Satellites Aid the Chase for Better Information on Oil Supplies – Kayrros

May 4, 2020

Satellites Aid the Chase for Better Information on Oil Supplies

Resource: New York Times

By Stanley Reed

PARIS — In a wing of a massive former bank building here in the French capital, dozens of youthful women and men gather around computer screens. This collection of around 100 mathematicians, software engineers and petroleum analysts are bent on shaking up the opaque world of information on the world energy markets.

On a recent day, one group was sifting satellite images for clues to oil output in Venezuela — once a major oil producer but now in decline. Another cluster was checking the levels of crude in a tank farm in China.

The company, named Kayrros after the Greek deity of opportunity, is headed by Antoine Rostand, a petroleum engineer turned entrepreneur, and several other partners. Mr. Rostand said that when he ran the business consulting unit of the oil field services company Schlumberger — for about a decade ending in 2016 — he became frustrated at the quality of statistics on matters like oil production and consumption.

“I was amazed by the fact that the data that everyone was using to make decisions were incomplete facts and most of the time incorrect,” Mr. Rostand said in an interview. “The largest industry in the world was making trillions of decisions — investments and trading and whatever — based on completely incorrect data.”

Mr. Rostand was referring to a longstanding oil industry complaint about the quality and timeliness of industry statistics.

“The state of oil industry data is abysmal, given both antiquated collection methods and the political nature of some numbers,” said Michael Lynch, president of Strategic Energy and Economic Research, a consulting firm.

Mr. Lynch said that at any given time there was likely to be some uncertainty about the exact number of barrels of oil being produced on any given day. That uncertainty — typically ranging from 500,000 to 1.5 million barrels a day — can affect the oil market, leading either to oil gluts or the draining of tank farms. Either can have a major impact on prices.

That may not seem like a lot given that the world produces and consumes close to 100 million barrels a day, but it is a big number considering that over time, differences in supply and demand of that order can lead to either a rise or fall in inventories and impact prices.

Oil industry statistics are largely furnished by government agencies. The numbers supplied by these departments are considered mostly reliable in the major industrialized countries, which make up about 50 percent of oil consumption. But much of the data is annoyingly slow to arrive.

It “hasn’t become much more timely in 30 years,” said Neil Atkinson, head of the oil industry and markets division at the International Energy Agency, the Paris-based multilateral group whose monthly oil market reports are a kind of industry benchmark.

The rest of the world is “a very, very patchy picture indeed,” Mr. Atkinson said. For instance, the Paris organization and other analysts only manage to put together estimates of how much oil China, a major consumer, is using with “detective work,” through extrapolating from trade and refinery figures and other clues, Mr. Atkinson said.

As for the supply side, OPEC, the Organization of the Petroleum Exporting Countries, which accounts for about one-third of global oil output, is a “big black hole,” Mr. Atkinson said. Wary of disclosure that could lead to embarrassments like owning up to cheating on agreed production ceilings, the OPEC member states have not “produced or published reliably transparent data for many, many years,” Mr. Atkinson said.

Kayrros is one of several firms trying to make money by using emerging technology to fill in pieces of the data jigsaw. Often these activities focus on giving traders an edge by providing advance forecasts of government data releases on matters like how much oil is in storage. Kayrros mostly focuses on satellite images, which are becoming more readily available at lower cost as satellite companies scan the planet with instruments that are smaller and less expensive through smartphone technology and other breakthroughs.

Rather than pore over individual pictures, the company’s computer scientists and analysts have developed programs that sift through an average of 10,000 images a day of tank farms, oil fields and other facilities and then flag developments that might give clients an edge.

In OPEC countries, for instance, the analysts monitor the light and heat from “flaring” — the controlled burning of natural gas produced along with oil — for clues to activity. These flames can be easily seen from space. In July, for instance, Kayrros analysts noticed that the flares at a Libyan field called Wahah had gone out. Their conclusion: the facility had been shut down because of fighting at coastal ports.

When it comes to divining how much oil countries like China have on hand, Kayrros turns to satellites that bounce radar probes off the tanks. Many storage tanks have floating roofs that rise and fall depending on the volume of oil they hold. The company’s algorithms analyze the signals coming off the tanks to produce an estimate of the volumes they contain. Aggregating these numbers sheds light on how much oil China has on hand and may be consuming — increasingly important pieces of information for the markets.

Mr. Rostand’s troops also use programs to sift through social media posts and other chatter for energy news that could move markets. For instance, he says that through such tactics his analysts were able to detect a recent refinery explosion in Germany ahead of news outlets.

Mr. Rostand said Kayrros, which raised $24 million from venture capitalists recently, is a start-up that is burning cash, but clients seem to like the combination of satellite surveillance and oil industry savvy.

Kayrros’ has been “smart enough” to hire “not only people who would be able to capture and read satellite pictures, but also people who have some expertise on what analysts are looking for,” said Frederic Lasserre, director of analysis for trading and shipping at Total, the French oil company, an early client.

There are several entrants in the game of using technology to provide oil traders an edge. Genscape, for instance, a more established company based in the United States, sends helicopters to photograph key facilities like the storage tank farms in Cushing, Okla., which are a bellwether of the United States oil markets. The goal is to estimate how much oil is in the tank and tip clients in advance of the weekly data released on Wednesdays by the United States government.

The company also maintains large numbers of sensors to check on flows through facilities like pipelines. It even mounted cameras near the California manufacturing plant of the electric car company Tesla to try to determine how many vehicles were coming off the line. “We create our own intelligence,” said Clay Seigle, managing director for oil at the company.

Both Kayrros and Genscape have substantial staffs and presumably charge accordingly for their products, though they declined to disclose their fees.

For more detailed of this article, please consult this link: