Embracing Digital- Realizing Unfulfilled Potential in Oil and Gas Industry
Divjot Singh
Business Development Manager
Energy and Natural Resources

Not long ago, the crucial rule of the game was focused on large production. The rules then shifted - to better margins because of a significant imbalance in demand and supply, geo-political decisions, and low crude prices. In the current economy, efficiencies in operations is the name of the game and the industry seems to have fixed their eyes on one major frontier: digitization.

Digitization, which can be described as collecting, monitoring, and analyzing huge amount of data, can bring a dawn of new operational efficiencies using sensors, increased computational power, automation, remote configuration and optimization, control systems, and even artificial intelligence. Analyzing big data is not new for an industry that has relied on data for decades to understand the potential of reservoirs that hold billions and trillions cubic feet of oil and gas. Yet the industry, particularly upstream, has been struggling to become "more digital." Many companies are now giving their digital strategies a new lease of life to curb the menace of a rather painful downturn and position themselves for next growth cycle.

Fig 1: Impact of digitization on Upstream Value chain

Although the potential benefits of automation in the entire upstream value chain is evident, some of the biggest and impactful opportunities exist in production operations. With oil and gas companies looking to deeper seas for resources, any downtime will become costlier than it was at any time before. Automation may create several benefits for operator to that end: asset utilization and integrity and increased field recovery. There is another opportunity lying ahead, not just for oil and gas producers, but also for drilling operators and oilfield services companies.

Digital approach of major upstream stakeholders

Exploration and Production companies
  • Smart Exploration
    Digitization is not just about much needed efficiencies; it is also about enabling E & P companies to develop powerful capabilities to benefit from smarter exploration, easy capturing of data, robust reservoir modelling applications, safer operations, and interoperability of data across exploration activities. This helps not only in reducing costs and better utilization of labor, but also, if done well, in transforming the planning process with predictive analytics. This provides E & P companies with a better shot at anticipating and responding to ever-changing market scenarios.
  • Payment Process
    An often neglected area for exploration and production companies is the ability to speed up the ever daunting and slow process of payments in this industry. Some E & P companies are trying auto-executable contracts and quick payments transfer by using blockchain technology that removes the requirement of a mediator to validate transactions. By accelerating the industry's slow payments process, technology can free up cash for exploration, lower a company's operating expenses, and contribute to higher margins per barrel.
Drilling Contractors
  • Asset Strategy
    Since the downturn, many drilling operators had either cancelled new orders or refurbished their old rigs to continue working with aging assets. Many companies may have to reassess their portfolios, and make sure that they capable of supporting increased activity and new drilling environments. Most will need to redefine their fleets to match those opportunities—and likely will have to expedite retirement of some older rigs. Operators and drillers should collaborate in developing scenarios for balancing the supply and demand of rigs over the long term to reduce the risk of fleet investments.
  • Technology
    All three upstream stakeholders, operators, drilling contractors, and oilfield services providers have to work together to transform the entire end-to-end technology solution by introducing more automated drilling, data-centric approach, and condition-based maintenance. This requires acceptance from all the stakeholders about challenges and opportunities new technology brings to the sector.
Oilfield Services
  • Connected Oilfield
    The connected oilfield is about an integrated approach towards operations: using IT to change processes for better decision making, remotely access, monitor and control equipment, and to move more functions and personnel onshore. This approach ensures that not only risks associated with business, health, safety, and environment are reduced but also the objectives of going digital are achieved. A connected oilfield works on a virtual environment where effective communication and collaboration among experts can occur, regardless of where the experts are physically located or to which organizations they belong. For example, a basic ability to remotely recalibrate a pressure gauge makes sure that relevant data can be shared and incorporated in the decision-making process quickly, avoiding delays and saving safety risk, time, and money. A lot of visualization tools are being developed that will aid in ensuring seamless integration of data, thus making interpretation of data easier and availability of data transparent.
  • Use of Virtual Assistants
    With the advent of chatbots, it is not difficult to imagine that a virtual assistant can provide a technician clear instructions in the field when a safety valve stops functioning. The idea of virtual assistant may seem futuristic, but already a major oilfield services company is trying an AI based virtual assistant providing assistance to its field engineers for its logging operations.
Key themes of digitization across oil and gas Industry
  • Predictive Analytics and Asset Management
    Asset management has been a much talked about topic in the industry, but it is only now that oil and gas companies are warming up to utilize its full potential. Coupling asset management with predictive analytics has ushered in a new age of out of the box solution to reduce costs of operating an asset. Asset maintenance, in many industries, is moving from a time bound inspection towards a risk based assessment of assets. This ensures minimum downtime and reduced costs and occurrences of emergency repairs.
  • Artificial Reality and Wearables
    Many technology commentators have already written a lot about applications of artificial reality / virtual reality in our daily lives. Imagine this: a field engineer is wearing a smart glass that shows him 3D schematics, guidelines, and video instructions to repair a critical failure in an offshore gas turbine that powers the operations of a huge process platform. Or a wearable that guides you to the nearest evacuation points in case of emergency. This kind of over-the-shoulder coaching will not only reduce downtimes drastically, it will also reduce HSE risks and expedite on-the-job training for new employees.
    Fig 2: Oil and Gas Industry is slowly bracing automation

