Why Is a Digital Transformation In Oil & Gas 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.

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 industry 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. 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.

What are the main challenges to digital transformation specific to the Oil and Gas industry?

From a technological standpoint, Oil and Gas has a reputation of being risk averse. This is one of several challenges that must be overcome in order to carry out the digital evolution the Oil and Gas industry needs and deserves.

Various sources have written about the obstacles that slow down Oil and Gas digital transformation, but they can be summarized in the following ways.

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Low digital maturity, high risk-aversion

As we stated earlier, Oil and Gas has the lowest digital maturity score in Deloitte’s study, lagging behind Power and Utilities, Asset Management and Life Sciences. In its simplest sense, digital maturity measures the benefit that an industry is reaping from its digital transformation efforts, and a low score points towards leadership not having digital in its priorities, and not believing in the potential of growth through digital evolution.

Risk-aversion is a natural trait of Oil and Gas leaders, for a number of reasons: the heavy capital invested in the facilities, the many national and international regulations that apply to this industry, and even the fact that leadership tend to have long careers in which prudence and adherence to tradition are highly valued. 

If leadership is not onboard, is tepid about digital transformation, or is resistant to change, then the whole endeavor is compromised.

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Geography and complexity of operations

Oil and Gas companies carry out business literally all over the world, in all sorts of extreme geographical and weather conditions. This complicates the deployment of technology such as sensors, which must be proven to resist extreme temperatures, pressure, etc as well as be shipped and installed in hundreds or thousands of locations all over the world. The logistic complexity is undeniable - but so are the benefits.

Additionally, there is the human side of the digital transformation: persuading team members and management to get onboard is significantly more difficult if not done in person, and training across countries and timezones has its own set of complications.

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The engineer mindset

While those in a digital frame of mind - AVIO among them - live by the motto “fail fast”, the Oil and Gas industry is run by engineers. McKinsey describes this mindset as “a love of large, comprehensive projects, a premium on finding the perfect solution up front, detailed planning to the highest degree, and a preference for rigorous analysis and process over fast judgments and flexibility.” It’s easy to foresee resistance to an agile, flexible, “let’s see if this works and pivot if it doesn’t” approach from leaders who want perfection, safety and predictability above all.

silhouette of a man using a laptop on an oil field

Trends in Digital Transformation



Accenture’s recent Upstream Oil and Gas Digital Trends Survey interviewed 255 industry professionals and came 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 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 or 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 of their location or time zone. It also makes software deployments, upgrades and general communications easier and more efficient.

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 especially 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 and even 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 operations efficiencies

 

The numbers speak for themselves. In a recent case study, an Italian energy provider sought digital solutions to solve downtime 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 successfully, we have already seen it facilitate 2 to 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 gas production.” 

Emerging technologies such as AR and VR, IoT, and Big Data Analytics combined with data-driven insights can change operations, help with strategic decision making, enhance agility, and create new business models.

Some specific benefits and improvements that can be achieved through technology include:

The predictive forecast that is empowered by robotics and analytics results in lower costs that are associated with maintenance cost and low asset downtime.

Monitoring the status of the assets in real time.

Real-time sensor and machine integration with real-time alerts.

Emission control monitoring and release management.

Improve safety, operation efficiency, and minimize maintenance costs.

Resource planning and a dashboard for triggering maintenance workflow, trend analysis, plant dashboard, and reducing data leakages.

Case studies and success stories

Modernizing IT Delivery in Oil and Gas

Well Lifecycle Management

Digital evolution for the Oil and Gas sector


The time is right for a major change in Oil and Gas, and choosing the right partner is a vital element of success. Working with AVIO will enable any Oil and Gas company to accelerate their digital evolution by embracing the MuleSoft Anypoint Platform. Using API connectivity, IT will be able to mine the most important untapped asset in its portfolio, a company’s own data. By strategically connecting the enterprise with an integration plan, AVIO can help your Oil and Gas firm explore new territories of business intelligence. AVIO understands that digital evolution requires more than just technology. n We can work closely with you to transform the entire business by embracing digital evolution.

AVIO has already helped one of the leading oil producers to modernize its business by accelerating their IT delivery using MuleSoft Anypoint platform, and we can help your company too. While risk and change are scary, especially in this industry, becoming obsolete and un-competitive is an even scarier prospect. Step confidently into the future of Oil and Gas with AVIO as your guide and partner, and embrace evolution.

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