Digitalization Tops 2019 Industry Investment Survey

Digitalization leads oil and gas research and development investment priorities, according to DNV’s 2019 annual outlook.


According to the latest annual survey from industry technical advisor DNV-GL, digitalization is a strong No. 1 in the top ten research and development (R&D) priorities for oil and gas investments in 2019, and challenges have shifted from barriers of adoption to those related to increasing adoption.

Forty-five percent of survey respondents said they would invest in digitalization this year—more than twice the 21% who said they would invest in the second-ranked priority, subsea technology. Thirty-six percent of senior oil and gas professionals and 60% of total respondents said they plan to increase investment this year, from R&D to full-scale implementation. The prevailing sentiment is that digitalization is crucial to providing the long-term efficiency and productivity gains the industry needs to maintain its competitiveness over the declining cost of renewable energy over the coming decades.

Value Creation
A 2017 report by the World Economic Forum says digitalization has the potential to create approximately $1.6 trillion of value for oil and gas firms. Three-quarters of companies now say their organizations need to embrace digitalization to increase profitability, compared with 49% in 2017.

Examples of tangible value creation from applying digital technologies to project and operations are growing. Songha Offshore has connected as many as 600 sensors in each of its four oil rigs in the North Atlantic Basin to help cut maintenance costs and increase operational productivity. ADNOC’s Thamama Subsurface Collaboration Centre in Abu Dhabi can monitor as many as 120 live drilling sites simultaneously, comparing performance with historical data to improve rig efficiency and ultimately reduce drilling cost. In the UK, the National Grid will add more predictive maintenance to assets.

Another key area for value creation is in ongoing maintenance for century-old US pipeline structures. “We are building a pipeline data hub that will be the key repository of knowledge for the development of the next generation of tools, processes, and personnel for the industry,” said Cliff Johnson, president of Pipeline Research Council International. “It is an effort to use everything we have learned in the last 60 years to help us in the next 60 years, and AI [artificial intelligence] and other digital tools are fundamental to that.”

Collaborative Tool
Cost pressure is another driver of growing investment in digitalization, with 60% of survey respondents saying it will drive greater collaboration between their organizations and others and that digitalization has the potential to make collaboration easier, particularly for large organizations with projects that involve coordinating thousands of employees and contractors.

Petronas Gas Chief Executive Director Kamal Bahrin Ahmad said that using pervasive wireless technology enabled the company to track the movement and location of every employee and contractor working in the plant during a recent turnaround, improving productivity and raising confidence around managing everyone’s safety. “Ultimately, this digital solution will help to drive cost efficiency in addition to safeguarding our people,” Ahmad said.

Data as the New Priority
While some barriers to adoption are falling, others are on the rise. According to DNV’s research over the past 3 years, bureaucracy and insufficient funding have diminished as barriers and senior management has become more aware of the benefits of digitalization. In their place are new challenges that are symptomatic of increasing adoption. These include a lack of required skills, cybersecurity, and data access and reliability.

The report cites data access and reliability as fundamental as both a barrier and an enabler. As organizations become more aware of the extent to which they are dependent on their data, they realize the imperative of being able to trust its quality while also being able to control sharing it across and outside the business to achieve the best outcomes on their investment.

In fact, according to the survey, the top three priorities within the industry’s 2019 digitalization agenda relate to data sharing, integration, and access. Two-thirds of total survey respondents and three-quarters of those in Asia Pacific countries said their company will prioritize data quality and availability this year.

China National Petroleum Corporation (CNPC), for example, has established a large-scale SAP database to improve data integration, quality, and access times. Through its new A6 Exploration and Development Integrated Research and Application platform, the company intends to integrate all the core data from the entire upstream business into a single platform. According to Yuan Zhengang, deputy director of the China Petroleum and Petrochemical Energy Institute, the A6 platform will enable CNPC to share data from all its oil and gas fields and its research institutions. “The data is standardized and structured, and the data quality can be guaranteed and fully shared in real time,” he said.

The growth of collaboration and data sharing among organizations brings with it an exponentially growing need for cybersecurity. The DNV report cites several reports of industry security compromises over the past 3 years involving information loss, operational disruptions, or both. According to the survey, 49% of companies are increasing their spending on cybersecurity in 2019, with a further 36% maintaining their current level of investment, and larger companies are increasing spending at a faster rate than smaller ones.

An increasing use of contractors prompted a warning from the authors of the report. “With 42% of large companies planning to increase their use of contractors in 2019, there is a rising risk of cyber vulnerabilities created by collaborations with smaller players that have not invested sufficiently in their digital defenses,” the report stated.

The report concludes that most in the industry understand that digitalization is not an overnight solution to all their problems and that the industry will rise to overcome the challenges it presents. In the meantime, automation, data insights, predictive analytics, situational awareness, and advanced process control are bringing welcome incremental benefits.

Find DNV's Industry Outlook 2019 report here.