New-age Technologies Transform Oil & Gas Companies into Digital Enterprises
Sahil Dhawan
Associate Vice President & Head
Energy & Utilities Vertical (Asia, Middle East & Africa)
KPIT Technologies

The unpredictability of declining oil prices has slashed profit margins, intensifying pressure on Oil and Gas (O & G) industry to get a handle on their inefficiencies, rein the operating costs and reduce downtime. While all the three major aspects of the O & G sector worldwide - upstream, midstream and downstream - are faced with many challenges, it could certainly use a game changer to deal with the many challenges it faces - technology and digitisation. The industry is expected to leverage technology in order to optimise asset utilisation, improve operational efficiency, gain sustained performance and deliver better experiences. The article explains on technologies such as Big Data and Analytics, data management and platforms, Internet of Things (IoT), IT modernisation, virtual reality, robotics, machine-to-machine (M2M) learning and real-time solutions that will play an imperative role in guiding the future for the O & G companies in terms of digital refinery, connected fueling, remote pipeline monitoring, etc.

The Oil and Gas (O & G) industry is a globally integrated one. It is a key indicator of how economies around the world perform and define their monetary policies. Further it has a multiplier effect on the growth of secondary industries such as the production and sale of heavy machinery, motors, pumps, drills, transportation, automobiles, chemicals, etc. According to the International Energy Agency (IEA), the oil products demand in India is said to continue on an upward trajectory, rising two-and-a-half-fold to 10 million barrels per day (b/d) by 2040, which is the biggest rise projected for any country. Experts feel that the Smart Cities mission and the boost from the Make in India campaign for manufacturing will further drive this rise.

While demand for oil and gas is always on the high, the industry faces a few challenges nevertheless. Geopolitical events, globalisation, pricing, environmental change influence, demand and low availability of workforce are affecting the industry now, more than ever. The unpredictability of declining oil prices has slashed profit margins, intensifying pressure on companies to get a handle on their inefficiencies, rein the operating costs and reduce downtime .

All the three major aspects of the O & G sector worldwide - upstream, midstream and downstream are also faced with many challenges. Upstream companies, involved with exploration and production (E & P), explore new hydrocarbon fields, develop them and produce petroleum are mainly affected by the increasing dollar valuation. They are on the constant lookout for better machinery and skillful workforce to operate the electrical equipment. The Midstream firms, which take care of transportation, shipping, pipeline management and liquefied natural gas (LNG) terminals, are whereas concerned with asset management and its effective usage. They run on the principle that 'less the breakdown, better the productivity'.

On the other end are the downstream companies which are concerned with the refinery processes of crude oil to produce different products such as petrochemical plants, polymers, plastics, etc. With focus on customer factors and trends which change on a continuous basis, the challenge arises in transportation and tracking of the trucks' movements, theft of the product in the trucks, adulteration, etc. Availability of workforce on a contract basis is a matter of concern as well.

As the O & G sector comes face-to-face with reality, it could certainly use a game changer to deal with the many challenges it faces - technology and digitisation. The industry is expected to leverage technology in order to optimise asset utilisation, improve operational efficiency, gain sustained performance and deliver better experiences. Technologies such as Big Data and Analytics, data management and platforms, Internet of Things (IoT), IT modernisation, virtual reality, robotics, machine-to-machine (M2M) learning and real-time solutions will play an imperative role in guiding the future for the O & G companies in terms of digital refinery, connected fueling, remote pipeline monitoring, etc.

While we can expect a lot of transformation in the industry, below are a few areas where we will especially see technology influence and digitisation taking place.

Streamline Inventory Management
With the infusion of new technologies such as big data and analytics, companies seek to improve reliability, optimise operations and create new information and value. This helps in minimising the risks to health, safety and environment, improve cost and capital efficiency, explore new avenues for income and competitive advantage that transform the business.

Through analytics we can predict the demand and accordingly produce and distribute the products to the relevant markets. Open communication protocols, sensors, advanced wireless mesh networks, augmented intelligence through integrated devices and asset-management analytics facilitate a shift towards condition-based predictive strategies. One will slowly see a change of mindsets from preventive planning to predictive planning.

Companies have to invest in measuring this predictability of demand which is linked to the production. This will help in addressing a lot of challenges faced by the industry. For example, demand for digital oil-field applications will rise due to the plunge in oil prices. In such cases, one can avert the need for physical on-site inspections by creating opportunities to connect multiple platforms which can be operated remotely from a single onshore center.

Having more automation in oil fields and using data analysis is considered the way forward. The constant stream of data produced by automated equipment also known as measurement data, will be mined, collected as big data, and altered into smart data through intelligent analysis. This will help us in understanding production processes better.

