Digital Transformation in Oil and Gas is a Must
Industries all across the board have been increasingly embracing technology, and oil and gas is not an exception — in fact, the digital transformation of the oil and gas sector started as early as the 1980s, but it has mainly been in the shape of an unsystematic adoption of technologies without a fundamental shift in strategies.
Deloitte doesn’t mince words about the value of digital transformation for oil and gas: “The oil and gas industry is potentially losing trillions of dollars by not fully embracing digital.” This is the leading idea from a paper that says the oil and gas industry scored a meager 1.3 in Deloitte’s Digital Maturity Index, making it the lowest score of all industries analyzed.
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Why Oil and Gas Companies are Choosing Digital Transformation
The World Economic Forum is enthusiastic about the potential benefits, claiming that:
"...the industry could benefit more by pursuing a revolutionary agenda with digital as a backbone. Digital transformation has the potential to create tremendous value for both the industry and society as a whole."
Many leaders are already speeding up their technology adoption and treating it as part of their strategy.
The digital transformation market in oil and gas is expected to grow by USD 33.89 billion during 2019-2023.
Challenges & Solutions
While some areas of the oil and gas industry have adopted advanced technologies — as in the field of seismic exploration — most of the data captured is not being processed or used for decision making. And in the areas of supply chain management, trend prediction, and business management, technology has not yet made a significant and profound impact.
Trends in Digital Transformation
Accenture's recent Upstream oil and gas Digital trends Survey interviewed 255 industry professionals and come out with the main digital trends in the industry, of which cybersecurity was the top one by far, followed by cloud computing, Internet of Things (IoT), and Big Data Analysis.
According to the survey, cybersecurity was the number one investment focus in 2019, with a 61% of reported investment going into it (a 49% increase from 2017) It makes perfect sense if you consider the intense scrutiny and regulations the industry has to go through, the magnitude of the fallout if there is an accident of failure, as well as the risk-averse nature of management we outlined above.
The very global nature of Oil and Gas operations makes Cloud Migration a natural choice for managing many flows of information coming from all over the world, and making information readily available to anyone regardless to anyone of their location or time zone. It also makes software deployments, upgrades and general communications easier and more efficient.
The Internet of Things (IoT)
The Internet of Things (IoT) concept is not new: an environment where the sensors can easily function and interact with every other element in the system. The Industrial Internet of Things is specially designed to withstand the heavy use and hard conditions of an industrial setting, and can both capture and analyze valuable data that can be used to enhance decision making even at the same time and money, as in the Mediterranean case study mentioned above. Real-time monitoring can lead to reduced maintenance and repair costs, less downtime, and greater security, as well as illuminating leaders with information they had not previously been exposed to.
Benefits, Improvements, and Operational Efficiencies
The numbers speak for themselves. In a recent case study, an Italian energy provider sought digital solutions to solve downtimes issues in its 300,000-barrel-per-day refinery in the Mediterranean. Within weeks, a digital solution was set in place, which can predict potential failures 24-45 days before they happen.
This solution will cut down unplanned shutdowns by up to 10 days, increase revenue by 1-3% and reduce refinery maintenance costs and operating expenses by 1-5%. If this is how a specific digital solution performs, imagine what a thorough digital evolution can do.
In general, the increases in efficiency and production alone are enough to make a case for digital transformation. According to McKinsey, "where energy companies have applied digital solutions successfully, we have already seen it facilitate 2-10 percent improvements in production and yield and 10 to 30 percent improvements in cost.
If these benefits hold true at scale, they could have a material impact on competitiveness: for example: improving cost efficiency by one to four cents per kilowatt-hour in power and $2 to $12 per barrel in upstream oil and pas production."
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Digital Evolution for the Oil and Gas Sector
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