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Baker Hughes Adds an AI Option

Shell's Olympus tension-leg platform in the US Gulf of Mexico. The operator is a prominent client of C3.ai. Source: Shell

Baker Hughes has doubled down on artificial intelligence (AI), forming a partnership to market the software and services of a prominent Silicon Valley company, C3.ai.

The large oilfield service company, whose majority shareholder is GE, will be marketing C3 as well as GE’s Predix software. The platforms are competing for oil industry customers wanting to add analytics capabilities to equipment and systems.

Baker Hughes’ investment in C3 is an indication of high value placed on being an effective competitor in what is a buzzy but young part of the oil business.

“The value proposition for technologies like artificial intelligence, machine learning, IoT, really haven't come through yet,” said Dan Brennan, vice president for strategy and marketing, digital, at Baker Hughes. “We think the partnership agreement that we announced yesterday, is really the start of that.”

The partners bring complementary skills: He described it as “an established equipment and services company like Baker Hughes that brings tremendous depth of expertise around the oil and gas industry, with a well-established technology company out of Silicon Valley, specifically focused on AI-based applications.”

C3, whose energy customer list is in the electric generating sector with one notable exception, Shell, will utilize Bakers Hughes’ industry contacts and its ability to integrate AI into its product lines. Through this integration, customers gain the benefits of AI without having to deal with it directly or separately.

As for how it will be used, Brennan said they are reaching out to customers, and plan a road show soon to meet them in person to identify problems requiring solutions. Baker Hughes has some successful pilot projects in progress, which can be scaled up using C3’s platform.

“A year from now I expect to have a couple of customers standing shoulder to shoulder with us talking about the value that this is driving within their organizations,” Brennan said.

Changing Roles

Digital technology’s promise comes with a threat to the established order in oilfield services. Outsiders like Amazon and Microsoft selling cloud-based services and analytics are pushing into a business hiring more data scientists. Service companies are responding, looking for digital ways to squeeze more value out of oilfield hardware.

This holds down costs for operators and provides a new source of revenue for service companies. For those who own the equipment, it can mean lower rates.

“In the deepwater drilling sector alone, a 30% efficiency improvement through automation and digital transformation would reduce rig demand by more than 20 rigs,” according to a report on the impact of digitization in the services sector by Malcolm Forbes-Cable, vice president of consulting at Wood Mackenzie.

Companies selling equipment will also feel the change. AI control systems promise to extend the life of equipment and reduce unplanned maintenance, two positives that are negatives for those whose business is making and repairing the hardware on production platforms. But it is a plus for those generating data from inspections for sensors that monitor equipment health.

“Equipment and systems that can facilitate increased automation will naturally be winners. A note of caution: automation is a focus of new entrants, so while the incumbents are well positioned, they will also meet increased competition,” noted the Wood Mackenzie report.

Outside Forces

Baker Hughes’ AI capabilities were born outside of the oil business. Predix was developed by GE to add advanced analytics to a large array of industrial control systems.

C3.ai is a Silicon Valley startup led by Tom Siebel, a billionaire known for founding Siebel Systems, a business applications company sold to Oracle. Baker Hughes’ equity investment in C3 allows it to name a director to the private company’s board and makes it an exclusive partner in selling C3 software and services.

Last fall BP announced a deal with Baker Hughes to expand the use of a Predix predictive maintenance system which had been successfully used on four platforms in the Gulf of Mexico. Using Predix, BP created digital twins to analyze equipment performance and reduce maintenance costs.

Not long after that, Shell reached a 3-year deal to use C3 platform throughout its operations, giving C3 a strong presence in the oil business where it had had only one small customer.

BP and Shell will help demonstrate the potential for AI, but Baker Hughes will need to find applications for the vast majority of oil companies who do not operate at that scale.

It is building AI into current product lines. For example, Baker Hughes and Shell developed a subsurface modeling program called JewelSuite. Adding AI from C3 could expand its capabilities, Brennan said.

The partners also hope to facilitate the transition to AI applications by creating teams with oilfield and analytics expertise to deliver AI to meet specific needs within clients companies. The model comes from C3.ai, which embeds groups of experts into a client company for a year or more to develop and deploy new applications, he said.

C3 and Predix

Baker Hughes’s investment in C3, which includes a seat on its board, exhibits a degree of independence from GE. But Predix remains in its product line. “We continue to be, partners with GE Digital and Predix. We think that this technology [C3] is additive and complementary to it as well,” Brennan said.

They chose C3 because customers appreciate its ability to integrate with other software systems, enabling them to scale up ideas that worked on a small scale, faster and at a lower cost.

Barriers remain to realizing this digital change. The proprietary equipment from different manufacturers used in oilfield operations can lead to incompatibility in the type of data generated. The first step in digital analysis is sorting through thousands of data types to ensure they are properly labeled and in a usable format.

“There remains a fairly big data challenge, and it's something that we run into, frankly, in every effort that we've been engaged in with customers today,” Brennan said. On the plus side, AI offers “a set of tools that will help you get through some of that challenge” much faster.

Baker Hughes Adds an AI Option

Stephen Rassenfoss, JPT Emerging Technology Senior Editor

28 June 2019

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