How Digital Transformation Supercharges the Oil and Gas Industry?
Currently, virtually all Oil & Gas companies have implemented some form of a digital transformation strategy to reap the potential advantages offered by Industry 4.0. Nonetheless, due to the impacts of fluctuating oil prices and the increasing urgency to transition to a low-carbon future, Oil & Gas operators must now accelerate their digital agendas and seize the potential benefits to optimize their competitiveness and sustainability.
Throughout history, the Oil & Gas industry has been at the forefront of technological advancements, which has even led to collaborations with NASA to leverage their intellectual property in support of space exploration missions. However, paradoxically, the industry now needs to catch up with other sectors that are adopting ‘Industry 4.0’ technologies. Despite the fact that most Oil & Gas companies have already initiated digital transformation strategies, many still require assistance to fully exploit the potential benefits promised by the fourth industrial revolution, and the pressure to catch up is growing.
The Digital Revolution in the Oil and Gas Industry
Across various industries, businesses are increasingly adopting technology to transform their operations, aiming to boost productivity, efficiency, and cost savings. The oil and gas sector is no exception and is actively working towards achieving digital maturity. However, there may be potential challenges on the path to digital transformation, and it is critical to address them. By creating a strategic roadmap, oil and gas firms can evaluate each operation and identify opportunities for digital advancements that align with their goals.
In the current era of digital technology, it is tempting to view it as a quick solution for tackling complex business challenges. For instance, the industrial Internet of Things, a key component of the broader digital transformation landscape, is projected to add $15 trillion in value to the global economy by 2030. Nonetheless, when an industry undergoes a significant shift, such as the shale revolution in the US midstream sector, companies must not only adopt a digital mindset but also derive tangible benefits from implementing digital transformation solutions for both their existing and new assets. [source: https://www.omv.com/en/innovations/digital-journey/digitup]
Market Segmentation
As of 2023, the market for digital transformation in the oil and gas sector was valued at USD 26.45 billion, with North America holding the largest regional market share worth USD 9.32 billion. According to Technavio, the market is expected to expand at a CAGR of 16.56% from 2023 to 2027, resulting in an estimated growth of USD 58.66 billion. This growth is likely to be fueled by increased investments and partnerships, as reported in a press release by Technavio.
Key Challenges to take
Oil and gas operators encounter various challenges in their operations and value chain, and while some are unique to their facilities, several are widely experienced across the industry. These challenges include:
- Data and Infrastructure
Decision-makers are increasingly concerned about data quality, management, and actionable insights due to rising data volumes and security risks. However, data is often scattered across various systems and lacks consistent structure, integration, or a cohesive “cloud strategy.”
Solution:
To address this, organizations need to enhance master data management, governance, and security. By establishing master data management and governance principles, they can ensure that data is secure and organized, of sufficient quality, and available in real-time for all employees and machines. Data governance must prioritize the ongoing evaluation and improvement of data assets to enable effective data mining and avoid the pitfalls of theoretical interoperability.
- Business Case Realization
Establishing the actual return on investment and developing a data-driven business case to gain stakeholder buy-in can take time and effort. Organizations often face challenges in defining and monitoring use cases and demonstrating tangible value under tight deadlines, leading to lost momentum. Moreover, collaboration across business units can be complicated when digital maturity and infrastructure levels vary.
Solution:
Organizations need to design a holistic and coordinated digital program that aligns with their overall strategy. This approach is typically more effective for an entire organization, although certain business units may require a tailored approach and infrastructure. Implementing digital strategy and transformation across teams and functions, rather than in isolated areas, can result in greater benefits for the organization. While use cases may differ across the organization, core technology enablers such as cloud and application development tools can be standardized and integrated.
- People, Organization, and Culture
Encouraging the adoption of digital technologies and solutions within an organization, including establishing new behaviors, methodologies, and approaches can be difficult and may result in low user acceptance. Digital strategies often need to consider the availability of talent in the right areas and the requirements for driving end-user adoption.
Solution:
Organizations should adopt an agile culture that promotes a positive attitude towards failure and the ability to quickly pivot and learn from missteps. By embracing failure and encouraging teams to experiment and pivot quickly, organizations can cultivate a culture of innovation fundamental to agility. This approach can help organizations to drive innovation and encourage the adoption of new digital technologies and solutions.
Big Tech Transformation Ideas for CEO
Here’s a possible rewrite:
CEOs of oil and gas companies can take decisive steps to overcome the obstacles to digital transformation. These steps include:
- Prioritizing value creation over technology
Successful digital transformations always prioritize value creation. Oil and gas CEOs should be clear about the business problems they want to solve and the results they want to achieve through digitization. Digital and analytics have proven to be effective across the oil and gas value chain, as demonstrated by the industry’s digital pioneers.
2. Keeping up with shifting supply chains
Digital projects have had a significant impact on oil and gas companies, with many using optimization techniques such as AI to improve operations. For example, implementing an AI system at a refinery and petrochemical complex can predict optimal operating conditions in real-time, optimizing factors such as coil outlet temperature, suction pressure, and steam velocity to increase production and overall margins. Advanced analytics approaches like this can generate significant value for the company within just 18 months.
3. Building the right infrastructure
Oil and gas companies have complex and dispersed technology infrastructures, relying on a combination of modern and legacy IT and OT systems that distribute business-critical data across various systems. Accessing, interpreting, and ensuring the quality of this data can be challenging and inconsistent, creating an unstable environment for digital transformation. Successful organizations aim to comprehensively revamp their infrastructure to support frontline digital initiatives.
Conclusion
In summary, as oil and gas companies prepare for the new normal post-pandemic, accelerating the implementation of digital strategies is crucial for reaping the benefits of Industry 4.0. A solid digital strategy is only valuable if it’s implemented effectively. Weak strategies executed well are better than solid strategies that are never implemented.
For more information, connect with Gyan Consulting.
