digitization in upstream oil and gas

DUBLIN, May 28, 2020 /PRNewswire/ -- The "Radical Innovations Transforming Upstream Oil & Gas Industry" report has been added to ResearchAndMarkets.com's offering.. This customer thought they were spending US $480 million on rig charges; PowerAdvocate’s analysis identified nearly US $800 million in spending. On that basis, anyone in the industry talking about digitalisation may legitimately ask, "what’s new?” What does seismic interpretation deal with if not Big Data? Companies need to ask themselves what they are really good at and what they want to be famous for — and then figure out how digitization can help. Digitization holds key to unlocking oil and gas industry's potential New and disruptive technologies, structural simplification, and the opportunities offered by digitization could potentially transform offshore operations as well as enhancing productivity from existing capacity, making the industry more productive, more agile and more prepared for a sustainable future. What’s new is a number of technologies that have emerged over recent years outside of the oil and gas sector. The companies that really embrace this trend – utilising their data as an asset and scaling the application of digital technologies – will be the ones to benefit the most. US$75Bn. Those companies that simply view digitization as a technology play and fail to transform are likely to become digital dinosaurs and risk extinction. When applied to all major service categories within a play (or a region), this analysis is particularly powerful as it highlights where suppliers’ work rates varied. The customer found that they could determine where they were paying different rates for the same equipment in a specific play; they could ensure that they were always paying the lowest negotiated rates; and they could improve their negotiating leverage with some suppliers. The iconic image of “roughnecks” — overall-clad workers with oil-stained faces handling equipment on a drilling rig — has not changed much over the past few decades, even as the industry is recognized for its technological innovation. The growth of cloud computing services has also enabled companies to process massive amounts of data at relatively low cost. Digitalization is touching every part of Repsol; Upstream, including the development projects, exploration, downstream, the corporate center and it will change how we plan, we develop, we monitor and we are managing our businesses while we are at the same time improving margins and efficiency, lowering costs and delivering long-term value. Benchmarking data also illustrate the broad opportunity for improvement. PowerAdvocate started with an analysis of the customer’s third-party spend. In our earlier "Laggard or Leader"  insight we identified up to US$150bn in annual operating cost savings that could be achieved in the energy and natural resources sectors through digitalisation. They let you easily navigate your way around the site and allow us to improve its performance, or even recommend content we believe will be of most interest to you. Satyam Priyadarshy (Halliburton): The oil and gas industry started its digital revolution a decade or so ago.This first revolution is now known as digital oilfields or some variant of it. All stakeholders around new field development —including the host government and the oil service providers and contractors — need to be digitally enabled. As we’ve discussed, Lower 48 companies are more advanced in their adoption of digitalisation than their conventional upstream peers. The upstream oil and gas sector is well behind other industries when it comes to being digitally enabled. Reducing the current heavy reliance on paper is one of the most significant benefits of digitization in oil & gas, both in economic and environmental terms. But it will. Getting the right weighting between technical (the engineers) and technology (the data scientists and software engineers) capabilities is critical. PowerAdvocate believes that the foundation of successful digitalisation is good data. Research shows that average production efficiency dropped in the past decade, while the performance gap between industry leaders and other companies widened, from 22 percentage points in 2000 to around 40 percentage points in 2012. Identifying opportunities to spend more efficiently yields powerful savings, but PowerAdvocate also worked with this customer to help them to identify ways to hold costs steady in rising markets. To a large degree, it entailed digitization and some effort towards digi… From a technology perspective, the growth of data analytics coupled with the industrial IoT is generating new ways of optimizing workflows. Here are some guiding principles for operators starting out on a digital journey. Digital transformation is proving to be a true game-changer for Exploration & Production. What’s more, PowerAdvocate and this customer used the cleansed, enriched data set to do more sophisticated analysis about third party supplier productivity by adding information from production management and field data capture systems. Drilling for data: Digitizing upstream oil and gas. Best-in-class players do not incur higher costs to improve productio… Upstream executives are right to be sceptical of promises to transform cost structures; they have been burned before by these kinds of promises. You only need to look at what CEOs of the biggest oil and gas companies are saying to realise the strategic importance being placed