I was recently asked if I thought that the oil and gas industry would bounce back once the world is rid of the coronavirus. It was a question prompted by the sharp decline in activity in several oil-and-gas-dependent sectors such as transportation. The coronavirus and its subsequent impact on the price of oil have injected a sense of uncertainty into the industry, prompting many to speculate as to what will happen once the pandemic abates.
Rather than asking if we’ll bounce back, I’d prefer we focus on how fast we can learn from the challenges and move forward. The oil and gas industry has come to a point at which there is no turning back. The pressure to transform was mounting long before COVID-19 entered our vocabulary. Recent events only highlight the urgency of it.
It is an urgency that stems from new regulation, increasing financial pressure, and growing societal expectations. From the Paris Agreement to the UN’s Sustainable Development Goals, the world has come to terms with the fact that our planet is not immune to human impact and that we need to take measures to mitigate our damage to it. For oil and gas, that means transformation, in both the short and long term, all the while remaining profitable and competitive.
In the shorter term, the world is not able to fill the void that going completely fossil-free would create. Oil and gas are still key components of the global energy system, driving both social and economic development in much of the world. That means that while our dependency remains, the extraction of this natural resource and its subsequent processing need to be done as safely, efficiently, and as carbon-friendly as possible. That’s where technology stands to play a pivotal role.
For oil and gas operations, achieving near-term, sustainable success will require three things.
Optimizing the use of data for increased transparency. There are savings to be had across oil and gas operations. In 2017, global management consultant McKinsey & Company reported that the industry’s performance gap was around $200 billion and that most offshore platforms are only running at 77% of their maximum potential. This means that there is significant ground to be gained. Today, we have the tools available to capture this value, to extract the data, and identify where there is waste and where there is opportunity. This kind of accountability is possible only if you are transparent with your data, which requires the right tools to uncover it, understand it, and share it.
Several oil and gas players today have already cracked the code to learn how to use data to ensure more sustainable operations. By gaining an understanding of the inherent power of data flowing through their operations and by embracing transparency around that data, they can harness it to their advantage. Norway-based oil and gas operator Aker BP is one such example. Working with Cognite, it recently implemented machine learning to improve water-contamination detection, saving $6 million per year and reducing the company’s environmental impact. The massive savings for both the companies and the environment was achieved with the smarter and more open use of data.
Leveraging more efficient processes. Sustainability is about improving the effectiveness of operations while reducing costs and energy consumption. Maintenance and integrity work is one area that is being transformed with digital technology. Costs have dropped significantly over the years for smart technologies such as sensors, field devices, and wireless connectivity, making it possible to use data from sensors or to capture images through devices to make better and more informed decisions. By bringing all the information sources together into a shared platform, operators have greater insight into the entire operation and can more readily anticipate problems.
Based on our experience, when an oil and gas operator and its vendors are able to share live data to prevent issues from happening, the savings are significant. Our findings show that streamlining maintenance routines can reduce overall maintenance needs by 30% and shutdowns by 70%. Less maintenance work not only saves costs but also benefits the environment by reducing emissions and resources related to the production and transportation of new parts and the disposal of wastes.
Scaling digitalization across operations. It is easy to use the data to extract value across operations, such as with water contamination or maintenance routines. The real challenge is attempting to scale the data. The companies that do this successfully are the ones that acknowledge that this is a cultural shift for the organization. This shift will not happen overnight, but instead should be seen as a learning journey. The employees must mature along with the digital solutions, making digitalization an inclusive process from day one.
A partner of ours told us that “… while there is a benefit in automating workflows … that same data can later be leveraged by digital twins to optimize maintenance decisions or ultimately, be leveraged by machine-learning algorithms to optimize portfolio performance.” She referred to this as “blowing the roof off” of the operation, to see it holistically, to find the efficiencies, cut the waste, and make everything flow better, together.
Crystal Ball Not Needed: Renewables Are the Future
The three steps mentioned above give oil and gas operators a chance to operate sustainably and profitably as they head toward their ultimate transformation to renewables. This is the long-term journey for energy providers who must prepare for the day when the world is no longer fueled by petroleum but rather by wind, sun, and water. It is an inevitable shift, and one that still holds the promise of a profitable future.
Oil and gas providers are positioned to bring other energy forms into their mix. Norwegian oil and gas operator Equinor referred to this as its “dual mindset”—filling the energy demand today as efficiently as possible while preparing for a green and carbon-free energy future. Companies are slowly turning away from their label as “oil and gas operators” and instead are opting for a more inclusive nomenclature such as “energy providers.” While much of the offshore engineering expertise can be reapplied to wind farms, for example, a strong digital foundation is truly what makes the energy transition possible from an internal perspective.
I speak to oil and gas operators around the globe who are disrupting the status quo and embracing a roadmap by which they will retire one form of energy in favor of another. But many of the same skill sets and technology staples will still apply. The renewables operators of the future will require strong safety and integrity routines, skilled engineers, and a broad digital mindset across the company. A former Shell employee was quoted in The Guardian as saying, “There’s no magic to renewable technologies … Managing a wind farm or solar project is nothing a good oil and gas [person] who has built or organized facilities cannot manage.”
Data are the most powerful driver of sustainability in the energy industry. Without data, sustainability is just another buzzword. I believe that sustainability and profitability can go hand-in-hand and that energy operators need to unlock data-driven opportunities to make their operations safer, smarter, and more sustainable in the long run. When you understand the impact of your operations and embrace transparency around your data, you are better equipped to take transformative action and “bounce forward” rather than backward. It is this increased speed in realizing actual value that can have a significant benefit to your bottom line, now and in the energy future.
Francois Laborie is Cognite’s North American president. He has had an extensive career in the technology industry, serving in both research and executive roles. He spent 11 years as chief operating officer and chief commercial officer of Vizrt. Before that, he managed research projects on collective decision-making and human-computer interfaces at the Airbus Group Corporate Research Centre. Laborie holds master’s degrees in computer science and engineering from the National Institute of Applied Sciences and a PhD from the Toulouse Institute of Computer Science Research.