What does digital transformation in oil and gas look like?
Is digital transformation in the oil and gas industry as simple as it sounds?
Put simply, digital transformation can be used to refer to any element of technical progression within a company that utilises digital tech. This may include elements of the IIoT, emergent technology such as VR, or even basic digitisation in a move towards the paperless workplace.
There has been an active push for oil and gas companies to embrace the digital revolution, and as a result, the previously slow-to-adapt industry is now at the forefront of many types of emergent technology – including artificial intelligence, augmented reality, and the IIoT. Even within the past ten years, wells are being sunk at depths never-before-encountered, reserves are being located and prospected with far higher success rates, and operational expenditures are being trimmed left, right, and centre – all due to increased investment in digital assistance.
Digital transformation fuelling progress
As an asset-heavy industry, the oil and gas sector has been in dire need of digital operations for decades – but the cost and difficulty of properly implementing a strategy in such a hardware-intensive environment has slowed progress in the past. Digital transformation is no longer an option that some companies are choosing to pursue – it is rapidly becoming impossible to function without strategies in place.
Data is actually extremely cheap and very valuable in the digital age, however, 90 per cent of all data fail to influence business decision-making processes – despite having often already been paid for.
This loss of revenue is no longer being tolerated, and when combined with the drive for sustainability – increasing efficiency and returns for investment on data are driving change. With prices fluctuating more than ever, it is vital that digital disruptors become the new norm. Digital is already a key part of reducing costs, decision-making, and worker productivity – but for the majority of companies, it is still difficult to extract financial performance and growth from digitalisation.
In many other industries, digital transformation has led very quickly to return on investment – yet in oil and gas, the payback has been slower. This is due to the complexity of the environment and the cost of revolutionising a business that may comprise many hundreds of sites in dozens of countries. Recent changes to how data has to be handled have also forced companies to rethink or abandon strategies that have aged before even being completed.
Digital transformation opportunities
In the relentless race to completely digitalise businesses, there are many challenges to oil and gas companies in the 21st century. Prices are fluctuating more than they ever have, technologies are phased-in and phased-out faster than many companies can even keep track of, capex is being emptied into digital opportunities, and the drive to maximise asset production and flexibility has left many key decision makers split as to where to head.
The current emerging trend amongst vendors and interested end-users is the idea of democratisation of data – universal access, as well as the best business structures and processes for workers, drawn from a complete digitalisation of the company.
Transforming the chain
The endgame here is to completely transform the company’s operating model by digitalising core and support functions. This can broadly be broken down into the following areas (which differ company to company, of course):
- Research and development can be helped by the leveraging of new approaches to data collection and analytics
- New approaches to fuels and products can benefit from leveraging digital
- End-to-end operations can change significantly with the use of data and analytics
- Aim your services more accurately and precisely through a marketing revolution
- The whole ecosystem of the business will tighten-up with new business models
In order to properly capture the benefits of a digital transformation, modern oil and gas companies need to feel comfortable with the role they are playing in the digital ecosystem, must identify the other key players they need to maintain their digital presence, and need to prioritise skills and personnel acquisition for futureproofing.
Signs of digital change for oil and gas
According to Deloitte, the oil and gas industry has a digital maturity rating of just under five out of ten.
Despite efforts to revolutionise, this measure is a damning indictment of a sector that is lagging behind. However, there are some further signs of change.
Firstly, as technology becomes more affordable, and appetite for investment increases in the lee of price crashes in 2008 and 2015, digital solutions are becoming more common as go-to options for companies looking for a competitive edge. Reducing costs and providing ever-greater access to data is the name of the game.
Real-time data is also helping to streamline business procedures and increase agility. Justifying increased spending in choppy waters (or at any time, to be honest) is always tricky, but tech solutions that help the business work smarter rather than harder are proving popular. Effective use of digital solutions can increase productivity, efficiency, and agility by making precise business decisions more reliably – and the number of collaborations between oil and gas and technology companies is rising.
In addition to this collaboration within the sector, there are cross-sector relationships in this space, too. The world of the solution provider is changing, and smaller specialists are now taking the place of larger generalists. These smaller solution providers are able to tailor packages to directly suit the needs of oil and gas companies, and provide powerful analytics, data, or performance-driving information – and make changes to their key competencies. With these partnerships, oil and gas companies can enter their age of digital maturity and become fully integrated and interconnected.
Finally, Big Data is a key factor in lowering costs across all aspects of the company – especially in the face of rising production costs and the difficulty with optimization of sprawling company departments. Switching to a digital model has saved oil and gas companies an average of $50 million on reducing downtime alone – with cost reductions in most areas in the double figures.
The future of digital transformation and oil and gas
Finally, Oil & Gas IQ would like to leave you with a few key areas we believe will see the most action as we move in the 2020s and beyond. These are just our predictions, and we would love to hear from you if you have your own, but we can reasonably assume the following three key areas of digital growth:
Blockchain is essentially a digital ledger system that allows decentralized transactions across the entire business. Whilst this may sound risky, security is in-built and a vital part of the success blockchain has experienced in recent years.
As the oil and gas sector increasingly employs gadgets such as sensor systems across its entire supply chain, blockchain will play a vital part in connecting all interested parties without the need for employees to become directly involved.
- Platform development and data-driven decisions
Put simply, we are now able to analyse more data in more ways than ever before. Oil and gas companies are also producing exponentially more data year-on-year, so machine learning, predictive analytics, and new insight tools are no longer an option. Expect to see increasingly space-aged methods and programs for the analysis of data packets – at lower and lower price points.
- IIoT and emergent technology
Augmented reality, virtual reality, AI, intelligent automation, and the interconnectedness of all devices, hardware, and plant machinery will completely change the face of day-to-day oil and gas operations. From logistics and prospecting, to training and shutdowns – expect eyewear, tablets, HUDs and instant information to abound.
Thanks for reading this guide to digital transformation. Make sure to stay tuned to this content hub for all the latest pieces on digital transformation in the oil and gas industry.