Digitalization has taken over the world and has changed the way we shop, eat, travel and live. However, one industry that has not yet fully reaped its benefits in spite of being heavily technology centric is the oil and gas industry. With the recent crash in oil prices traditional oil and gas companies initiated cost-cutting tactics through layoffs and facility shutdowns. However, with the shift in demand to renewable energy sources, the demand for oil and gas is declining. As a result, lower oil prices seem like the new norm, hence future incremental synergies can only be recognized if the supply chain is improved through adopting technologies such as additive manufacturing – also known as 3D printing.(5)(4)
GE Oil & Gas has been quick to adapt to the trend of digitalization. This company has made significant investment in data and asset performance management in order to plan preemptive maintenance of expensive oil and gas equipment. Their recent investment in 3D printing and robotics aims to drastically reduce the costs and logistical obstacles associated with the supply chain. (1)
Traditionally, the manufacturing of oil and gas equipment takes around six to eight weeks ex-works (till the plant site), after which the equipment is shipped to the necessary location adding another two to four weeks of delivery time to the overall lead time. Furthermore, these equipment, made of heavy metals, incur high transportation costs. Moreover, as precision is key in the manufacturing of these equipment, a few inches in deviation of specification may lead to multiple days of downtime, increasing the overall costs of rig operation. Industrial 3-D printing does not only drastically decrease the manufacturing cycle time but also allows higher accuracy and more intricate designs with less weight. Consequently, decreasing the transportation costs, lead time, and overall defect rate. (5) (3)
In 2016 GE Oil & Gas invested USD$11.2 million in two of their production lines in Talamona, Italy. One of the lines was equipped with fully automated anthropomorphic robotics arms to produce nozzles used in gas turbines. The other line employed the use of 3-D printing to produce end burners for turbines and compressors. Both these innovations were able to capitalize on the benefits of digitization such that they produce more precise, efficient and cost-effective products while increasing the plant capacity. (1) (2 (6)
GE had already been working with 3-D printing, using it in their aviation and health care businesses, prior to leveraging the success of this technology in oil and gas. Lean manufacturing is a goal of every manufacturing firm and 3-D printing can improve many key parameters that help to make the production process leaner. First, as the product now has a shorter cycle time, less inventory is required. In 2011, 14% of the revenue of high-tech manufacturing firms was held up in inventory(3), hence 3-D printing allows companies to decrease the inventory quantities. Second, due to the nature of the operations and the uncertainty associated with the geology of the project site, companies usually pre-order multiple drilling products, for example; drilling bits in anticipation of encountering a different ground formation than what was expected. The benefit of 3-D printing is that in offering flexibility and products on demand, companies can better respond to the unpredicted variations at the project site. They can streamline the supply chain and experience cost savings associated with product delivery and planning. (1) (2) (3)
Furthermore since 3-D printing promises to reduce the number of links between different supply chain functions such as purchasing, operations, distribution and integration and bring production closer to consumers it can also decrease the overall variability in the entire supply chain. (3)
In the short term oil and gas companies can prioritize digitizing equipment that are smaller and have high variability in demand such drilling bits. While in the long term, the industry should invest in decreasing the overall links in supply chain by bringing suppliers closer to the end users.
Exhibit 2: GE’s 3-D printing portfolio
Future of the industry
While the prospects of 3-D printing in oil and gas industry seem exciting, in order for them to be sustainable there are still many aspects that need to be addressed.
- Can industrial 3-D printing be extended to all product lines with in the industry.
- In the low oil price environment, will companies invest in making significant changes in their current supply chain model.
- If equipment can be printed on site, how will companies incorporate quality control of these equipment before they are used downhole.
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(3) Costs and Cost Effectiveness of Additive Manufacturing A Literature Review and Discussion Douglas S. Thomas and Stanley W. Gilbert http://nvlpubs.nist.gov/nistpubs/SpecialPublications/NIST.SP.1176.pdf