How technology can save the oil and gas industry

How technology can save the oil and gas industry

/ Technology & Smart Cities / Wednesday, 30 September 2020 11:34

To say the oil and gas industry has had a tough couple of months, if not years, would be a massive understatement. With coronavirus cases surging in many parts of the world and more people working from home, the recovery in global oil demand is likely to be slow in the coming months, the International Energy Association said.

As the oil and gas outlook remains stagnant, oil and gas companies are increasingly turning toward big tech for help in streamlining operations and cutting costs. We are in the middle of a digital transformation in each industry and sphere of our lives. Companies are adapting to stay ahead of the competition in this fast-paced competitive industrial market. This includes the oil and gas industry.

In recent months, as overall production has been erratic and irregular due to the effect of the global pandemic, the deployment of a raft of advancing technologies has played an ever-advancing role over time in enabling companies to maximize recoveries and profits.

Although the oil and gas sector was slower than others to come on board with digitalization, now digital disruption and transformation are front and center on the agenda of every oil giant across the world. Oil and gas firms have even started to form partnerships with oilfield services providers and Big Tech to work to digitally transform operations.

The industry’s first three-party collaboration comes from three of the biggest companies in their respective sectors – US oil and gas major Chevron teamed up with the world’s biggest oilfield services firm, Schlumberger, and with tech giant Microsoft to accelerate the creation of innovative Petro technical and digital technologies.

Under the partnership, the companies will jointly work to build Azure-native applications in Schlumberger’s DELFI cognitive E&P environment initially for Chevron. This will help companies to process, visualize, interpret, and obtain insights from many data sources.

“We believe this industry-first advancement will dramatically accelerate the speed with which we can analyze data to generate new exploration opportunities and bring prospects to develop more quickly and with more certainty,” said Joseph C. Geagea, executive vice president, technology, projects, and services for Chevron.

“It will pull vast quantities of information into a single source amplifying our use of artificial intelligence and high-performance computing built on an open data ecosystem,” Geagea added.

Schlumberger’s CEO Olivier Le Peuch said: “Working together will accelerate faster innovation with better results, marking the beginning of a new era in our industry that will enable us to elevate performance across our industry’s value chain.”

Microsoft’s chief executive Satya Nadella noted: “There is an enormous opportunity to bring the latest cloud and AI technology to the energy sector and accelerate the industry’s digital transformation.”

To stay relevant, oil companies must reinvent their purpose. Today, public perception is that oil and gas companies are not keeping up with the times. Similarly, the industry is often blamed for fueling the climate crisis.  Perhaps as they strive to become more agile and adaptable, connected, and collaborative, they could reinvent their business models by stepping up their climate efforts.

According to Accenture, oil companies can tackle the global energy challenge with new strategies, firstly to “transform their current core business,” while releasing funds to simultaneously “grow and scale new businesses.”

Some companies are already on this transition journey from “oil” to “energy,” redefining their purpose and focusing on new businesses. But with disruptors entering the competitive landscape and value increasingly shifting downstream, incumbents need to act fast.

“With oil and gas industry disruption, wait and see isn’t an option. It’s time to reinvent for a decarbonized, digitalized, demand-driven future. Now,” the report says.

The oil and gas industry combined are multi-billion dollar industries; big oil is big money and the time is now to bring the industry into the digital age. Many oil and gas firms, especially the world's largest, are already using data analytics, cloud computing, IoT, digital twins, robotics, automation, predictive maintenance, machine learning (ML), and Artificial Intelligence (AI).

Technavio, a London-based market research firm, believes the global digital transformation market in oil and gas will increase by $34 billion between 2019 and 2023, primarily in exploration. For example, additional sensor-driven and IoT-driven data on the environment, equipment, seismic activity, and more — along with AI and machine learning (ML) — will enable drillers to optimize operations and perform real-time predictive analytics and maintenance.

According to research conducted by Berg Insight, there were 1.3 million "wireless IoT devices" used in oil and gas in 2018, growing at a compound annual growth rate of 6.8%. The most common applications are to remotely monitor storage tanks, pipelines, and industrial equipment in the midstream and downstream. Pipeline fuel leaks cost $10 billion yearly in the US so this is an area where digitalization will have huge cost-saving benefits.

In the industry, AI can be used to uncover trends that pinpoint and predict inefficiencies. Leveraging AI to improve performance operations from C-level to field worker, automate processes, streamline manual business operations, and connect with IoT devices, makes every arm of the company more efficient and profitable.

As the oil and gas undergo this enormous transformation to a digital infrastructure, cloud computing will prove to be a powerful engine. The sheer amount of data companies can harness and further analyze through automation, will reduce operational expenses, down well times, and lessen risk.

A report published by PwC estimated that digitizing operations can cut downstream operating costs by 20% and increase plant efficiency by 12%, concluding, "Digitization is more than an opportunity, it is imperative."

Another report published by Deloitte noted that more efficient and effective maintenance through digitization could minimize unscheduled refinery shutdowns, which cost industries worldwide 5% of production annually.

Even industries that aren't traditionally progressive can no longer afford to oppose digital transformation. Luckily for organizations that may have been slow to adapt, emerging technologies, including cloud computing, AI, and robotics can be easily implemented and impactful almost immediately.

Oil and gas can gain more business value from these technologies than most other industries. According to a study conducted by the World Economic Forum, "digital transformation" in oil and gas had a total value of $1.6 trillion and could expand to $2.5 trillion if "existing organizational/operational constraints are relaxed" and "futuristic" technologies are embraced.

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