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Is digitalisation the key to the future of Oil & Gas?

15/04/2020
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The last couple of months have shown many of us the benefits of digitalisation. Across a vast range of industries, workers around the world are able to keep doing their jobs remotely, aided by a digital transformation in the way businesses operate. 

With coronavirus impacting the Oil & Gas industry, digitalisation could be the key to its recovery

Oil & Gas is no exception. It’s been long established that the benefits of digitalisation can help the Oil & Gas industry significantly, but major players in the sector have remained stubbornly against changing their ways of working. 

As recently as June 2019 we reported on the Oil & Gas industry’s failure to score highly on Deloutte’s digital maturity index - which showed the industry falling significantly behind the likes of Power & Utilities, Aerospace & Defense, Consumer Products, Telecoms and Automotive in quantifiable measurements of digitalisation advancements. 

The problem, of course, is one of money. Despite the clear long-term benefits of implementing such systems, there are significant costs to developing digitalisation processes, integrating them with existing workflows and training workers. As long as existing processes are profitable, and as long as none of the other major businesses are gaining market share from digitalisation efforts, there is no incentive to change. 

Until there is.

The recovery in oil prices following the dramatic fall in 2015 spurred many operators to re-evaluate the potential of Industry 4.0 in their workstreams. With business already disrupted, companies were more willing to consider new ways of working. And once some businesses begin investing in newer technologies and processes, others are forced to follow suit or risk being left behind.

In a 2017 survey, nearly 40% of oil and gas companies said they were worried about the risk of being left behind if they didn’t continue to invest in digital transformation programs - with 70% saying they planned to invest more in new digital areas over the following three to five years. 

The same year, industry leaders polled by Sphera’s Operational Excellence Index (OEI) were asked about the importance of digitalisation for the industry. At the time, 73% believed that the digital transformation would help them achieve operational excellence in a sustainable way. By 2019 that would rise to 90%.

Paul Marushka, Sphera’s President and CEO commented on the response: 

“As companies look for new ways to keep their people safe, their operations productive and their products sustainable, being able to tap into and monitor data from Industry 4.0 solutions will be a major differentiator for organisations looking to separate themselves from the competition. It’s not surprising that 90% of respondents agree that digital technology will accelerate operational excellence. We couldn’t agree more. Sphera believes digital is the wave of the future for operational risk mitigation.”

More Oil & Gas companies are turning to digitalisation to improve efficiencies and save money

It’s true that in recent years greater investments have been made to incorporate new technologies and retrain workers through digital transformation programs. But that view and that investment comes from the “top figures” in the industry - company heads, analysts, academics. What about those who actually work on Oil & Gas projects and deal with the day-to-day aspects of a changing workstream? Do they also value a shift in focus towards digitalisation? 

We asked this exact question in May last year to Fircroft’s own audience of engineering and technical professionals working at varying levels of the Oil & Gas industry. And our own results showed that 76% of respondents believed that companies need to invest more in digitalisation or risk being left behind.

So the digital tide has been coming in slowly. But will the effects of Covid-19 really spur a faster transition?

Reports in many sectors suggest that global businesses are looking at more digital solutions that will allow operations to continue while social distancing measures are in place. For many this means massive changes in priorities over the last two months and shifts in investment. Newer projects have had to make way for smarter working methods that will allow existing operations to continue. 

But it’s expected that digitalisation efforts won’t simply be in place to tide over the “lockdown” period. Continuity is key now, but investment that goes into keeping the ball rolling during this time will still provide benefits in the future.

And the benefits are significant. According to a study conducted in October by Rystad Energy, up to $100 billion can be saved from E&P upstream budgets through automation and digitalisation. 

This represents roughly a 10% saving of the $1 trillion spend in 2018 by 3,000 companies in upstream operational expenditure, wells, facilities and subsea capital. Digitalisation and automation processes, used well, can account for massive efficiencies and increases in productive operations - through faster data gathering, problem solving, reduced downtime and increased production from a digital oilfield.

