Refining the Process: RFID is a Growing Force for Profit, Efficiency in the Oil and Gas Industry

Sept. 2, 2008
Insight on tomorrow's technology, being used today.

As potential earnings soar from record energy prices, the stakes are growing higher than ever for oil and gas companies. If equipment goes missing or fails, production slows or shuts down completely, costing companies millions of dollars.

Radio frequency identification (RFID), a system made up of rugged readers and tags that wirelessly transmit detailed location information, is playing an increasingly important role in helping oil and gas companies run their businesses more efficiently in today's fast-changing economy. This technology is an improvement over today's bar code technologies as it increases automation and reduces manual processes, while withstanding the harsh weather and environmental conditions specific to this industry. More importantly, the real-time track and trace capabilities of RFID offers companies a better way to capture mission critical data to ensure product quality, track assets, meet industry mandates and be more competitive.

According to technology analyst firm, VDC, the oil and gas industry spent approximately $104 million in 2007 on RFID solutions to help refineries, rigs, manufacturers and distributors gain greater visibility into their valuable drilling equipment, while also helping to safeguard mission critical parts from tampering and counterfeiting as they travel from one destination to the next.

There is no doubt that one day, RFID will be the tracking technology of choice for the industry, but what does that mean for oil and gas drillers looking to adopt this technology today? Consider the use of RFID in the following scenarios from industry experts.

A Better Way to Track Assets -- From the Manufacturing Floor to Corporate Headquarters

RFID brings new levels of strategic and operational decision-making to oil and gas companies. "Recording the movement of assets to ensure that they go through all quality control steps is vital to our industry, but it can be cumbersome for floor workers," said Konrad Konarski, president of Merlin Concepts and Technology, a company that designs inspection and quality control solutions for oil field product manufacturers and oil providers. "No other data-capture technology can enable the sort of seamless, automated tracking in the way that RFID can."

Tejas Casing Ltd.Konarski's company, along with Motorola and industry integrator, Ship2Save, designed and implemented an RFID system for Tejas Tubular Products, a leading oil field drill pipe, tubing and casing manufacturer. The system uses RFID tags and readers to provide real-time visibility of components moving from manufacturing into various staging areas. RFID readers identify where the products move and captures data in real time about what inspections they pass. The information is then displayed on a large screen in Tejas Tubular's sales office so that staff can share the status of an order with customers who request it. At the same time, the system gives floor workers information on wirelessly-enabled mobile computers to validate orders and shipping information. With every step of the manufacturing journey recorded through RFID, a full history of any product is available to customers at any time.

"Before RFID, we had to manually correlate all of this information," said Max Tejada, Chairman and CEO of Tejas Tubular. "But now, this process has been automated, similar to a toll road, where each piece of a pipe is accounted for, like a car going through a toll booth. We automatically know which checkpoints every product has been through. RFID gives us by far the best traceability."

The benefits are endless, including:

Greater Visibility from the Warehouse to the Rig

RFID technology has improved concurrently with the development of wireless LAN networks and new equipment. More specifically, new mobile and wearable readers, as well as rugged portable computers, can now take RFID-enabled data capture beyond traditional fixed locations and into any workplace location, from the warehouse to the rig. The result is that oil companies have greater visibility into what is really happening across geographically far-flung operations.

Improving Asset Tracking in Harsh Environments

Determining Whether RFID is Right for Your Company

RFID can be used in so many ways, and there are multiple kinds of RFID technologies. What kind of tags should be placed where? And what kinds of readers should go with them are difficult questions to answer without expert guidance. There are three, initial steps you can take to determine whether RFID is right for your company.

1. Do your homework. Identify two or three business problems you have, and find out how businesses across industries are solving similar problems with RFID. Good starting references include RFID Journal , The Association for Automatic Identification and Mobility technology and RFID News.

2. Get management buy-in. Before going too far into the research process, find out whether company managers are open to, and have the budget for, a new technology system like RFID. Once you have management's approval, you'll need to build a case that will achieve buy-in across the organization, since an RFID-based asset management system requires the willingness of both managers and workers to modify existing processes.

3. Do a pilot. Consult a systems provider who has experience with RFID and arrange for a smaller-scale RFID implementation to make sure that the system really does what you identified in step 1. Identify known technology vendors with proven RFID hardware that has been used in real-world, scalable deployments. And take the time to fine-tune the technology and make sure that you're deploying what works best for your company. Throughout this process, you will be building a database of knowledge you can use to help make your business more competitive over the long-term.

Unlike other track-and-trace systems, including barcodes, RFID can withstand a tough environment. Because RFID tags do not require direct line-of-sight to be read, you can read them when they are covered in dirt and grime or painted over. Specially designed tags can also withstand pressure washing and other harsh wear and tear.

