need to address the following imperatives to navigate today s complex environment: Improve outcomes of capital projects Optimize production operations Improve asset management Integrate the workforce Enhance performance and safety Enable innovation Improve information management Canada s natural resources industries (particularly oil sands production, hard rock mining and forestry) face local challenges and opportunities that are unique to the Canadian markets, economy, ecology and society. For example, oil sands production is pushing innovation in how and where oil can be produced. With this innovation comes new forms and uses of information that can help improve discovery, increase yields, lower costs, predict maintenance issues and increase safety and environmental performance. As oil sands operations adopt new technologies in greenfield operations and turnarounds, new opportunities also exist to push new practices into business processes and information technology. In this light, oil sands producers can be leaders in global innovation, pioneering new ideas beyond production to include asset management, remote operations, safety performance, and more. The velocity and quality of innovation coming from Canadian operations will contribute vastly to the evolution of the natural resource industry at large, and help advance a shared vision for a Smarter Planet. Take advantage of analytics

Smarter natural resources in Canada The business of identifying and extracting natural resources such as oil, gas, minerals, metals, fibers and wood is critical to modern life. These raw and base materials make up homes and buildings, power transportation systems, and are found in every physical product bought or sold. The global population is expected to grow up to 10 billion by 2050, so demand for natural resources is expected to rise. This increasing demand will require new oil production techniques, such as those being seen in the Canadian oil sands production industry. As the world s dependence for energy expands, the role of Canadian oil production companies will rise in local and global prominence as well. The Canadian natural resource and base materials extraction industry must be as effective and productive as possible. Canadian commodity producers are key participants of a complex, global supply chain. They often operate in remote environments that are subject to harsh weather, concerned communities and changing Canadian regulatory conditions. Downtime can take the form of breakdowns, a missing spare part, an employee injury or inclement weather. These common disruptions can slow production and threaten profitability. The impact of supply interruptions can affect dozens of adjacent industries as well. If the disruptions are sufficiently severe, they can threaten entire local economies. Negative impacts could be minimized if production decision makers were better able to predict events that increase the risk of unplanned shutdowns and take immediate action to either avert or prepare for a disruption. Organizations would be able to optimize operations to grow revenue, satisfy customers, raise operational efficiency and drive production. They could maximize uptime, deployment and use of assets, whether in oil sands operations, offshore oil rigs, mines, forests, machinery or transportation networks. Natural, human, and technological systems could be harmonized to meet peak production capacities. At IBM, we believe information technology assets are underutilized in the Canadian natural resources industries. IT assets can be a key to solving many challenges organizations confront on a daily basis. IBM is not alone in this belief. Some of the most forward-thinking leaders in the industry are examining new ways to harness technology, data, analytics, mobility and instrumentation. These innovations can deliver greater recoveries and higher product yield, improved efficiency, better human and environmental safety and more efficient global supply chains. Today, these companies are looking to new technologies and processes to: Instrument critical assets to access information about the status of machines or operations, and analyze the information to improve outcomes, efficacy and performance. Integrate asset, production, customer and operational data to gain new insights and reports on production and key performance indicators. Establish remote command centers with visualization and virtualization technologies, enabling knowledge workers to live and work remotely while supporting global operations. Take advantage of location awareness technologies to monitor and track assets, people and worker safety. Harness event triggers and alerts to monitor production facilities, warn of shutdowns and breakages, and perform condition monitoring and predictive maintenance. Integrate information from production systems with planning and customer systems to provide a holistic view of the business for improved collaboration, coordinated decision-making and increased organization agility. These opportunities are helping Canadian natural resource companies face and solve some of their most pressing and immediate challenges. This type of insight and decision-making is required to meet the growing demand for natural resources, and help build a Smarter Planet. 2

