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. 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. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. This analysis revealed that, in fact, one low-rate wireline supplier was nearly 40% less productive than a more costly, but more productive vendor, identifying a multi-million-dollar opportunity. Traditional operators are concerned by the emergence of unconventional players with differentiated, market-leading digital capabilities. The customer could then understand the competitiveness of their rates and negotiate accordingly. 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. 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. It is critical that the oil and gas sector attract and retain talent that is technologically focused. 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. Without good information, the other benefits of digitalisation, like lower-cost operations and better decision making, cannot be reliably produced. The value of data analytics is potentially transformative in the oil and gas industry. Cognite is in effect the oil services player of the future, focused on digital solutions with the objective of accelerating and driving digitization on the NCS. Benchmarking data also illustrate the broad opportunity for improvement. 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. Despite a deluge of digital advancements, upstream oil and gas companies have been slow to seize the opportunity. 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. By continuing to browse the site you are agreeing to our use of cookies. Unconventional players in the US, driven by the overall cost competitiveness of that market, are probably the furthest along the path to realising the benefits of digital transformation. Still, L48 operators have adopted Big Data initiatives and advanced analytics and been rewarded. We've extracted oil from deep underground in the harshest offshore environments. Decision making could be transformed, as the use of augmented reality and digital twins would underpin the simulation of “first oil” — the initial amount of oil that emerges from a field that’s being commercially drilled — before final investment decisions are made. As digitalisation permeates the upstream sector, successfully managing the cultural impact across organisations will dictate the success of digitalisation. 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 Oil & Gas industry is adapting to the new era of digitization which is rapidly changing the ecosystem in all areas of business but especially Upstream. The company is encouraging its employees to develop apps stored on common platforms to improve workflow processes. Conventional upstream has likely made the least progress, despite the size of the potential gains. In our latest research, we take a closer look at the likely impact on the upstream sector. This unconventional producer found US $1 billion of savings in their third party spend. Note the iconic hires for the NCS, such as Statoil recruiting a new chief digital officer. BP has stepped up its capabilities by building its own digital workforce and running digital boot camps for executives. 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. The biggest changes will be automated drilling technology, such as that being developed by Rockwell Automation, and predictive maintenance, like the solution offered by MapR and Mtell. Offshore oil production began with the Argyll field in the Central North Sea (CNS) in 1975. As a result of these activities, PowerAdvocate’s customer found US $1 billion of savings in their third-party spend. As we’ve discussed, Lower 48 companies are more advanced in their adoption of digitalisation than their conventional upstream peers. 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. We will reach a 7% reduction in production costs thanks to: advanced algorithms to ensure reduced asset downtime and higher production rates; and, predictive analysis systems, based on big data, which allow us to optimize maintenance, logistics and well operating costs. In so doing, it offers increased safety of our operations and profitability of our businesses. Drilling, performance monitoring, and production optimization could become highly automated. PowerAdvocate discovered a difference in productivity between two suppliers of 40%. 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. 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. Two good examples are Cognite, a technology company focused on upstream operations in the Norwegian part of the North Sea, and Baker Hughes General Electric, which was created in 2017 in an effort to industrialize digital capabilities. 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. Often during the time of crisis Operator companies such as Shell, Exxon Mobile, ENI, ADNOC, ARAMCO etc. Here are some guiding principles for operators starting out on a digital journey. Digitization hasn’t quite yet ripened into a full-fledged revolution in upstream oil and gas. look towards cutting cost, slashing jobs and requesting heavy discounts prices from the service providing companies such as … The analysis unlocked by this dataset was telling: PowerAdvocate found that hundreds of millions of dollars were incorrectly understood. Some of that has been through technologies that sort and operationalise data to unlock structurally lower costs. As illustrated in Exhibit 1, savings can be realized in operational excellence (such as more efficient maintenance and better operation of assets); in the supply chain; in the use of artificial intelligence; and in the use of integrated platforms (connecting the organization with external partners). As a first step, they are setting up pilots across their organizations to assess how best to apply digitization, as well as to identify the key digital capabilities that need to be developed. Recently, PowerAdvocate worked with a US-based unconventional producer to transform the way the producer understood and analysed third-party supplier costs. Our benchmarking analysis of North Sea offshore platforms illustrates the efficiency challenge that many oil and gas companies face. Everything from strategy and capabilities to organizational structure and culture will need to be considered and potentially reconfigured to reflect a digitally enabled business. PowerAdvocate, Wood Mackenzie’s sister company, does exactly this. It is setting up a digital center of excellence with a holistic road map for digitization stretching out to 2020. The upstream oil and gas sector is well behind other industries when it comes to being digitally enabled. Our own experience confirms this significant potential. 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. DUBLIN, May 28, 2020 /PRNewswire/ -- The "Radical Innovations Transforming Upstream Oil & Gas Industry" report has been added to ResearchAndMarkets.com's offering.. Now upstream companies can maximize oil production while minimizing gas lift, flare, energy consumption or other constraints. 