A Better Way to Comply with Mandates

In the oil industry, the American Petroleum Institute requires manufacturers to provide a documented history for every product. This history is essential when you consider that product failure in the oil field can halt production, costing a company millions of dollars. More importantly, RFID is quickly becoming a technology companies rely on to comply with the Sarbanes-Oxley Act, the federal law requiring rigorous financial reporting and auditing in the wake of Enron's collapse. With detailed history recorded, CFOs can account for all assets accurately, and make better capital investment decisions in the future.

More Efficient Maintenance and Repair

To maximize its life-span, expensive machinery requires proper maintenance. But most maintenance logs are recorded manually by hand, leaving significant room for error. With RFID, an asset's entire repair and maintenance history is recorded automatically to the RFID tags, which can be affixed anywhere on a part. This capability essentially integrates the product flow with the information flow. An RFID reader can read equipment when it comes in for service and when it leaves. Readers can also record all relevant information, including service date and time, who performed the service, what happened, and when the equipment should be serviced again.

Ashe Menon, an RFID product specialist at MD Totco, a division of oil and gas drilling equipment producer National Oilwell Varco, says today's market makes proper maintenance critical. "The oil and gas market is extremely busy now. Back in 2000, if you had a piece of equipment that broke down, you would call up your supplier and they would send you a replacement. Today, you can't get parts or replacements quickly because the demand is so high. And when you consider that an oil rig makes around $500,000 a day, time is of the essence."

A Big Differentiator for Small Companies

Many smaller companies are finding that the benefits of RFID are giving them a leg up against larger competitors.

"We are competing against large companies every day, so for a customer to choose a small to mid size company like us, they need to have a compelling reason," said Liam Stone, facility manager for Texas Casing, which processes casing for oil wells. The company uses RFID to track casing throughout the multiple stages of manufacturing, testing and shipping. To Stone, this detailed history offers customers that compelling reason to chose Texas Casing over its larger competitors.

"One 40-foot piece of faulty casing can cause an entire well to fail and millions of dollars to be lost," Stone said. "RFID allows us to see our process in real-time, and maintain accuracy for our customers."

Tejas Tubular's Max Tejada agrees. "RFID is a key differentiator for a company of our size," he said. "And we hope it will be for years to come because RFID will allow us to continually improve our business processes and add value to the overall solutions and services we offer our customers. Once you have the tracking database that RFID enables, you can add to it and use the information you gather in new ways."

Looking to the Future

Dr. Ben Zoghi, a professor of engineering and RFID expert at Texas A&M University, sees tremendous promise in RFID. "Being able to RFID tag assets and determine their location and status in real time as they travel from manufacturing floors to on-site delivery is extremely important for oil and gas businesses. RFID fits this industry because it works well under very harsh environments, and as the technology continues to evolve, it opens doors to even more possible uses," he says.

Dr. Zoghi says the industry is just beginning to scratch the surface of how RFID can be used. Future uses Dr. Zoghi envisions include preventing counterfeit or deterring lesser-quality products from entering the supply chain and tracing system parts that malfunction. For employees who work in potentially dangerous conditions, like an offshore rig, Dr. Zoghi said RFID tags on employees could help emergency teams reach them more quickly in the event of a disaster.

There are challenges ahead, too. One of the biggest is designing tags that withstand the harshest environments in the industry, such as on the ocean floor. But Dr. Zoghi is confident that the technology will continue to evolve to meet the challenges of a fast-paced industry. "Like the personal computer, RFID is part of the business technology revolution," he said. "You have to be a part of it."

Case Study: Before & After: Customers Turn to RFID for Maintenance Efficiency

To avoid running out of equipment parts, Ras Gas, a leading liquefied natural gas producer, chose an auto identification (auto ID) system, complete with RFID, barcode, voice and GPS technology, to manage its spare parts inventory. Before switching to this high-tech solution, when a hydraulic lubrication pump on a rig needed repair, it involved a time-intensive and costly process. For instance, Ras Gas maintenance staff once determined from an inventory list that one seal kit was left in stock to repair the pipe. But when staff went to retrieve the kit, they discovered it was missing. As a result, the kit had to be sourced offshore and sent to the rig, shutting down operations for several hours.

Since their deployment of an RFID-based solution by Shipcom Wireless and Motorola, their inventory is accurate and accessible in real-time, thereby ensuring that when a maintenance worker goes to pull the seal kit, it is there. Then, when the kit is taken, the back-end system automatically updates the inventory list and orders a replacement, so if the pump breaks down again, it can be repaired quickly, minimizing the rig's downtime.

Case Study provided by Shipcom Wireless, a leading provider of integrated supply chain execution software solutions focused on the RFID and enterprise mobility markets.

Joe White is Vice President of Business Development for Motorola's Enterprise Mobility Business's RFID Division. Motorolas Enterprise Mobility business provides a platform, portfolio and application partner network, enabling mobility across a wide variety of vertical industries -- inside and outside the four walls. See more on Motorola and RFID

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