Digital transformation driving upside for the LNG industry
Ron Beck
Energy Industry Director

Sunil Patil
Business Consulting Director

A current industry hot topic is the impact of digital transformation on the LNG value chain. The market outlook for Liquified Natural Gas (LNG) is relatively bullish, as the US and Australia are well positioned as reliable LNG suppliers to energy hungry Asia Pacific, especially Japan. Well supported by pro-environment policies, LNG is a relatively cleaner source of energy for the power generation industry. Relatively affordable with lower carbon output, the usage of LNG(compared to coal) helps countries reduce the amount of particulate and greenhouse gas emissions. In Southeast Asia, the Lantau Group sees the proliferation of LNG regasification plants, as an ongoing trend for the rest of this decade. According to BP, India is one of the fastest growing large energy consumers globally and IEA projects the country's share in the global energy market to reach nearly 7% by 2020. Like China, India is also trying to rely less on coal and increase usage of LNG to reduce pollution.

A changing game for LNG players
Industry tailwinds, such as growing middle-class populations in emerging markets and the deployment of asset optimization software, help accelerate upside for the LNG market. With the perception that market risks are increasing, the LNG industry is likely to face increasing restrictions in securing capital expenditure (CAPEX). Without sufficient CAPEX, future supply can be impacted. Factors impacting access to capital, include the duration of contracting timelines, as well as increasing export facility reliability and supply chain agility. The capital-intensive nature of the LNG industry forces companies to optimize their logistics operations and strengthen operational excellence. This necessitates the adoption of the latest automation technology, such as analytics, ar tificial intelligence (AI) and advanced machine learning software. In adopting innovative asset optimization software, process and capital-intensive companies can reduce risk , increase reliability and accelerate returns on investment (ROI). New concepts, such as repeatable, modular compression and regasification plants that can be implemented on floating vessels, are also redefining the equation for driving down time and CAPEX.

The LNG industry is transiting from long-term to shor t-term contracts, which will commoditize the industry overtime. The financing parameters for capital-intensive LNG refrigeration plants have changed with shorter timeframes and reduced planning cycles. As such, the entrepreneurial LNG players need to accelerate their adoption of new disruptive technologies to secure the best possible competitive advant age. Clearly, the time delay in bringing LNG projects to completion needs to be shortened, factoring new market realities. In doing so, producers are well positioned to mitigate delays in completing LNG projects by driving down capital costs, in areas, such as new contracting models, reduced project execution risk.

Transform digitally with a clear roadmap
To increase productivity via digital transformation, process companies need a clear roadmap. This roadmap needs to align with the company's objectives, be pegged to measureable outcomes, demonstrate a clear return on investment (ROI), factor previous efforts to transform digitally and the subsequent impact on the organization. Companies need to be flexible and recognize that digital transformation presents an immense oppor tunity to increase profitability. In adopting the right technology solutions, leading companies become lean and agile. The best performing companies will be those who have adopted cutting edge innovation in a pragmatic manner. With the emergence of digital technologies, the adoption of digital transformation is accelerated. However, there are roadblocks. In a global survey, AspenTech found out that only 38% out of hundreds of refiners expec t a significant return on investment in less than two years from digital transformation driven initiatives. This means that companies need to be diligent and disciplined in devising a good plan to succeed.

A master game plan
To accelerate returns, companies need a five-step plan to succeed. First, it is necessary to maximize value from current technology, as new initiatives need to be integrated and built upon existing infrastructure. Second, it is necessary to understand the level of maturity in an organization. Digital transformation is strongly tied to organizational change, as the level of collaboration between teams increases. This is because all technology investments and digital transformation initiatives should be linked to expected business benefits, payback and return. Fourth, companies need to identify key success metrics when adopting such initiatives. For example, the key measures of refining excellence include feed and product flexibility; reliability and uptime; energy use optimization and the overall cost of leadership. Fifth, companies should encourage workforce skills development. Beyond a solid master plan to achieve optimal digital transformation, technical and operational competency needs to be present. In outsourcing technical work, companies risk draining technical expertise. Leading energy companies benefit greatly by choosing the right technology software to transform digitally. For example, a LNG firm from the Gulf of Mexico has employed machine learning based prescriptive maintenance in Louisiana to obtain early warning of compressor operating risks. With reduced compressor downtime, the company saved several millions of dollars per year in maintenance expenses.

Locking in upstream upside
Industry leaders advocate the accelerated schedule, which is the early monetization of successful discoveries. The LNG industry's interconnected ecosystem is geared towards adopting new digital technologies to improve asset-heavy businesses. Successful digital transformation is adopting a combination of new and existing technologies, targeted at LNG and upstream assets. Companies willing to utilize real-time operational data, advanced analytics (enabled by machine learning); multivariate analysis and rich process knowledge will be industry leaders of tomorrow. The following examples show how asset optimization can help LNG companies achieve operational excellence:
  • Machine learning keeps expensive LNG assets running, increasing the reliability and uptime of LNG compressor trains;
  • Digitally twinning crucial LNG assets can save millions of dollars across the lifecycle to achieve a wide range of operating benefits and safety assurance;
  • Concurrent and smart engineering software optimizes the LNG design process, reducing the time and CAPEX of LNG projects;
  • Collaboration improves workflows and relationships with contractors, while eliminating cost and time overruns;
  • By producing at optimum capacity, advanced control can yield several thousand times return on investment.
As emerging technologies advances, there is no turning back from the rapidly accelerating digital transformation wave. Smart companies need to be razor sharp in tracking ROI and be armed with a pragmatic roadmap to advance ahead of the market competition in a strategic manner.