CIPS Australasia SM award winner used an innovative sourcing process reduced emissions and costs while increasing reliability for the oil producer
The remote Cooper and Eromanga Basins, on the borders of Queensland and South Australia, are home to the country’s largest onshore oil and gas field development, from which Santos produces sales gas, ethane, crude oil and gas liquids. Given the distances to cover, the production, maintenance and delivery of fuel in Australia is logistically complex and costly.
The 208 oil beam pumps at the Cooper Basin site had been powered by local diesel generators, but these pumps consumed some 8.1 million litres of diesel that could be otherwise sold to customers, and added significantly to production emissions.
That changed when the newly-created Santos Energy Solutions team, along with the Santos Procurement team and Operations, began working with suppliers to develop an ‘Australian-first’ solution, which involved installing solar cells and batteries to power the beam pumps. The aim was to reduce emissions, fuel consumption and operating expenses while increasing the reliability of the pumps.
The Santos team knew an innovative approach was required to ensure the correct supplier was chosen, especially considering the company had no prior history of working with vendors in the solar energy market. After producing an initial strategy paper signed off by senior management, a design competition was conducted to enable suppliers to create solutions. This rephrased the standard expression of interest approach in order to stress that Santos was specifically looking for innovation.
Five suppliers were shortlisted to tender for a ‘proof of concept’ oil well. After the well had been running flawlessly for four months, four suppliers provided a submission for a further trial to minimise Santos’ risk exposure, learn from the proof-of-concept well and increase competition for a lower price. All responded with improved designs and an average 5% lower price.
Collaborate towards goals
After just five months, three suppliers; AGL Energy, Kaefer Integrated Services and CD Power, were awarded two trial wells. Eight months later, one well has reduced diesel fuel consumption to zero, increased oil well availability and saved $32,900, proving that solar PV and batteries can maintain reliability and availability in the harsh environment of the Cooper Basin. Travel diesel delivery has gone from 26,000 litres for eight months to zero and that diesel can now be sold to customers. Predicted savings are $10m when all wells are operational and Santos has announced a 56-well roll-out.
This positive initiative has created a strong internal collaboration between Santos Procurement and the Energy Solutions team. According to the company, it has “set a new standard on how collaboration can achieve an Australian-first outcome”.
Favourable media coverage has enhanced the Santos brand, while the teams gained recognition as winners of the Collaborative Teamwork award and overall winner at the CIPS Australasia SM Awards 2019.
Active in the energy business since 1954, Santos got its name from the acronym for South Australia Northern Territory Oil Search. It made its first significant discovery of natural gas in the Cooper Basin in 1963. Having discovered oil in the 1970s and developed a major liquids business in the 1980s, by the 1990s Santos had become a leading Australian enterprise with global interests.
In 2011 the Santos Gladstone Liquid Natural Gas (LNG) project was agreed, with the company’s first production of LNG being shipped to South Korea in 2015. Today, Santos operates five core long-life natural gas and LNG sites and aims to be a leading Australian domestic gas supplier and a major LNG exporter, supplying clean energy to Asia.