Creating a digital advantage in oil and gas industry

Indonesia’s oil and gas industry has faced challenges. Not only have crude prices been volatile, but there have also been dramatic changes in the regulatory landscape. Despite the increase of prices in the last few months and several new incentives for the private sector, upstream oil and gas companies are looking for ways to better manage their operations.

Digital technologies provide them the opportunity not only to cut costs but also to redesign their businesses to thrive in volatile market conditions. However, time and money are short, so the pressure to act decisively is growing as the current downturn lingers.

Most oil companies have already taken dramatic cost-cutting measures and canceled or delayed capital projects. Yet many still feel the weight of managing their businesses under the constraints of their current organizational structure, a legacy technology footprint and traditional ways of working. Upstream companies are now realizing that traditional cost-cutting levers will not be enough and most, if not all, understand they cannot simply cut their way to future growth.

That’s where digital technologies can help. In the recent “2016 Upstream Oil and Gas Digital and Technology Trends Survey”, cost reduction was identified as the most important business challenge that digital tools can help address (by 72 percent of respondents) and 91 percent said that they were already getting value from their digital initiatives. More than half ( 53 percent) of the professionals surveyed said this value was high to significant.

The greatest short-term cost reduction opportunities oil companies are implementing are in areas including IT, where “as-a-service” cloud models are reducing IT infrastructure costs, field operations where mobility is reducing costs while increasing worker productivity and field assets where basic Internet of Things (IoT) technology and analytics are helping optimize asset operations and reduce costs.

The survey shows that up to the next five years oil and gas professionals believe the focus will shift to areas that deliver greater long-term value while helping them make better and faster decisions.

The emphasis will be on technologies like big data/analytics, IoT and in maturing technologies such as robotics, wearables and artificial intelligence.

These digital technologies will help oil and gas companies deliver greater long-term value in areas including: asset operation centers where advanced IoT and analytics will enable assets to be managed in single integrated systems; field operations where workers will become even more efficient using wearable and connected technologies; and the assets themselves where autonomous operations using automation, robotics and artificial intelligence will change how work is done.

These areas still are only the beginning of the value opportunity.

Upstream companies have the chance to create even more value by redesigning their businesses to operate at a completely different cost base and with greatly increased agility. They can transform traditional operating models and long held assumptions about organization structures, workforce deployment, asset strategies and their positions in the upstream value chain.

Across all major upstream functions — including drilling and completion, engineering and construction and operations and maintenance — upstream companies can achieve significant efficiency gains and cost savings with digital technologies.

On the drill floor, the evolution of automation will continue. In the field, workers armed with digital work orders on tablets and wearable devices can make digital inspections of equipment and assets much faster than traditional manual inspections, saving time and money without sacrificing safety. By redesigning these workflows and the decision points within them, upstream companies can make these functions more efficient and agile with lower cost.

In asset operations, digital tools provide the opportunity to manage every well with the same data intensity and focus with which the largest oil and gas platforms are managed today and to do so at negligible cost.

Advances in low-cost sensors, network communications and hyper-scale cloud platforms means that over time every well can be digitally instrumented and managed. This type of digital transformation is already occurring in the industrial equipment and retail durable goods industries.

Other industries, including banking and utilities, are also transforming the back office and oil and gas companies can reduce back-office costs by redesigning these functions and leveraging digital technologies and design thinking models. These functions will become customer-centric and service the business at the lowest possible cost.

Finally, across value chains, digital tools are redefining traditional boundaries and players. This is no less true for upstream companies. They have more options today regarding what parts of the value chain they want to own versus leveraging other ecosystem players, such as oilfield services companies, or new digital services companies in areas including advanced data sciences.

For instance, Woodside adopted digital tools rapidly to make analytics pervasive in decision-making, establishing models specifically to drive proactive maintenance strategies and support decisions to enhance production, safety and risk management capabilities.

Through statistical modelling, data management and visualization software, the huge amounts of production data are combined to deliver business insights.

Upstream companies have long been pioneers by innovating and pushing boundaries using technology. Digital tools provide new opportunities to simultaneously innovate and position themselves to thrive in the new volatile market conditions and with the pace of technological change faster than ever, acting now to create a digital advantage through digital technologies is an imperative, not an option.

by Neneng Goenadi

source The Jakarta Post, Friday, June 17, 2016