Simulation: A game-like approach to innovation

The low price of oil has caused hydrocarbon companies to look at innovative ways of reducing their costs. Simulation modeling has recently emerged as a way of minimizing operating overhead or removing unnecessary scope from capital projects.


Companies constantly face tough challenges that are solved by a combination of leadership, strategy, and innovation. The current low price of oil is reducing the industry's profits and increasing risk aversion for investors. This is an example of the type of adversity that requires an agile response. Apple Computer founder Steve Jobs used to say that innovation is what distinguishes between a leader and a follower. The market is avid to innovative approaches. However, not many companies dare to try new ways of doing things, which could be due the risk involved and the unknowns associated with new methods.

This screen shot displays Interactive graphical presentation of crude oil storage terminal model. Courtesy: Stream Systems

Risk is the paradox that drives and stalls society simultaneously. The search for a risk-free environment is the reason why we use standard methodologies. When one plays video games, the player is released from the natural boundaries that inhibit the real world. Through gaming, new methods of doing things can be uncovered, which in consequence, improves achievement. "Gamification" uses game thinking and game mechanics in a non-game context to engage users and solve complex problems. This analogy illustrates how much game thinking is necessary for companies to find winning strategies.

Oil and gas applications for simulation

Simulation technology in the oil and gas industry has been largely restricted to a few isolated areas, such as reservoir analysis or control instrumentation. A general lack of experience with simulations and some technical limitations have restricted the adoption of the technology in the oil and gas industry, though the technology is widely used in other industries, such as telecommunications, logistics, health care, and financial services.

Many aspects make simulations a fundamental tool to innovate and potentially uncover unused capacity or capability. Reasons to use simulation in oil and gas include: ยท

  • Users can experiment with different physical configurations or operating schedules before making changes in their facilities.
  • There is a possibility of creating and modifying individual and collective behaviors through the use of simple logic or business rules, such as blending, crude management, or batch sequencing.
  • Users can find practical ways of exploring existing assets, discovering unseen relationships, and improving opportunities.
  • There is a potential for interaction with users that increases the engagement at different levels (i.e., schedulers, managers, executives, etc.).
  • Communicating with other systems, such as reservoir simulators, instrument sensors, and control centers; and incorporating the information (past or real time) as input into the simulation.

Simulation is the science and art of replicating the essential elements of a problem or opportunity. It is not digital twinning, where one attempts to copy reality. Rather, is designed to mimic reality in a controlled environment.

This screen displays Crude oil storage tanks dynamic statistics. Courtesy: Stream Systems

After there is a reasonable representation of the actual facility, the simulator can play with any number of variable inputs or outputs in a risk-free virtual environment.

How games tie into simulation

Contrary to what the traditional paradigm says, games (and more specifically video games) are very popular activities for all ages and social positions. According to the Entertainment Software Association Foundation, 155 million Americans play video games, where some 74% are more than 18 years old. Additionally, 70% of senior executives play games during work hours according to Gamification Nation, a company that helps other integrate gamification into business. The popularity of games is explained by many factors, including social acceptance, the possibility to compete, and collaborative play. Another reason for its popularity is the ease of access. Currently, it is possible to play games on computers, tablets, and smartphones. It requires no preparation, and with some dedication level, it is possible to learn and master the game in a short time. There are games for all tastes: social games, action, strategy, and puzzles are just a few examples of the variety of subjects.

Gamifacation can be considered, in part, a philosophical approach to running models through simulations with many tweaked variables, until the best approach for solving a problem is found. In other words, the player wins the game. However, before playing the game, the company that wants to run the simulation must invest in research and spend great amounts of time and effort to gather and parse the data needed. This can be thought of as the player working to earn money to spend on playing the game. Once the game is started, it is easy to run the simulations, which can foster a free-thinking, intuitive approach to solving the problem.

Compared to other industries, the oil and gas industry is late to partake in the simulation "game". Telecommunications, logistics, healthcare and financial services have been using simulation as a fundamental tool to innovate and uncover unused capability for many years, incorporating some of these elements in basic business processes. For example, U.S. industrial manufacturer 3M uses simulation to support decisions in their supply chain management. The French aircraft company Airbus uses simulation to control the manufacturing process of airplanes. In addition, some hospitals have implemented simulation to train staff and allocate resources based on workflow and forecasted patient inflow.

Simulation is the future of innovation

A major advantage of using simulation games in a business context is that users become active decision makers in an artificial environment without limitations. This is not to say that modeling is not a serious business that requires great efforts to acquire and parse data needed to run the simulation. By removing the boundaries, the user is free to explore new possibilities and experiment with varied scenarios with no risk or fear of injury or loss.

Another benefit is the extreme flexibility provided by a virtual world. Dealing with complexity becomes easy when a systematic approach is applied to a problem using machine algorithms and high-speed processors.

Recent examples of applying simulations in crude-oil pipelines and terminals have resulted in capital savings of $85 million and additional revenues of $24 million per year. In this case, a large trans-national crude oil pipeline company was growing quickly and unable to resolve a chronic shortfall in its throughput and revenue performance. The traditional static analysis tools (spreadsheets and manual analysis) were used to understand the commodity flows and track the various physical and operating constraints at each terminal and across main pipelines. The analysts were not able to definitively identify the system bottlenecks because the conflicts moved around the network as the inputs and boundary conditions varied. In addition, the causative events leading to inventory build-up were not readily apparent and the interactions between the events in the terminals were not well understood. Clearly, a dynamic analysis was required to understand the cause-and-effect dynamic at play.

Other examples include assessing designs for new rail and marine loading facilities that realized more than $200 million in capital savings. In this case, a client went thought initial study and design with engineering company that estimated the total costs of the project around $500 million. The proposed project consisted of a low-speed rail circuit railway system, petroleum storage tanks and several miles of pipeline to be installed between the facility and the marine terminals at the port. This project was used to transfer petroleum to marine vessels. After performing an operations and infrastructure optimization study, through simulation, the client was able to cut around 40% of infrastructure costs by optimizing its business model, operations, risks aversion.

Typically, Game-simulation models are constructed in a way that can be modified as needed for additional projects or tuned for operating diagnostics. Because any number of variables can be added, the simulations can be extended to include maintenance and reliably, or any associated business functions, such as risk management.

- Alvaro Gill is a project manager and senior developer at Stream Systems. He has more than 10 years of experience in modeling, simulation and optimization in industries such as pharmaceutical, manufacturing, logistics, healthcare, finances and more recently oil and gas. He holds a Bachelor's degree in Industrial Engineering as well as Master's degrees in Industrial Engineering and Economics. He's been involved with Stream Systems since the beginning of 2015.

PAUL , GA, United States, 12/03/15 12:27 PM:

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