  • Internet of Things, Data analytics, and Process Efficiencies
    Big data has been talk of the town for the past five years, and rightly so. Rich data that had been lying unused for decades suddenly became useful and helped companies in shaping their strategies to iron out efficiencies in their operations. All this has been possible by ensuring that companies collect right data using sensors that feed continuous data to the cloud. As we look to expand scope and applications of Internet of Things, oil and gas companies are finding newer ways to collect more data and devise strategies to improve efficiencies further. It is an unavoidable truth that many oil and gas companies either have made a new CXO position of Chief Data Officer or are in the process of hiring one.
  • Overcoming Human Resource Crisis using Artificial Intelligence and Machine Learning
    Oil and gas industry is undergoing one of the biggest "forced" transformations at this time: Human Capital management. There is widespread unknown of losing many experienced professionals, as many tenured employees are going to retire in next 3-4 years or have switched to other professions to weather the downturn. Many players across the industry are trying to digitize the knowledge and experience these professionals possess. As the age of AI and high computational power dawns on us, we can use these tools to create an intelligent database of all these experiences. A database that not only grows, but also learns.
Strategy to Plan for the Digital Future
  • Identify key areas of value chain
    that has the highest impact on financial and operating parameters, and treat them as opportunities to improve delivery through digital approach.
  • Look for significant trends
    that dominate the industry with focus on identified areas of the value chain, and take a decision to either innovate or adopt tested technologies and processes.
  • Define the links
    between a company's most critical decisions and digital applications, and show how these applications improve efficiencies of existing processes.
  • Most companies falter by considering digital strategies as a one-time approach. Evaluate the investment
    to digitize identified processes and activities and support with a multi-year budget and roadmap.
  • Accept and assess the gap between current personnel capabilities and capabilities
    required to implement new technologies, and plan an upgrade of existing talent or leverage a partner.
Way Forward

The journeys of this digital transformation will not always be rosy, and they will differ depending on maturity on the digital ladder, ambitions, and financial provisions. Digital leadership is not always the best strategy, and it can be expensive. Although at a time when companies are reducing their capex extensively year on year, this strategy might look odd. However, with the ever-decreasing cost of digital transformation, rapidly improving tools, and potential reduction in operating costs, this area should have enough bandwidth in terms of focus and budget. It is no coincidence that all the major themes on digital transformation lead on to some degree of automation, and it is anybody’s guess that the industry is indeed headed towards automation. While en route on this digital transformation, it should not be forgotten that any strategy should aim to create a competitive advantage over the next three to five years. All of these propositions should include initiatives that offer short-term gains and ensure that the companies develop long-term competitive advantage to reap the benefits of digitization.