on digitalisation. The oil and gas industry is not a stranger to this and is progressing towards digital maturity. The cost curve for tight oil has been materially lowered, and digitalisation has played a critical role. But there is a disconnect; the E&P sector is conservative when it comes to adopting new technologies. Yet look at a modern-day automotive manufacturing plant, where lines of workers assembling individual car parts already have been largely replaced by robots. He has over 20 years of experience in the oil, gas, utilities and mining sectors, working with the boards… Read More Simon Flowers is Chief Analyst and Chairman for Wood Mackenzie. Upstream technology and innovation solutions help you source, manage and advance strategic technology developments across the oil and gas value chain. Buy our reports to address business challenges and make better commercial decisions with objective insights, analyses and data. And E&P companies will likely not be the ones to develop new digital technologies and solutions; these will likely remain the preserve of the largest players with deeper pockets. The oil and gas sector has a relatively long history with digital technologies, notably in upstream, and significant potential remains for digitalisation to enhance operations. Natural resources research for financial services, Oil Field Services & Original Equipment Manufacturers, 2020 Featured Reports - Power & Renewables, The digital imperative: why upstream oil and gas is embracing advanced analytics, Visit the PowerAdvocate blog, Cost Insights. In the Upstream Oil and Gas digitization Survey, 66% of those surveyed believe analytics represents a transformational opportunity for their business but only 13% believe their company has fully mature analytics capabilities. Examples of these elements are 3D seismic technology, unmanned oil and gas installations in the Dutch and Danish parts of the North Sea, and advanced reservoir modeling. Look at what has been achieved. We've extracted oil from deep underground in the harshest offshore environments. From your experience, how should oil and gas companies see the current digital evolutions and how will business models in the oil and gas industry be impacted and changed? PowerAdvocate, Wood Mackenzie’s sister company, does exactly this. 5 Conclusions Mingaleva Z., Shironina E., Buzmakov D. (2021) Implementation of Digitization and Blockchain Methods in the Oil and Gas Sector. Source: U.S. Bureau of Labor Statistics The trend toward digital innovation is accelerating across the sector because companies are much more focused on cost and driving operational efficiencies in an era of relatively low oil prices. Statoil’s objective is to increase significantly its use of data, analytics, and robotics to improve safety, reduce its carbon footprint, and improve profitability. These analytical tools break down the procured equipment or service into component parts, which were modelled to the specifics of the customer’s business, down to the supply and demand dynamics in the Permian, for example, and to the specific technological configuration of the rig (stage length, pressure, and so on). IoT will enable companies to digitize, optimize and automate processes in mid-, up- and down-stream that were previously unconnected. PowerAdvocate did this by creating cost models for the customer’s key procured goods and services. Submit your details to find out more about how we can help you and your organisation. Yet technology and digitalisation are characterised by rapid adoption and fail-fast attitudes, with those able to adapt quickly capitalising. OEMs and rig owners are also at a crossroads as upstream oil and gas faces digitization. The upstream oil and gas sector is well behind other industries when it comes to being digitally enabled. Traditional operators are concerned by the emergence of unconventional players with differentiated, market-leading digital capabilities. It is setting up a digital center of excellence with a holistic road map for digitization stretching out to 2020. Moreover, advances in cloud computing and edge analytics mean firms do not need a supercomputer or a Supermajor's IT budget to capitalise on this opportunity. That’s the cost saving on offer from digitalisation in upstream over the next five years. Given the increasingly sensitive nature of offshore operations in terms of health, safety, and the environment, operators need to be sure digital technologies can be deployed without risk to operations. Always view this as a business-led — as opposed to a technology-focused — exercise. Our own experience confirms this significant potential. PowerAdvocate believes that the foundation of successful digitalisation is good data. Some challenges in the upstream oil and gas industry can be effectively resolved if we lay emphasis on the new interdependencies between senior management information, operational effectiveness and decision making. The upstream oil and gas sector has faced a variety of challenges such as unpredictable oil prices, changing patterns of demand and ensuring safe working conditions at remote sites. Aker BP, which aims to become a preeminent E&P independent player on the Norwegian continental shelf (NCS), sees digitization as one of the cornerstones of its strategy to improve efficiency and reduce full-cycle breakeven costs to less than $35 per barrel for new developments. Please see www.pwc.com/structure for further details. The company has committed an investment of 1 billion to 2 