Helping Cenovus-Husky to Address Alberta’s Orphan Well Crisis with a “Future Proof” Inventory Management System
A simple but effective solution for a complicated problem.
By Annie Zhan, RJ Taylor, Sophie Baxter, and Talha Hassan
Recent events have pushed our directors at Cenovus-Husky to ask, how should we, as leaders in the oil and gas industry, manage our inventory in a way that fosters accountability? Research into the causes and consequences of Alberta’s current orphan well crisis has pushed us to develop a solution: Asset Management, powered by Cenovus-Husky.
This groundbreaking platform will allow for real-time, continuous monitoring of our well-site equipment. A central location for all of our inventory data will allow our operations and procurement specialists to evaluate the assets we have on hand on a continuous basis. Our goal is to improve the traceability, reliability, and reusability of our Cenovus-Husky-owned assets in order to reduce our environmental impact. Join us on this journey.
What is the Issue?
The Orphan Wells of Alberta continues to pose a problem for many oil and gas companies. Without any party assuming legal responsibility, these wells, pipelines, and facilities cannot be officially abandoned or reclaimed (Jaremko, 2020). As of April 2021, there are still over 2000 orphan wells up for abandonment, and almost 5000 for reclamation (Alberta, 2021). This has become a costly issue, with the Alberta Liabilities Disclosure Project estimating a clean-up fee of $11.9 billion in 2019 (The Canadian Press, 2019). In particular, Husky Energy’s wells were estimated to cost $2.17 billion to clean up. Close behind was Cenovus Energy Ltd., at $1.4 billion. Now that Cenovus has acquired Husky, Cenovus Energy Inc. may be facing a cost of up to $3.57 billion.
Luckily, the Procurement and Transformation team at Husky Energy has recognized an opportunity. Much of the equipment located at these sites have value and can be repurposed, or sold; however, Husky Energy unfortunately has been lacking with their inventory management practices for these well sites. Currently, they are reliant on a set of Excel spreadsheets, which do not accurately catalogue their equipment or motivate any further action. The Alberta Energy Regulator (AER) has also already fined Husky once for their failure to accurately report their equipment, and another round of fines will be coming their way at the end of 2022 if they are unable to resolve this issue. Additionally, some of the equipment has been stolen or gone missing, which further contributes to the overall disorganization and mismanagement of their oilfield equipment.
As such, it is clear that Husky could benefit from the implementation of an effective inventory management system to help them gain control of their oilfield equipment. As consultants brought in by Husky’s Transformation and Procurement team, we were able to develop a solution that is not only cost-effective and easily accessible, working off of tools that Husky already utilizes, but is also feasible and addresses key issues. Additionally, we have also considered the ease of integration, as well as user experience, hoping to make this solution as user-friendly as possible.
What Alternatives did we Consider?
To address Cenovus-Husky’s key issues, there were a few alternatives we deliberated. First, Husky could consider implementing a new ERP system to improve their inventory management and bring some consistency to their practices between orphan well sites. While this would resolve the problem, considering the fact that Cenovus already uses the SAP S/4HANA ERP system, and that acquired companies tend to adopt the systems and practices of their acquirers about 40% of the time, this does not seem like a long term, efficient, or cost-effective solution (Hough et al., 2007; Conway & Baldwin, 2019).
Another alternative that Husky could have considered was implementing an IP&O platform, such as the one that Smart Software offers (Smart Software, n.d.). Doing so may also allow Husky to gain control over their oilfield equipment; however, this service offers functions that Husky may not be able to take advantage of. For example, Husky does not require demand forecasting, or inventory level optimization, as they are still in the stages of creating a unified database of all of their equipment. Additionally, this solution is not very cost-effective. For a business as large as Cenovus-Husky, using a service like Smart Software would cost a minimum of $10,000 monthly (Smart Software, n.d.).
As such, we believe that using a Sharepoint Intranet platform is the most suitable solution for Cenovus-Husky. This is the most cost-effective solution, and also works off of tools that Husky already uses. In addition, SharePoint can be integrated with Cenovus’ current SAP system (Microsoft, n.d.).
