Thinking about Optimization and Automation
Enhanced connectivity has potential to boost performance across the entire upstream oil and gas value chain by enabling optimization and automation.
Optimization involves using all the relevant data to inform better decisions at a certain regular frequency. Pushing the limits on optimization means getting more data and crunching it faster, which requires more sensors to collect data, more bandwidth, and more computing capacity.
Automation involves using automatic or semi- automatic machines instead of individuals to drill, inspect, and maintain equipment in high-risk operating environments like offshore or onshore sites of drilling and production. These machines can monitor themselves and share data with an onshore control center, where most of their activities are managed remotely, though it requires bandwidth and to transfer the most relevant data back to base.
To illustrate the diversity of the opportunity facilitated by advanced connectivity, we can illustrate five themes: drilling time, production, smart predictive maintenance, enhanced field operations, and planning enhancement. Each one is a combination of smaller use cases that, in our experience of working with the oil and gas sector for the last twenty-five years, have the largest upside potential for a typical upstream oil and gas operation. They all have an element of optimization and automation and drive down cost per barrel. In these areas alone, some $250 billion of additional or incremental value is at stake globally, as well as a potential major contribution on the reduction of greenhouse gas emissions and greater operational resilience.
The experiences of industries more mature in the deployment of connectivity suggests three approaches to unlock value from technology at scale, using enhanced connectivity:
1. Invest in human capabilities and future technologies
Digital enablement requires new skills to deliver the promise of our use cases in the oil and gas sector. Translators—individuals who can connect business problems with analytic approaches— will need training and, more broadly, industry mindsets and behaviors toward data-driven decision making will need to shift. Some talent, like robotics experts and product designers, may need to come from outside the industry.
Capitalizing on the potential of connectivity technologies requires investment in data interoperability, augmented reality, autonomous vehicles, and robotics and instrumentation connected by wireless networks.
2. Rethink business models
Unlocking digital and analytics values using enhanced connectivity will require changes in the structure of the value chain. Using connectivity technologies, companies could begin relying on shared, basin-wide planning and inspections, a radical departure from industry norms today. Relationships within the value chain will need to change too. For example, oil companies today pay drilling operators by the day, which provides contractors with less incentive to prioritize efficiency and reduce how long it takes to drill a well. The industry structure would need to change to release and share the value created with analytics and connectivity— among operators and drillers, in this case, and with suppliers, more broadly.
3. Incentivize digitalization
Regulation can create incentives for enhanced digital capabilities in the sector. For example, tighter regulation of emissions from operations and the supply chain could spur investment in connectivity to monitor and reduce emissions.
Regulators could encourage data sharing and help orchestrate labor education and
reallocation opportunities for workers affected by automation. In regions where driving down cost is imperative to remain competitive, regulation could be adjusted to accelerate pilot projects.
Oil and gas price and demand pressures in the middle of the Global Energy Crisis following the Ukraine war, make the potential value embedded in current advanced connectivity for exploration and production more important than ever. That will require sizeable capital investment in new capabilities and technologies, albeit not nearly as much as the industry has traditionally devoted to capital expenditures, much in line with the last 6 to 8 years trend. It will also demand significant shifts in the industry’s organizational culture, data and labor practices, and business models and ecosystems, as well as potential changes in regulation. It is, in other words, a tall order. Still, the hundreds of billions of dollars of potential value, this could unlock make such investments and evolution worthwhile.
IF YOU WOULD LIKE TO KNOW HOW A|F CONSULTING PARTNERS CAN HELP YOU WITH DIGITAL TRANSFORMATION AND OTHER CRITICAL ISSUES OF THE O&G UPSTREAM INDUSTRY, DO NOT HESITATE TO CONTACT US.