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The secret to unlocking efficiency for the energy transition? One exec says data governance

Nick Purday, IT director of emerging digital technology for ConocoPhillips, presented at the Reuters Events Data-Driven Oil and Gas Conference 2023 to help dispel any myths about digital twins. Photo courtesy of Shuttershock.

As Nick Purday, IT director of emerging digital technology for ConocoPhillips, began his presentation at the Reuters Events Data-Driven Oil and Gas Conference 2023 in Houston yesterday, he lamented at missing the opportunity to dispel any myths about digital twins given his second-to-last time slot of the conference.

He may have sold himself short.

No less than a hush fell over the crowd as Purday described one of the more challenging applications of digital twins his team tackled late last year. Purday explained, “The large diagram [up there], that’s two trains from our LNG facility. How long did that take to build? We built that one in a month.”

It’s been years since an upstream oil and gas audience has gasped, but Purday swept the crowd with admiration for the swift, arduous task undertaken by his team.

He then addressed the well-known balance of good/fast/cheap in a rare glimpse under the hood of project planning for such novel technology. “As soon as you move into remote visualization applications – think Alaska, think Norway – then you’re going to get a pretty good return on your investment. Think 3-to-1,” Purday explains. “As you would expect, those simulation digital twins, those are the ones where you get huge value. Optimizing the energy requirements of an LNG facility – huge value associated with that.

“Independently, Forrester did some work recently and came up with a 4-to-1 return, so that fits exactly with our data set,” Purday continued before casually bringing up the foundation for their successful effort.

“If you’ve got good data, then it doesn’t take that long and you can do these pretty effectively,” Purday stated plainly.

Another wave of awe rippled across the room.

In an earlier panel session, Nathan McMahan, data strategy chief at CoP, commented on the shared responsibility model for data in the industry. “When I talked to a lot of people across the organization, three common themes commonly filtered up: What’s the visibility, access, and trust of data?” McMahan observed.

Strong data governance stretches across the organization, but the Wells team, responsible for drilling and completions activity, stood out to McMahan with its approach to data governance.

“They had taken ownership of [the] data and partnered with business units across the globe to standardize best practices between some of the tools and data ingestion methods, even work with suppliers and contractors, [to demonstrate] our expectations for how we take data,” McMahan explained. “They even went a step further to bring an IT resource onto their floor and start to create roles of the owners and the stewards and the custodians of the data. They really laid that good foundation and built upon that with some of the outcomes they wanted to achieve with machine learning techniques and those sorts of things.“

The key, McMahan concluded, is making the “janitorial effort [of] cleaning up data sustainable… and fun.”

The sentiment of fun continued in Purday's late afternoon presentation as he explained how the application went viral upon sharing it with 1 or 2 testers, crashing the email of the lead developer responsible for managing the model as he was flooded with questions and kudos.

Digital twin applications significantly reduce the carbon footprint created by sending personnel to triage onsite concerns for LNG, upstream, and refining facilities in addition to streamlining processes and enabling tremendous savings. The application Purday described allowed his team to discover an issue previously only resolved by flying someone to a remote location where they would likely spend days testing and analyzing the area to diagnose the problem.

The digital twin found the issue in 10 minutes, and the on-site team resolved the problem within the day.

The LNG operations team now consistently starts their day with a bit of a spark, using the digital twin during morning meetings to help with planning and predictive maintenance.

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A View From HETI

Energy hungry data centers are increasing electric costs. Getty Images

Amid rising electric bills, states are under pressure to insulate regular household and business ratepayers from the costs of feeding Big Tech's energy-hungry data centers.

It's not clear that any state has a solution and the actual effect of data centers on electricity bills is difficult to pin down. Some critics question whether states have the spine to take a hard line against tech behemoths like Microsoft, Google, Amazon and Meta.

But more than a dozen states have begun taking steps as data centers drive a rapid build-out of power plants and transmission lines.

That has meant pressuring the nation's biggest power grid operator to clamp down on price increases, studying the effect of data centers on electricity bills or pushing data center owners to pay a larger share of local transmission costs.

Rising power bills are “something legislators have been hearing a lot about. It’s something we’ve been hearing a lot about. More people are speaking out at the public utility commission in the past year than I’ve ever seen before,” said Charlotte Shuff of the Oregon Citizens’ Utility Board, a consumer advocacy group. “There’s a massive outcry.”