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. We deliver real-time and historical data, forecasts, analytical insight, tools and software solutions. Here are a few examples: At the other end of the spectrum, there are smaller exploration and production (E&P) companies starting to explore digital transformation. 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. US$75Bn. ICIS 2020. US $75 billion each year. All stakeholders around new field development —including the host government and the oil service providers and contractors — need to be digitally enabled. At its heart, digital technology offers the industry, the opportunity to increase predictability, productivity and efficiency at all stages of the upstream value chain. We believe there are huge prizes on offer at every stage of the upstream lifecycle. Digital has the power to help the sector reap the most from its boom periods and avoid the worst damage when things go bust. There is no one successful digital template to follow. Subscribe to our trusted data and analysis for global energy, chemicals, metals and mining industries. Find out when you purchase this insight. The upstream oil and gas sector is well behind other industries when it comes to being digitally enabled. As we’ve said, energy firms are at different points in the digitalisation journey. All dimensions of a company and its operating ecosystem (its suppliers and external partners) need to be digitally enabled. Finding this balance between technical and technology capabilities is likely to prove one of the trickiest challenges for chief strategy officers and chief information officers. Some oil and gas companies still view digital technology as something peripheral to the core business. We help our clients address their most pressing strategic and commercial challenges. Yet technology and digitalisation are characterised by rapid adoption and fail-fast attitudes, with those able to adapt quickly capitalising. That’s the annual cost saving on offer from digitalisation in upstream over the next five years. We conservatively estimate that use of digital technologies in the upstream sector could result in cumulative savings in capital expenditures and operating expenditures of US$100 billion to $1 trillion by 2025. 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. The cost curve for tight oil has been materially lowered, and digitalisation has played a critical role. Senior executives need to make sure they have the right capabilities in place when it comes to the mix of engineers and data scientists. 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. 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. 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. The UK’s oil and gas sector is dominated by production from offshore areas, which account for virtually all of UK output1. The case for becoming digital Look at what has been achieved. That’s the cost saving on offer from digitalisation in upstream over the next five years. Those companies that simply view digitization as a technology play and fail to transform are likely to become digital dinosaurs and risk extinction. 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. But it will. Some major companies are already fairly far down this path. Moreover, the industry faces a complex set of challenges including geographically dispersed assets, legacy assets that may be in long-term production decline, and operator (the lead E&P company on a project) versus non-operator (a partner in an E&P project) status. OEMs and rig owners are also at a crossroads as upstream oil and gas faces digitization. In the past, capabilities may have focused on technical expertise to deliver excellence in engineering projects. The Real-Time Production Optimization solution helps reduce deferred production by moving more oil, condensate or gas from wells to sales export. While large volumes of data in the past could be a problem, Big Data is now an asset. Companies need to develop their own digital transformations because there is no “best practice” model in the sector to replicate. 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 staggering complexity of tasks like these has engendered an industry of innovators and inventors. 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. 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. Statoil has created a digital twin of the Johan Sverdrup offshore field to address troubleshooting and process improvements. The customer thought they were spending US $480 million on rig charges... their actual spend was 1.7x higher. We use cookies on the public areas of our website. Now, with a growing focus on data analytics, companies will need engineers who are more digitally savvy. At the start of the industry in the 1960s and 1970s production was dominated by a small number of very large fields, such as Inde, Leman, Forties, Brent, Ninian and Piper. Digital transformation is not a technology-led solution. We believe there are some basic guiding principles that companies should consider when developing their digital business models: In its 2017 Digitization & Energy report, the International Energy Agency estimates that digital technologies could cut production costs by as much as 20 percent. 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. 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. Operational excellence, with assets operated much more efficiently, could be achieved through the use of predictive maintenance and drone technology. The sector is starting to fully recognize that power, and more and more upstream companies are scrambling to seize it. The application of “digital twin” technology opens up the possibility of replicating physical assets from fields to equipment in digital form, allowing companies to model scenarios to optimize everything from production to maintenance. 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? Upstream technology and innovation solutions help you source, manage and advance strategic technology developments across the oil and gas value chain. The analysis also provided more granularity on how that spending was composed of rig operating charges, rig standby time, and tools, materials, and consumables. PowerAdvocate started with an analysis of the customer’s third-party spend. This transformation requires all aspects of the operating model (vision, strategy, process, culture, and behaviors) to encompass digitization. Mingaleva Z., Shironina E., Buzmakov D. (2021) Implementation of Digitization and Blockchain Methods in the Oil and Gas Sector. 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. As operators explore new ways of working, some companies will be pioneers in digital solutions, and others will be fast followers. 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