Ian Theophilus, CEO and co-founder of DigiRig. Photo: Ian Theophilus.

[Via Satellite 10-29-2015] The oil and gas market continues to have a number of interesting dynamics that impact satellite players. Firstly, the market has been going through a tough time this year. This has lead to oil companies looking to be more cautious with their network and technology investments. Ian Theophilus, CEO and co-founder of DigiRig and consultant to BP as a program manager, is uniquely placed to talk about the challenges facing oil and gas companies in this sector. With new High Throughput Satellites (HTS) coming online at a regular rate, satellite is responding to changing needs in the market. The question is whether the industry is doing enough to satisfy this demanding vertical, which is asking more for less. Theophilus, an ex-Tullow Oil exec, talks to Via Satellite about how oil companies see the satellite industry.

VIA SATELLITE: What are the oil and gas industry current demands for satellite? Do you expect these to exponentially increase over the next few years?

Theophilus: The utilization of satellite technology is continuing within the oil and gas industry. It is still high up the agenda in remote locations, as it has always been. There is still a focus on reducing the cost overheads of satellite technology and a move to terrestrial fiber is normally considered where possible. I continue to see an increased demand for satellite technology, especially as we drill in more extreme and remote location;, so, I expect to see continued growth within the market.

I think we may see a larger demand for Medium Earth Orbit (MEO) satellite technology over time as oil and gas operators rely more on remote, real time systems. The MEO technology is making a difference with its low-latency, high-bandwidth solutions, but cost is still an inhibitor. If the costs associated with deployment of MEO systems decreases, I expect to see a significant move to that communications medium over time.

VIA SATELLITE: At an oil and gas satellite event a few years ago, Andrew Marks, Tullow Oil’s ex-CIO said “Satellite is king for now, but you have to ask, is the long-term satellite VSAT deal at risk”. What are your thoughts on this?

Theophilus: The big change to support the continued take up of satellite services is related to how these contracts are costed and sold. Satellite bandwidth is still expensive; it is still a significant part of a telecoms budget and this needs to continue to reduce to make it more cost effective. There has been a change: satellite companies are starting to see that oil companies, particularly with the downturn in the market, are looking at as many ways as possible to reduce their costs. Here at DigiRig, we are helping companies review the WAN costs, and deliver services cheaper, but, I think the satellite providers can do more to help that. Whether we look at different pricing models or smarter contracting, there is something that needs to be done to help the majors with these cost reductions, especially in this current market environment with the oil price decreasing. If this doesn’t happen, oil and gas companies will be under significant pressure to look for alternative forms of communication while satellite bandwidth continues to be expensive.

VIA SATELLITE: It is a tough marketplace right now. How is this impacting networks/technology decisions?

Theophilus: Lots of companies big and small are looking at their investment budgets. The current oil prices are having an impact and a number of companies are imposing a delay on some of their major investments. That could potentially be new fields or new developments but will probably be more pertinent in the area of new technology. There is a feeling right now, of “let’s ride the oil crisis and see what happens in six to 12 month’s time, before we invest in new technologies.” What we have been doing at DigiRig is looking at alternative options for smaller type exploration companies where there are three or four of them operating within close proximity. So, for example, within a geographic area in Africa, we are investigating the possibilities of bandwidth sharing across multiple companies. This will help drive down the costs down for the smaller exploration companies and look at an alternative way of funding their communication needs.

Here at DigiRig we have held discussions with a number of drilling companies and the clear message back is, “what can you save me in terms of drilling time?” rather than “what is the cost of the bandwidth?” This leads me to believe that if as an industry we can innovative and find ways to improve “down hole” time, then the focus on the cost of bandwidth may shift.

At DigiRig we are aiming to deploy systems that can aid utilization of the applications required to improve efficiency at a rig site, and speed up the drilling program. We are working to share that cost across different companies within a geographical area to minimize cost. The exploration and production companies have responded favorably to this type of model. 

VIA SATELLITE: In recent times, we have seen a number of HTS launch. Will these be game changers for the oil and gas industry?

 Theophilus: HTS technology is definitely a game changer. This will allow companies to deploy real time-applications, and allow a model of remotely controlled production environments. There is a drive to reduce headcount at a remote facility from a health and safety standpoint and the increase of HTS systems will aid this. The ability to run real-time applications and systems over a low-latency, high throughput system will make a huge difference to how these companies work in these remote fields and will certainly reduce the number of staff on site. I am aware of a number of O3b Networks systems being deployed in the Middle East that are making a difference in terms of the type of applications being run in these remote facilities. I see that growing exponentially over time.

VIA SATELLITE: What trends are you seeing in terms of offshore video? How is this leading to increased demand for bandwidth?

Theophilus: There is a drive toward offshore video in terms of remote support and the ability to resolve issues offshore whilst having the expertise onshore. People and companies have been talking about this technology for a number of years, and are continuing to investigate these systems and processes. I am of the opinion that we will see a continued push to move to these high throughput video systems and the demand of bandwidth increasing to support this type of technology.

VIA SATELLITE: In terms of the overall communications ecosystem that you use to put networks together, how do satellite and fiber interlink? Do you think you will use more or less satellite in the future? 

Theophilus: It will be dependent on location. You still do not have fiber infrastructure in the majority of the remote locations. For instance, DigiRig is currently delivering a project with a company in Africa, where there are zero fiber networks available, therefore all communications are using VSAT. That will continue to be the case for the near future. Fiber is still predominantly a metro technology with limited deployments into remote areas.

If you are drilling in the middle of the desert, or a similar remote location, the tendency is to swing toward satellite systems due to the lack of fiber infrastructure. I personally don’t see this changing in the near, or even mid term. It is going to be a long time until we see fiber in deserts, jungles, etc. I see the demand for satellite bandwidth continuing whilst operations continue within remote and harsh environments.

VIA SATELLITE: Will these new initiatives in satellite such as O3b, OneWeb and others, genuinely make a difference to oil and gas and exploration companies?

Theophilus: They should genuinely make a difference in terms of cost. If we take a simple supply-and-demand model, then the more bandwidth that is available via multiple suppliers should bring down the cost of the bandwidth. I believe it will make a difference. In terms of technology, this technology is enabling companies to use satellite bandwidth more effectively and, as I have previously mentioned, HTS will aid the utilization of real time applications and remote support.

VIA SATELLITE: Internationally, what are the key target areas for your company in terms of oil exploration? How does satellite fit here?

Theophilus: Operators are focused on reducing costs wherever possible at the moment. A substantial amount of work that DigiRig is engaged in at present is within the area of circuit rationalization, and improving efficiency. This is on a global basis and is focused not only terrestrial, but also VSAT systems. Operators are continuing to explore and find hydrocarbons, and to enable this, VSAT is a continued requirement. We need to work together as an industry to assist the operators to successfully deliver their projects, but also to innovate and reduce the overhead associated with satellite systems.

VIA SATELLITE: Finally, what are the major communications/networks challenges facing DigiRig over the next 12 months?

Theophilus: It is all about reducing costs and being more cost-effective. It is looking at where we can potentially change technology and innovate to reduce cost. The common message we receive at DigiRig from the major companies is “we need you to help us become more efficient in the utilization of our technology whilst keeps cost down.” Doing more with less is the challenge of the next 12 months.