Digitization fuels growth in the oil and gas business

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The oil and gas industry, which has sat on a market rollercoaster ride in recent years, is now looking to digital technologies and agile methodologies to improve operational efficiencies to underscore its future.

Oil and gas companies have met the challenges of lower prices, the need to reduce operating costs and environmental issues head on. To ensure their sustainability, they must now maximize alternative resources, while enhancing efficiencies and improving product flow through up-, mid- and downstream markets.

“Oil and gas companies have been under huge pressure in the last few years, squeezing costs as far as possible to maintain good margins. Now is the time to invest in digitization for growth,” explains Olivier Vicaire, Senior Business Consultant, Orange Business Services. “At the same time, they need to be smarter in analyzing new sources as well as producing oil and gas in a more streamlined way.”

Preparing for change

The foundation of this digitization lies in realigning core business processes. A lack of visibility and continuity between different parts of the industry have siloed operations when what is needed is a more efficient and effective flow throughout. This means introducing real-time transactions and analytics for greater insight and accurate decision making, for example. A connected approach will improve the productivity of new and existing wells, increase safety, advance logistics and help mitigate environmental risks.

“Digital transformation is shaping the future of the oil and gas industry. Digital technologies are helping companies become agile, flexible, faster and better equipped to adapt to volatile market conditions, optimize production and minimize costs,” explains Vicaire.

Developments in technologies such as cloud, the Internet of Things (IoT), mobility, artificial intelligence (AI), virtual reality (VR), big data and analytics are driving trends that will have enormous potential in the industry. McKinsey estimates that effective use of digital technologies in the oil and gas industry could cut capital expenditure by up to 20 percent. At the same time, it forecasts that total cash flows will improve by $11 per barrel across the offshore oil and gas value chain, adding $300 billion a year by 2025.

Big data harvested via sensors during drilling, for example, provides the opportunity to predict any anomalies in real time that may affect the success of a project, such as geological variables. Sensors on drill heads can monitor equipment and predict when maintenance is required or is about to fail. This allows operators to schedule maintenance planning in advance to reduce downtime.

According to Gartner’s 2019 CIO Survey, the capacity for digital innovation to enable business outcomes is now widely recognized in the oil and gas industry, elevating it to a position of strategic priority. To take this forward, Gartner recommends that CIOs must “encompass leadership of innovation and change.”

Defining the digital oilfield

Automation is key to the digital oilfield, driving productivity and innovation both onshore and offshore. Early adopters of digital oilfield technologies are already reaping rewards, according to a recent report by June Warren-Nickle’s Energy Group, including improved efficiencies, cost savings and advanced health and safety and environmental compliance.

“With increasingly challenging extractions and growing energy consumption, the industry is under pressure to deliver. Through the digital oilfield, companies will not only be able to monitor operations, but also take informed and decisive action where needed to optimize operations,” explains Vicaire.

IoT devices and sensors can provide real-time data on machinery, pipes, storage, transportation and employee safety, for example. With a total impact of $930 billion estimated from oil and gas within the next decade, it’s little surprise that the industry is showing huge interest in leveraging IoT.

Digital technologies

IoT will enable companies to digitize, optimize and automate processes in mid-, up- and down-stream that were previously unconnected. This will help to cut costs, save time, improve safety and reduce environmental impact.

The upstream oil and gas industry, for example, hemorrhages billions of dollars every year due to non-productive time (NPT), with tool failure being the main concern for this downtime. IoT can reduce NPT using predictive analytics to predict lifespans of machinery, among other benefits.

Big data and AI

The gargantuan amounts of data constantly generated by oil and gas companies are invaluable when it comes to business insight and staying abreast of operational complexities. The deeper you can dive into the data, the better the outcomes.

With high-quality data, far more granular analysis can be carried out using AI to obtain more meaningful responses. Data models and predictive algorithms, for example, can better manage end-to-end water consumption for oil and gas companies. AI can help in the planning and execution stages of drilling to improve well planning and real-time drilling capabilities.

AI is already paving the way for autonomous robots with robotic heads deployed in the North Sea to replace humans in dangerous offshore operations.

In addition, AI is proving important in addressing health and safety issues for personnel on production sites. AI can help operators to control critical tasks in risky locations through automated systems without the need for human presence, for example. AI can also be used to reduce the impact on the environment by using smart sensors to monitor environmental compliance.

“In an industry that operates across a high-risk environment, fast and informed decision making is critical. AI is showing enormous potential in streamlining production processes and allowing for more intelligent, automatic business decision making such as predictive analytics,” says Vicaire.

Emerging technologies

Investment in digital technologies is helping oil and gas companies to cut costs, make faster decisions and improve performance and worker safety. As we see a bigger shift towards digital oilfields, new technologies will come into play that will support collaboration, virtualization, visualization, biometrics and accelerated insight.

Gartner predicts that by 2021, 50 percent of large industrial companies will utilize digital twins, resulting in a 10 percent improvement in effectiveness. Oil and gas companies will be among those building digital twins for applications such as early detection of faults in the field.

Or take augmented reality, which can be used to fix and maintain equipment in remote oil and gas fields, cutting down on the time and expense of flying in specialist engineers.

A digital game changer

In an industry that will remain largely variable for the foreseeable future, technology is set to become an enormous facilitator for oil and gas companies that are prepared to make a commitment.

As John England, U.S. Oil & Gas leader, Deloitte LLP, explains: “Companies that are willing to innovate and invest can unlock tremendous value and may remain financially strong, regardless of what happens to global supply and demand trends.”

Oil and gas companies that decide to shy away from a truly digital future, however, are risking turning their lights out for a final time.

To find out more about oil and gas solutions from Orange Business Services, download our brochure.