billion Norwegian kroner ($128 million to $257 million) in digital and emerging technologies, to be executed through the center of excellence. The analysis also provided more granularity on how that spending was composed of rig operating charges, rig standby time, and tools, materials, and consumables. Note the iconic hires for the NCS, such as Statoil recruiting a new chief digital officer. Each company needs to develop its own specific digital transformation road map. Putting Digitization in the Pipeline Oil & gas businesses face additional challenges in adopting digital technologies, which is slowing their adoption rate compared to other sectors. But how close is the industry to achieving this? With a total impact of $930 billion estimated from oil and gas within the next decade, it’s little surprise that the industry is showing huge interest in leveraging IoT. We use cookies on the public areas of our website. Combine these advances in technology with the fact that the sector is heavily focused on making productivity improvements, and it is easy to appreciate why companies are increasingly excited by the potential of digital solutions. Based on these figures, a graph was generated showing the distribution of fatal and non-fatal accidents in 2007 in the upstream sector. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. All dimensions of a company and its operating ecosystem (its suppliers and external partners) need to be digitally enabled. Digitization is Fueling Growth in the Oil and Gas Business Digitization is the buzzword in the oil and gas sector as it’s seen as transformative for the future of the industry. One key risk will be cybersecurity. 2015 marked the worst recession in the Oil and Gas Industry since World War II. At its heart, digital technology offers the industry, the opportunity to increase predictability, productivity and efficiency at all stages of the upstream value chain. ICIS 2020. Some major companies are already fairly far down this path. With a computing speed of 18.6 petaflops (a single petaflop computer can process a quadrillion calculations per second), this technology saves time and money by allowing analysis of exploration prospects to be done in weeks instead of months. If you would like to learn more about how we use cookies and how you can manage them, see our Cookie policy. In late 2019, Recab’s partner Congatec introduced a new rugged class of embedded edge server technologies designed for the digitization of the upstream and midstream oil and gas industry. This spending was structured and enriched, creating a new accurate, granular dataset. Eni has developed its own supercomputer, the HPC4, which is used to process data on oil and gas reservoirs. While large volumes of data in the past could be a problem, Big Data is now an asset. Many upstream companies have for some time been using elements of digitization, which we define as the strategic business value of data-based technology that includes the Internet of Things (IoT), cloud computing, and artificial intelligence. All rights reserved. Those operators that can design and embrace a digital strategy that works for them will be well-placed to succeed in a new digital era of oil and gas. Digitization of Oil and Gas Markets in 2019 - Understanding the Impact of IIoT-based Monitoring - ResearchAndMarkets.com December 18, 2019 08:39 AM Eastern Standard Time Find out when you purchase this insight. We believe there are huge prizes on offer at every stage of the upstream lifecycle. “Not your father’s oil and gas business: Reshaping the future with upstream digitization.”. In the not too distant future, the image of oil workers manipulating drill pipe on platforms could be replaced by something dramatically different. literature suggest that the oil and gas industry has begun major digitization initiatives. Generally, the digital oil field encompasses both the tools and the processes surrounding data and information management across the entire suite of upstream activities. Without good information, the other benefits of digitalisation, like lower-cost operations and better decision making, cannot be reliably produced. Senior executives need to make sure they have the right capabilities in place when it comes to the mix of engineers and data scientists. Statoil has launched a centralized and integrated digital improvement program. The Real-Time Production Optimization solution helps reduce deferred production by moving more oil, condensate or gas from wells to sales export. The staggering complexity of tasks like these has engendered an industry of innovators and inventors. As assets become increasingly connected to the network, it is important to protect critical digital infrastructure against cyber-attacks — by monitoring threats, identifying vulnerabilities, building robust controls, and promoting a culture of security awareness. Learn more. Digitization hasn’t quite yet ripened into a full-fledged revolution in upstream oil and gas. But how close is the industry to achieving this? For example, Aker Solutions is working closely with Statoil to develop the Johan Sverdrup field using data from a common digital twin. Days away from work in drilling oil and gas wells, by event, 2007 analysis for energy! During the digitization in upstream oil and gas of crisis Operator companies such as statoil recruiting a new digital. Past could be replaced by something dramatically different there is no one successful template. 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