Our Solution
Realizing that this problem required an effective and compact solution, our consulting group came up with the Asset Management System, powered by Cenovus-Husky, a system that will allow employees to retrieve inventory information with ease. Acting as a central hub, the intranet platform will provide an essential linkage between remote Husky well site locations and operation centers. The integrational capabilities of Asset Management will allow for real-time updates regarding well equipment location, condition and other vital characteristics. By addressing the key issues detailed above, the Asset Management System will bring immense value to Cenovus-Husky on an organizational level. This innovative operational system will allow employees to immediately address pending financial penalties imposed by the AER and also allow the organization to conduct daily operations more efficiently and responsibly.
Via the internal home page, employees have access to a number of resources that are integral to assisting the procurement and operations teams in their decision-making processes. An interactive map with real-time data of our current well site operations and equipment locations is easily accessible. The Asset Management System allows users to view consolidated inventory data, which can be filtered by location and equipment type and status, allowing for increased awareness regarding current assets which will allow the procurement specialists to make informed decisions. Users have the ability to input and edit data, which will be verified by system maintenance experts prior to being published to ensure data integrity. The implementation of Cenovus-Husky’s Asset Management System will address the organization’s current gaps in inventory management. Increasing the organization, traceability and accessibility of Cenovus-Husky’s current well-site equipment and machinery will allow for streamlined operations and increased accountability.
Tools we Used
Tool #1: SharePoint
You might think SharePoint is not the most advanced solution, however, based on our analysis and problem identification, we believe SharePoint is the most ideal solution. Using SharePoint, we were able to create a webpage and a live-tracking inventory management system that can be accessed by all Cenovus-Husky employees. It’s cost-effective and has all the functionalities we require in a system. We were also made aware that SharePoint is a commonly used system within Husky so it would have a high adoption rate and ease of transition for the procurement & transformation team. It also has the ability to be integrated within other systems due to its high usability.
Tool #2: PowerApps
Although using SharePoint really helped increase the usability of our solution, we knew we could go even further in terms of creating a better user experience. This is where PowerApps would come in. By using PowerApps, we were able to transfer all the features we had in our SharePoint form into a mobile application. This mobile application could be used by all of the Cenovus-Husky employees anywhere in the world as long as they have a company-approved cell phone handy.
Now, let’s take a walk through how our intranet webpage and Asset Management System works!
Intranet Webpage User Guide
All Cenovus-Husky employees will have access to the internal websites made through SharePoint. To begin, enter wellsiteassettracker.sharepoint.com on any company computer. Once you enter you will see the following homepage:
Here you will have access to all the main features of the Intranet Webpage. If you click on the left side, you can access the GIS Interactive map that will give you the scope of all the well site locations. It should look similar to the following:
The bottom right of the homepage will give you access to all of the user guides (including this one) of the different functionalities on the page, analytics requiring the equipment, and other resources that will help navigate the page.
Asset Management System
Now, introducing the most important functionality of the site, the Asset Management System. If you click on the top right link of the homepage you will be directed to the Asset Manager.
This page will contain all of the information you will require pertaining to the equipment such as site location, condition, status and other things. It will act as the new inventory management component that will replace the previous system. The advantage to having this new system is that all of the entries and information will be updated live, something that was not possible with the excel drives.
Once you believe you need to make a new entry, you can click on the top left button that says “+ New”. It should open up a form on the right that looks like the screen below.
This form will allow you to input all the information you have regarding new equipment and populate the Asset Manager automatically.
Another aspect of this new inventory system is that it is directly linked to a mobile app that will allow all the same functionalities of this current system. This app can be accessed through the power apps application in the Appstore. It’s designed to be much more compact and will give you the ability to access the Asset Manager regardless of whether you are on-site or have access to a web browser or not.