Support key imperatives Deep within the operations of many extraction companies is a different natural resource with tremendous value: data. These information assets can offer a wealth of insights, help improve yields and increase profits. By exploring data stores, natural resource companies can turn complexity into a competitive advantage. As some executives have already discovered, embracing and managing that data can help make their decisions simpler and their businesses smarter. In our work with industry leaders, IBM has found natural resource companies face key imperatives as they navigate today s complex environment. Improve outcomes of capital projects As of the end of 2012, there are roughly 150 capital projects for new oil sands operations that are either proposed, under construction or seeking regulatory approval. According to the latest Canadian Association of Petroleum Producers forecast, oil sands output will more than double to 3.1 million barrels per day (bpd) in 2020, from 1.6 million bpd in 2011. 1 With this much production on the line in the coming decades, getting the operations up and running efficiently is paramount. Developing the operational information strategy, agreeing on technology standards and defining the full role of instrumentation and analytics occurs during the design/build/construction phase. During this phase, engineering information lifecycle management emerges as a critical discipline to ensure the proper use of operational data both during the handover and throughout the lifetime of the operation. For example, improving the performance of capital projects was the focus of one global energy company that employs a design one, build many asset management approach to developing new fields. The exploration of one of its new developments was completed and full production was on the horizon. The company needed to keep production levels high and downtime low, which meant adapting to a number of local operational challenges. The company implemented an integrated asset management solution, based on adapted best practices in work management, stock management and procurement from other regions. This solution brought world-class efficiency to new and important oilfield development opportunities. The result was significant production efficiency gains, lower costs and improved safety. Optimize production operations Organizations must optimize production operations throughout the natural resource value chain and improve their return on investments. They can improve visibility and control of their resources, fields, workforces and production through the instrumentation, integration and analysis of their core data assets. These changes may include using geophysical modeling and processing to understand opportunities, integrating operations for better analysis and real-time monitoring and automating and optimizing manufacturing processes. The opportunity to establish remote operations and virtual command centers that enable knowledge workers to monitor and control operations in the field from afar is profound. New information, technology and processes can make the supply chain more intelligent and efficient. It can improve demand planning, production planning, forecasting, manufacturing, inventory, distribution and customer fulfillment. For example, to replenish declining reserves, a major oil producer decided to expand its primary, land-based properties into nearby underwater sites. To find substantial reserves, the company recognized that its best options lay farther offshore in fields that were difficult to find and produce. However, by optimizing advanced seismic information and using new technologies, the oil producer increased its offshore drill success rate to 50 percent (against an industry average of 20 percent). 3

Improve asset management Canadian natural resources companies must reduce planned and unplanned asset shutdowns to maximize asset use and production. Companies can improve the utilization, uptime, maintenance, security and lifetime of their key assets, including properties, fields, wells, machines, transportation, tools, facilities and technology. Key opportunity areas for improved asset management include capital project management, enterprise asset management, condition-based maintenance, real-time asset tracking and turnaround optimization. For example, a Canadian oil company had difficulty meeting safety and environmental regulations because of suboptimal asset management practices. With a growing number of assets across several production sites, coupled with a manual Management of Change (MOC) process, the company could not ensure that any asset-related changes would result in safe operations throughout its plants. They automated the MOC process using a multifaceted asset management solution that manages the change process for more than 4,000 plant assets. The assets include everything from wells to access pipelines. The solution helps ensure that the complete scope of a change is identified and addressed in a timely manner. By rating risks associated with the work and identifying interdependencies, the solution predicts the effect each change may have on plant operations and prioritizes work orders to prevent equipment failure. Integrate the workforce Taking advantage of knowledge across an organization is critical for improving work efficiency and reducing safety and reliability issues. Enterprises can improve their ability to recruit and maintain skilled people. Better employee recruitment and retention leads to an increase in productivity and collaboration, especially as companies manage attrition of their experienced workforce. Keys to this imperative include employee learning and enablement, knowledge sharing, collaboration, performance and talent analytics. For example, a leading global energy company improved operations of its intelligent oilfield program by establishing a remote operations center, optimizing core business processes around this model and implementing knowledge sharing and collaboration technologies. The result was a network of collaborative environments for faster, safer decision-making. Enhance performance and safety Canadian natural resources companies must be responsible for their employees, the environment and their communities. With growing concern over worker and population safety, environmental performance and the effects of emissions, water recovery, disasters and spills, a responsible approach has become a key differentiator in the market and even a competitive advantage. Applying new technology, practices and processes can improve performance in these areas. Commodity producers can pursue location awareness and safety, regulatory management, integrated risk management and carbon management. GHG emission and water sustainability are important in oil sands production and can be vastly improved through information management. For example, steel production plants can be dangerous facilities, especially around the blast furnace. A major global steel manufacturer sought to improve employee safety in their plants with real-time employee location monitoring. The new solution automatically detects and responds to potential accidents using real-time sensor data. Employees wear radio frequency identification (RFID) tags to coordinate location data with emergency staff to reduce response times. Enable innovation Innovation is a fundamental driver within natural resource industries. New exploration technologies have improved geospatial modeling and seismic imaging to find remote fields and new mines. New mathematical algorithms and modeling ideas enhance recovery and extraction techniques. To infuse new ideas and approaches into the business, companies can use computation geosciences, integrated operations, high performance computing and streaming analytics. 4