Not the typical electric customer

Some data centers could require more electricity than cities the size of Pittsburgh, Cleveland or New Orleans, and make huge factories look tiny by comparison. That's pushing policymakers to rethink a system that, historically, has spread transmission costs among classes of consumers that are proportional to electricity use.

“A lot of this infrastructure, billions of dollars of it, is being built just for a few customers and a few facilities and these happen to be the wealthiest companies in the world,” said Ari Peskoe, who directs the Electricity Law Initiative at Harvard University. “I think some of the fundamental assumptions behind all this just kind of breaks down.”

A fix, Peskoe said, is a “can of worms" that pits ratepayer classes against one another.

Some officials downplay the role of data centers in pushing up electric bills.

Tricia Pridemore, who sits on Georgia’s Public Service Commission and is president of the National Association of Regulatory Utility Commissioners, pointed to an already tightened electricity supply and increasing costs for power lines, utility poles, transformers and generators as utilities replace aging equipment or harden it against extreme weather.

The data centers needed to accommodate the artificial intelligence boom are still in the regulatory planning stages, Pridemore said, and the Data Center Coalition, which represents Big Tech firms and data center developers, has said its members are committed to paying their fair share.

But growing evidence suggests that the electricity bills of some Americans are rising to subsidize the massive energy needs of Big Tech as the U.S. competes in a race against China for artificial intelligence superiority.

Data and analytics firm Wood Mackenzie published a report in recent weeks that suggested 20 proposed or effective specialized rates for data centers in 16 states it studied aren’t nearly enough to cover the cost of a new natural gas power plant.

In other words, unless utilities negotiate higher specialized rates, other ratepayer classes — residential, commercial and industrial — are likely paying for data center power needs.

Meanwhile, Monitoring Analytics, the independent market watchdog for the mid-Atlantic grid, produced research in June showing that 70% — or $9.3 billion — of last year's increased electricity cost was the result of data center demand.

States are responding

Last year, five governors led by Pennsylvania's Josh Shapiro began pushing back against power prices set by the mid-Atlantic grid operator, PJM Interconnection, after that amount spiked nearly sevenfold. They warned of customers “paying billions more than is necessary.”

PJM has yet to propose ways to guarantee that data centers pay their freight, but Monitoring Analytics is floating the idea that data centers should be required to procure their own power.

In a filing last month, it said that would avoid a "massive wealth transfer” from average people to tech companies.

At least a dozen states are eyeing ways to make data centers pay higher local transmission costs.

In Oregon, a data center hot spot, lawmakers passed legislation in June ordering state utility regulators to develop new — presumably higher — power rates for data centers.

The Oregon Citizens’ Utility Board says there is clear evidence that costs to serve data centers are being spread across all customers — at a time when some electric bills there are up 50% over the past four years and utilities are disconnecting more people than ever.

New Jersey’s governor signed legislation last month commissioning state utility regulators to study whether ratepayers are being hit with “unreasonable rate increases” to connect data centers and to develop a specialized rate to charge data centers.

In some other states, like Texas and Utah, governors and lawmakers are trying to avoid a supply-and-demand crisis that leaves ratepayers on the hook — or in the dark.

Doubts about states protecting ratepayers

In Indiana, state utility regulators approved a settlement between Indiana Michigan Power Co., Amazon, Google, Microsoft and consumer advocates that set parameters for data center payments for service.

Kerwin Olsen, of the Citizens Action Council of Indiana, a consumer advocacy group, signed the settlement and called it a “pretty good deal” that contained more consumer protections than what state lawmakers passed.

But, he said, state law doesn't force large power users like data centers to publicly reveal their electric usage, so pinning down whether they're paying their fair share of transmission costs "will be a challenge.”

In a March report, the Environmental and Energy Law Program at Harvard University questioned the motivation of utilities and regulators to shield ratepayers from footing the cost of electricity for data centers.

Both utilities and states have incentives to attract big customers like data centers, it said.

To do it, utilities — which must get their rates approved by regulators — can offer “special deals to favored customers” like a data center and effectively shift the costs of those discounts to regular ratepayers, the authors wrote. Many state laws can shield disclosure of those rates, they said.

In Pennsylvania, an emerging data center hot spot, the state utility commission is drafting a model rate structure for utilities to consider adopting. An overarching goal is to get data center developers to put their money where their mouth is.

“We’re talking about real transmission upgrades, potentially hundreds of millions of dollars,” commission chairman Stephen DeFrank said. “And that’s what you don’t want the ratepayer to get stuck paying for."

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