With external forces pressuring revenues and costs, operating within a traditional and conventional mindset is no longer a viable recourse for upstream oil & gas companies. Standing still is not an option. Failing to embrace digital is costing the oil & gas industry as much as trillions of dollars in potential revenue.
We are standing at an inflection point in digital technology. Costs of sensors, data storage, and processing are falling. Algorithms are more sophisticated, and processing power is increasing rapidly. The future is driven by data and analytics due to a need to better understand products, customers, and the market.
When seen from the lens of innovation, digital and analytics go hand in hand. With annual data generation estimated to rise by 4,300% by 2020, the opportunities to make use of data differently are prevalent. Insights such as public sentiment analysis, weather data, government and market information are being combined with AI and cognitive technologies to better analyze and predict demand and introduce new efficiencies that were previously not possible.
Digitalization can revolutionize the entire oil & gas value chain, from exploration to production and onto customers. With an emphasis on data powered by analytics, digitalization can be leveraged for the full automation of production rigs, the consistent monitoring of the flow of crude and its composition, greater certainty in the discovery of new reserves, visual interaction with virtual representations of the field, and the continuous processing of data with automated decision-making capabilities. It can also minimize human involvement in high-risk activities across the field, integrate supplier and operator ecosystems to deliver more economical outcomes, and reprioritize activities by using intelligent systems that use real-time, dynamic analytics.
The structure of the industry is being challenged by internal and external forces, including: pressure on revenues from price volatility, an accelerated energy transition due to demand for lower carbon alternatives, and increased complexity in technology and global trade flows. In light of these structural changes, there is now a need for, among others, pervasive visibility and insights on cost and production, agile field development, and an integrated supplier and operator ecosystem to drive returns.
Some oil & gas companies have already jumped on the train of digital evolution as they have fundamentally re-imagined and changed how operations are conducted and managed across the entire value chain. Shell has employed analytics and AI to predict when maintenance is needed on equipment and to leverage real-time data to help geologists boost productivity and reduce drill wear-and-tear. Saudi Aramco has employed digital surface and subsurface technologies to optimize field development and operations and has also developed tools designed to help engineers better plan and manage fields and reservoirs.
Just as analysis of current market segments or operational processes can reveal opportunities to change the status quo, so too can innovative approaches to analytical solutions help to ensure all data sources and predictive indicators have been built into the model. But only focusing on digital technologies whilst ignoring components of an organization’s operating model, cannot lead to a quick adaptation of, and capitalization on, the gains of digitalization. Organizations need to define a strategy for digital transformation rather than placing emphasis on the implementation of tactical digital solutions for incremental gain. More importantly, with investment in the right mix of skillsets, upstream oil and gas companies can accelerate and sustain digital transformation in the long term.
With efficiency still the focus, oil & gas companies should be bold and strive to create a culture of experimentation where the model is driven by “fail fast and learn faster”. A digital strategy based on strong leadership, combined with skilled and capable resources, and an effective operating model, can then allow organizations to harness the full capabilities of digital and generate significant value for all stakeholders involved.
Bart Cornelissen, Energy, Resources & Industrials Leader, Deloitte Middle East