For example, during the design/build phase of a greenfield operation, a Canadian SAGD-based oil producer found a new way to manage engineering information. The way they managed and controlled documents during the early phases of commissioning a new operation affected the performance of the operation for years, so they developed whole new processes and systems. They received data from vendors before turnover to cement the effectiveness of their operational data strategy. This basis bolstered further innovation as the company had the data available to pursue strategies such as predictive maintenance, analytics-driven sustainability efforts and advanced analytics. Improve information management Data is becoming the most valuable resource in the industry. It is generated from facility, field, forest and mine operations. To better manage operations and collaborate with business partners, smart companies integrate information within their business and across their ecosystems. Companies should integrate systems to help simplify complex IT environments and improve the visibility, flexibility and collaboration required for effective operations and decision-making. For example, the heavy oil business unit of a Canadian oil exploration and production company developed a new method of extracting heavy oil and bitumen from oil sands. It was on the path to massive and rapid growth and needed to vastly overhaul their financial management reporting to gain a better understanding of their growth, financial resources and investments. They deployed a new analytics solution to replace slow manual processes. The new solution can produce financial reports in less than five minutes, eliminating many hours of manual spreadsheet-based work. The solution gives the finance department more insight into the invoicing process, making it easier to remove bottlenecks, accelerate invoicing and improve key supplier relations. Take advantage of analytics Collecting and managing data is one thing. But applying analytics and optimization capabilities to that data enables natural resources companies to make better production decisions that ultimately increase recovery rates, extend the life of mines and fields and reduce environmental risks. Predictive analytics capabilities fill in the gap between data and action by drawing reliable conclusions about current conditions and future events in such areas as asset management. Analytics can also be used to help optimize natural resource recovery through modeling and implementation of systemic changes that lead to insights. For example, one global mining company is turning complexity into an advantage. To identify the best portfolio of contracts to offer each client, they are adopting analytics and optimization capabilities. These capabilities define the best volume for each type of product and analyze which mines or combination of mines to produce. They also are using the data to synchronize production operations across the entire supply chain, from mines, ore processing, rails, ports and transportation to the client s front door. IBM can help With production and profitability on the line to meet the demands of a global economy, leaders in the Canadian natural resources industry are finding new value in their core assets. They also are finding new ways to boost yield, margins and customer satisfaction. IBM has worked with natural resources companies for nearly 100 years. We help them achieve the high levels of operational excellence and production efficiency they aim for because we believe that these companies, when managed properly, serve as the foundation for a Smarter Planet. 5

For more information For more about how you can take a smarter approach to natural resource extraction, please visit: ibm.com/smarterplanet Copyright IBM Corporation 2013 IBM Corporation Global Business Services Route 100 Somers, NY 10589 Produced in the United States of America March 2013 IBM, the IBM logo, and ibm.com are trademarks of International Business Machines Corp., registered in many jurisdictions worldwide. Other product and service names might be trademarks of IBM or other companies. A current list of IBM trademarks is available on the web at Copyright and trademark information at ibm.com/legal/copytrade.shtml This document is current as of the initial date of publication and may be changed by IBM at any time. Not all offerings are available in every country in which IBM operates. THE INFORMATION IN THIS DOCUMENT IS PROVIDED AS IS WITHOUT ANY WARRANTY, EXPRESS OR IMPLIED, INCLUDING WITHOUT ANY WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND ANY WARRANTY OR CONDITION OF NON-INFRINGEMENT. IBM products are warranted according to the terms and conditions of the agreements under which they are provided. 1 Financial Post Staff, Oil sands: A complete guide to all projects proposed, under construction or up for review, Financial Post, December 2012 Please Recycle MME12345-USEN-00