Towards the Digital Oilfield

Long considered a laggard in embracing the digital revolution, the hydrocarbons sector looks set to transform itself as energy companies scramble to make themselves ‘fit-for-fifty,’ that is still profitable at an oil price of merely 50 dollars per barrel.

Ironically for an industry often lauded for its technical prowess, the adoption of digital technologies has historically been patchy in the oil and gas sector, with the lion’s share of innovation confined to initiatives below ground and around the wellhead.

Scattered Solutions

Indeed, according to a report released last year by Deloitte, the industry registers a digital maturity rating of less than five out of ten: very low for an asset-heavy sector of such scale and strategic importance. So far, most digital initiatives in the hydrocarbons space have centered upon point solutions to aid discovery and extraction, rather than the holistic digitization of entire business operations. This means that digital solutions tend to be siloed, rather than being fully disseminated across energy companies’ supply chains.

There are a number of plausible reasons for this failure to optimize core workflows end-to-end. First of all, the industry’s assets tend to be highly dispersed and located in harsh environments where access to data is challenging and the requisite infrastructure lacking. Dependence on legacy systems and a hardware-intensive operating model further complicate the ability to capture data. At the very least, they present a radically different contextual environment to the conventional implementation of digital solutions in controlled, confined ecosystems such as warehouses and factory floors.

Many would argue that it’s actually only recently that the technology has reached an appropriate level of robustness. The consumer internet simply couldn’t have handled the sheer volume of data required by the oil and gas industry to become meaningful. Only with the onset of the Industrial IoT has this kind of solution become feasible.

Likewise, the increased affordability of sensors, data storage, and processing can be seen as having ripened the business logic. Hitherto, many industry managers had questioned whether they could justify the upfront investments required now that the free-wheeling days of the oil price super-cycle are over, and operators compelled to rein in spending.

The Times are Changing

Nonetheless, worsening oil price volatility and downward pressure on revenues now seem to be triggering an acceleration in digital adoption as oil firms scrabble to identify cost-efficiencies. The entire sector is struggling to create true value and faces demand and regulatory headwinds. These in combination with pandemic-induced disruptions, highlight a growing need for structural change. Indeed, the need for visibility and insight on cost and production, not to mention an integrated supplier-operator ecosystem to drive returns, has never been more acutely felt.

Consequently, it is hardly surprising that the global value of the digital oilfield market is projected to reach a whopping USD 28.5 billion by 2025. Certainly, there has been a flurry of recent investments by oil majors and juniors alike. Shell, for instance, has been busy embedding its industrial machinery with software and sensors which connect wirelessly to provide live data streams and which respond to digital commands. ENI has been deploying advanced algorithms to increase production rates, while Norwegian NOC, Equinor, has been experimenting with remotely operated offshore ‘ghost rigs.’

Predictive maintenance has become an especially sought-after capability with the realization that an AI-driven, proactive posture can significantly reduce downtime, correct suboptimal resource allocation, and assuage security concerns. HIMA, which provide smart safety solutions to nine of the ten largest oil and gas companies worldwide, for example, has witnessed an upswing in demand for digital systems that simultaneously guarantee safety and ensure high levels of production continuity.

Its Smart Safety Platform solutions for safety-critical production processes now empower energy companies to control processes dynamically on the basis of mathematical modeling with a view to operate plants much closer to the threshold while maintaining all-round safety. An important step in a time when cyberattacks are on the rise.

Fortune Favors the Brave

The rewards for entities bold enough to transition are vast. According to the calculations of IHS Cera, companies installing digital oilfields could realize up to 25 percent savings in operating costs and up to 8 percent higher production rates all within the first full year of deployment.

Expectations are that the true oil and gas winners of tomorrow, will be those firms bold enough to blend business process management with digital technologies, enabling them to maximize productivity while minimizing risk.