Our Mobile Application
The mobile application further increases the utility of the Asset Manager and can help the procurement & transformation team change the way they manage their inventory. When you open the app, you should see a screen similar to the one above. Looking at the top right, you have the ability to (in order from left to right) refresh the list, rearrange it, or add any new equipment. By clicking on any of the equipment, you should see the following screen pop-up. This screen will also pop up with empty entry spaces if you choose to add a new item.
This page will allow you to access all the previous specifications regarding the equipment as well as enter your new ones. All of which will be directly linked to the SharePoint page live and updated accordingly.
Hopefully, this new infrastructure design and system can aid and streamline a lot of the work being done by the procurement & transformation team.
A few key things that you should take note of before you start using the webpage and applications:
- SharePoint and PowerApps is an internal hub and may only be accessible by Husky employees. If external personnel requires use, they must go through a security check before access is granted.
- The interactive web map page is still under development by the GIS Team and still has many of its functionality not in use at the moment. This project will be completed fairly soon and we hope to offer it to help our operations as soon as possible.
- Some of the functionalities include: the ability to click on each well location and see all specifications regarding what equipment is on-site, how much quantity is there, and the status
- Other functionalities being proposed are: the ability to see optimal transportation routes to reduce costs between sites and vendors
How to Get Started
Now that you have all the information you need, it’s finally time to get access and begin your journey in the world of inventory management. To begin, all you need is your employee credentials and have access to a company browser or phone. If you are accessing through the web browser please enter the following URL: wellsiteassettracker.sharepoint.com. If you are entering through the mobile app, please use the company’s PowerApps integration and access the “Asset Management System” app through there. Once you have these tools at your disposal, you can begin making the vital decisions you need to for your team!
References
Alberta. (2021). Geo Discover Alberta. Alberta. Retrieved from: https://geodiscover.alberta.ca/GDAHTML/Viewer/?viewer=GDAHTML.GDAHTML&layerTheme=&scale=144447.638572&layers=2XXxVP2h8B/y¢er=-12655332.453140557%2c7046774.507596623
Alberta. (2021). Oil and gas liabilities management. Alberta. Retrieved from: https://www.alberta.ca/oil-and-gas-liabilities-management.aspx
CBC Radio. (2020, March 6). ‘If the polluter doesn’t pay to clean it up, taxpayers will have to’: Alberta’s growing oil well problem. CBC. Retrieved from: https://www.cbc.ca/radio/sunday/the-sunday-edition-for-march-8-2020-1.5482636/if-the-polluter-doesn-t-pay-to-clean-it-up-taxpayers-will-have-to-alberta-s-growing-oil-well-problem-1.5486689
Conway, M., & Baldwin, L. (2019, November 25). Cenovus Energy Selects IBM to Boost Digital Transformation with SAP®. IBM. Retrieved from: https://newsroom.ibm.com/2019-11-25-Cenovus-Energy-Selects-IBM-to-Boost-Digital-Transformation-with-SAP-R
Hough, J.R., Haines, R., & Giacomo, S. (2007). Contextual factors affecting the integration of enterprise systems in post-merger oil and gas companies. Enterprise Information Systems, 1(4), 421–441.
Jaremko, D. (2020, April 21). Understanding inactive and orphan wells in Alberta Efforts to address orphan and inactive wells accelerating before Ottawa’s funding pledge. Canadian Energy Centre. Retrieved from: https://www.canadianenergycentre.ca/understanding-inactive-and-orphan-wells-in-alberta/
Smart Software. (n.d.). Improve Forecast Accuracy, Eliminate Excess Inventory, & Maximize Service Levels. Smart Software. Retrieved from: https://smartcorp.com/
The Canadian Press. (2019, July 18). Critics and industry clash over accuracy of Alberta well cleanup cost estimates. CBC. Retrieved from: https://www.cbc.ca/news/canada/calgary/alberta-oil-gas-well-cleanup-alberta-liabilities-disclosure-project-1.5216707
Well Site Asset Tracker. (2021). PowerApps. Retrieved from: wellsiteassettracker.sharepoint.com
Well Site Asset Tracker. (2021). SharePoint. Retrieved from: wellsiteassettracker.sharepoint.com