“In addition to cost savings, digitalisation initiatives can also increase productivity by increasing uptime, optimizing reservoir depletion strategies, improving the health, safety, and environment of workers and minimizing greenhouse emissions – all of which have significant value creation,” said Audun Martinsen, head of oilfield services research.

Aside from savings, there’s also the increase in production that can be gained by implementing smarter technologies, AI, imaging technology and advanced data-gathering sensors. According to Deloitte, the application of existing digitalisation technologies could generate a further $1.6 trillion in global revenue. 

Various technologies can be used to improve processes in the Oil & Gas industry

So how exactly can digitalisation transform Oil & Gas?

According to software provider AVEVA - who specialise in supporting Oil & Gas companies - there are three primary ways:

  • Process optimisation with a digital twin

A “digital twin” is a virtual recreation of any element of a project - whether it’s the full infrastructure or a smaller element such as a motor, turbine or pump. An accurate digital replica can allow real-time testing and analysis of operational data that will allow operators to easily spot improvements or efficiencies in their processes. 

AI software can also create predictive control, analysing and calculating complex variables to maximise results and suggest operational adaptations in line with changing legislative and market requirements.

  • Cloud-based process design
  • Cloud computing allows users to tap into vast amounts of processing power and storage to develop advanced process designs without the need for large capital investments. Because of less need for new infrastructure and training, digital modelling can be used on very specific elements of a project that otherwise couldn’t be done at cost. 

    It can also allow for greater digital connectivity on projects between different areas, allowing gathered data from multiple sources to quickly and effectively be integrated for improved digital planning and increased efficiencies. 

  • Digital planning and operations

A digital overview of the entire supply chain model connects complex networks of silos in a way that provides a full 360-degree view of the value chain to be visualised, analysed and optimised in real-time. It can account for accurate planning of each stage by monitoring production status information and levels from a central, unified point of reference.

These are just three examples put forward by the software company, but there are many other benefits of digitalisation, including the implementation of new, smarter ways of workforce management and allowance for more flexible employment structures. Plus there’s improvements in safety through the use of intelligent sensors and artificial intelligence reducing the potential for human error. 

The automation of repetitive tasks also allows specialists to spend more time and focus on complex analysis, improving the potential for spotting problems or delivering creative solutions.

However the Oil & Gas industry moves forward in the current market, it is certain to involve a greater reliance on digital technologies. A report by the digital solutions provider Zyfra already shows that digitalisation processes are being favoured in Russia and India to mitigate the impact of Coronavirus on the Oil & Gas, Mining, metallurgy and machinery  industries.

"Oil companies need to consider key task dependencies, priorities and constraints for decision-making. Thereafter, a machine learning model chooses an optimal scenario for the current situation. About 50 scenarios are assessed to choose one. This comes along with regular recommendations on plan execution and process improvement,” said artificial intelligence director Alexander Smolensky.

“Machine learning could leverage existing data to create finer and more precise business models. It could predict profits and losses in detail. This prediction happens in a timely manner up to real-time. So, the traditional 'produce at all costs' model could be altered or replaced by a 'produce in context' model. This shift allows energy companies to be more flexible and able to deal with low oil or gas prices,” added managing director Pavel Rastopshin.

The effectiveness of digitalisation processes and the speed at which they can be developed, in the midst of a period when projects are being shut down or cancelled, could be the only hope for an efficient industry future. The upfront investment may be significant, but the benefits in the long term can not be argued with any longer. 

While we don’t know how long the effects of Covid-19 will impact the industry, it’s clear that this is a turning point for the way this sector operates.

Find your place in the future of the Oil & Gas industry

Fircroft has been recruiting engineering and technical professionals for the global Oil & Gas industry since 1970. Through 50 years we’ve supported professionals through this ever-changing sector and we’re well prepared for what comes next. 

Register your CV with Fircroft today to find out how we can help you secure your place in upcoming projects with leading companies.

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Is digitalisation the key to the future of Oil & Gas? - Time to read 8 min
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