Rise of the Machines: Fracking Execs Plan Profits by Using Automation to Shrink Workforce

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At a recent industry conference, Terry Spencer, headย ofย natural gas infrastructure company ONEOK, made clear the direction the fracking industry was headed:ย โ€œOne of these days one of these big olโ€™ fracs will be operated with nobodyย there.โ€

Translation: Computers and robots are going to replace all human jobs at the oil and gas fracking sites of theย future.

The fracking industry certainly has increased economic activity in America and created jobs within the industry. Less discussed, however, is the fact that the industryย has consistently lost moneyย on the wells it’s drilling and is heavily in debt. One way to address this structural problem in the industry’s finances is to eliminateย high labor costs by replacing people with computers andย robots.

Will fracking one day become profitable when companiesย shrinkย theย human element from the labor equation? Itย seems much more likely. And the industry appears more than willing to findย out.

Oil and Gas Production Is Up Butย Jobs Areย Down

While the first big secret of the fracking industry is that it has lost huge sums of money throughout its much-toutedย โ€œrevolution,โ€ the second big secret is that the record levels ofย oil and gas productionย in America haveย not translated to record levels ofย jobs.

The oil and gas are booming but the jobs arenโ€™t.ย Why? Automation.

โ€œWe are as an industry working towards where we can operate 24/7 unattended,โ€ Spencer went on to explain, according to materials from theย GPAย Midstream 2018ย Convention provided toย DeSmog.

And while the firms involved in shale oil and gasย are โ€” by their own admission โ€” in the early stages of using automation to replace human labor, the potential impacts are likely to beย significant.

In late 2016 the Houston Chronicle was already documenting signs ofย automation’s impendingย effect.

โ€œThese new rigs, using sophisticated software and robotics, could reduce the number of people working in the oil patch by up to 40 percent over the next fewย years.โ€

Scott Santens, writing in the online publication Medium, spells out these trends in a 2017 article titled,ย โ€œThe Real Story of Automation Beginning with One Simple Chart.โ€

The one simple chart, which can be seen here, shows that while the oil industry has experienced a recent boom in theย number of drilling rigs, the number of employees has remained flat. Santens goes on to predictย that โ€œof the 440,000 jobs lost in the global downturn, as many as 220,000 of those jobs may never come back.โ€ The industry is getting closer to 24/7 unmanned everyย day.

However, while good for profits, this is bad for workers and thusย is a problem for the industryโ€™s public relations efforts. The oil and gas industry historically hasย pushed new fossil fuelย developments as a source of high-paying, blue collarย jobs.

Now, many of those jobs are disappearing,ย and in an era when President Trump’s energy plan is proclaiming how many jobs the shale industry will bring,ย declining workforce numbers are not a pointย the industry is seeking toย publicize.

James West, an energy analyst for investment bank Evercore ISI, explained to Bloomberg how the industry was likely to spin the impending reductions in the oil and gas industryย workforce.

โ€œTheyโ€™ll more likely brag about the automation rather than these head counts,โ€ saidย West.

Eliminating Workers’ Jobs or ‘Time andย Costs’?

When people in the fracking industry discussย technological innovation and automation, they are essentially talking about shrinking the workforce, but as West noted, few people want to put it inย thoseย terms.

This June, the U.S. Energy Information Administration (EIA) annual conference featured a panel with the title โ€œTechnological progress in U.S. tight oil production.โ€ (โ€œTight oilโ€ refers toย oil from shale formations that require horizontal drilling andย fracking.)

Much of the technological discussion at that panel centeredย on replacing humans with automation. If you were expecting an in-depth discussion on improved drilling and fracking techniques, you were in the wrong place. The technologies of interest at the moment are automation and artificial intelligence, which will inevitably shrinkย the human labor force needed at drilling and frackingย sites.

This is a futureย eagerly anticipated by some of the panelists, including Stephen Ingram, Vice President ofย Technology Solutions and Innovation,ย for oil field services companyย Halliburton.

Ingram summed up the industry approach best when he described how oil field workers physically assemble drillingย rigs.

โ€œThis represents time and costs. How can this be eliminated?โ€ย heย said.


2018 EIA conference panel on โ€œTechnological progress in U.S. tight oil production.โ€ Credit: Justinย Mikulka

Note the framing here: Ingram and others in the industry don’t refer to eliminatingย people’s jobs but instead frame the issue as reducing โ€œtime and costsโ€ orย โ€œinefficiencies.โ€ย 

The answer to Ingram’s question isย easy andย already in the works. Iron Roughnecksย are machines, controlled remotely, that string together and pull apart drill pipes on rigs, replacing the โ€œroughneckโ€ rig workers who previously did thatย job.ย 

Automation: ‘The Sky Is Almost theย Limit’

But assembling pipes is just the beginning of what can be automated in the shale drilling and fracking process. A question during the Q&A session at the EIA conference revealed how far the industry is envisioning the future ofย automation.

The moderator asked the panel,ย โ€œWith labor being such a high cost, what is the outlook for automating much more of the shale oil fracturingย process?โ€

Halliburtonโ€™s Ingram responded with enthusiasm: โ€œThe sky is almost the limit. Itโ€™s limited by yourย imagination.โ€

Another panelist, Robert Clarke, research director for energy analysts Wood Mackenzie, recounted conversations he had with industry executives about future production and theย workforce:

โ€œI sit with a lot of executive teams and I simply ask them, ‘Youโ€™re talking about doubling production, does that mean doubling headcount?’ They politely respond, ‘No, that means halvingย headcount.’โ€

The fracking industry, despite its growth and promise, has not reached profitabilityย and to do so these companiesย are going to have to start removing what Ingram described, in response to a questionย about automation replacing labor, as โ€œstructuralย inefficiencies.โ€

โ€œThere are large structural inefficiencies to be extracted from this industry that will drive a nice cost advantage situation โ€ฆ โ€ Ingram said.ย โ€œLooking forward toย it.โ€

High-paid industry executives and Wall Street analysts are โ€œlooking forwardย toโ€ improving the economics of fracking, but in a move that will cost many blue collar workers theirย jobs.

The oil and gas industry appears primed to followย in the footsteps of the coal industry, where automation has been eating away jobs for decades. While the executives at the top of these firms will continue to prosper, many of the workers โ€” or โ€œstructural inefficienciesโ€ โ€” are quickly becoming the latest casualties to advancingย technology.

Follow the DeSmog investigative series:ย Finances of Fracking: Shale Industry Drills More Debtย Thanย Profit

Main Image:ย Middle of the fracking process while fracking the Bakken in North Dakota.ย Credit:ย Joshua Doubek,ย CC BYSAย 3.0

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Justin Mikulka is a research fellow at New Consensus. Prior to joining New Consensus in October 2021, Justin reported for DeSmog, where he began in 2014. Justin has a degree in Civil and Environmental Engineering from Cornell University.

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