One can soon see the future where valves will be operated by machines than people. The flying of workers to offshore oil platforms in helicopters may someday become an exception rather than a practice.

Making Pipelines More Secure
According to a Deloitte 2015 study, the promise of IoT applications in the O & G sector isn't just about managing existing assets, customer relationships and supply chains. It helps in creating an entirely new value or asset (i.e.) information. To obtain the full value of IoT, O & G companies must have an integrated deployment strategy.

The industry can benefit from the use of operational technologies to locate and exploit complex resources. The data generated from devices can also be used in a structured way to make hydrocarbon extraction and the various other successive stages before sale, more efficient and profitable. According to Oxford Economics, industry-wide adoption of IoT will increase global GDP by 0.8 per cent (USD 816 billion) during the next decade.

Fuel leaks and thefts have to be considerably brought down. The aging pipeline networks, manual monitoring and use of control devices present both challenges and opportunities for midstream companies who can visibly up their game in improving reliability and pipeline safety. Use of big data and analytics helps in creating data about potential breaches with the help of advanced sensors placed inside and outside the pipeline.

Amplify Customer Experience
The O & G sector is customer driven and the consistent increase in demand worldwide is what drives the sector. The way forward for the firms, is investing intelligently in making the business economically and efficiently viable. Fuel retailers are boosting sales at their gas stations through alternative forms of income, by tying up with food and beverage (F & B) firms, opening convenience stores, fashion outlets, ATMs, etc. These are some of the existent practices nowadays in Asian countries.

Going forward, the retailers have to focus on providing a complete digital customer experience for people visiting petrol pumps by enrolling in connected-car prototypes. This involves collecting customer information and analysing this data to gather more useful information. The future of retail marketing at petrol pumps is all about:
  • Correlating consumer profiles with fuel and in-store purchases across a specific retailer's owned stations and franchisees
  • Adding more appeal to the traditional loyalty and reward programs of offering discounts and redeemable points
  • Combining the existing data on petro-cards along with data generated from cloud-enabled emerging telematics solutions and connected Vehicles
  • Facilitating predictive analytics and behavioral marketing by collecting data from social-media networks
According to industry estimates, around 33 per cent of IoT-derived benefits for an integrated marketer can be achieved from connected marketing, if they are able to conceive a workable and secure system.

Reporting by Exception

With the availability of workforce on the downside, getting technology and easy to use software would benefit, so that even non-engineers can understand and operate them. Enterprise Resource Planning (ERP) will help with skilling and reskilling the people available and identify where the gap is. It will be useful in determining workforce triggered procedure to fix problems. Data collected through various means of monitoring is automatically gleaned to generate an estimate within minutes, thereby assisting in putting together a corrective-action plan immediately.

Digital Transformation at Workplace

An average worker in this industry is seven times more likely to be injured. This necessitates bringing the issue of safety and compliance to the forefront. Reshaping of the workforce is also necessary. If the O & G sector looks at employing and retaining some of the best talent in the market, then the need to offer a work environment that fits a millennial's mindset. Experts have to be brought into a more virtual world so that they can guide people using technology and thereby bridge distances and expertise. Having mobile applications for maintenance - with solutions like Smart Glass, Guided Maintenance solutions, Remote Monitoring and Maintenance Solutions, etc. also helps.

Digital Enterprises of Tomorrow

The digitally connected O & G enterprises of the future will also see adoption of three-dimensional (3D) imaging technologies, smart robots, sensors and Machine-to-machine (M2M) learning. These will help with the right tools which can accurately identify and measure cracks, dents and corrosion on the pipeline's outer surface. It can also help with the art of drilling and predict the availability of oil in the rigs.

While these technologies will make things simpler and create a better world, challenges will crop up in terms of implementation and localisation of this for large scale public sector oriented industry. The O & G industry's digital maturity is among the lowest, at 4.68 on a scale of 1 to 10 (1 - least mature; 10 - most mature), according to the MIT Sloan Management Review and 2015 Deloitte global study of digital business. Organisations need maturity to embark on this digitisation journey with the mindset to retract and modify their traditional policies and procedures. They need to give and get digital approvals and also imbibe a digital culture.

This is where technology providers with strong domain expertise can step in, to help achieve digital transformation. They have to help with building a digital roadmap, assessing where to start from, identifying problem areas and solving them. They have to provide end-to-end digital adoption and device-level exposure to strengthen internal security and overall simplification of processes. In short, O & G industry has to rise to the occasion, reposition itself. The industry might not disappear, but it will be very different, a decade from now.