In a dynamic market scenario, refiners are looking to optimize their core operations and most say that digital technologies will be the key enabler to capture value. While refiners have been leveraging and utilizing digital technologies for years, the scope and potential for digital technologies across the downstream value chain is evolving. The question is now quickly changing from “can refiners afford to” to “can they afford not to?”.
Although the potential opportunities for digital are well known within the refining space, most companies continue to struggle with implementing initiatives at scale and therefore achieving the expected value from their investments. We are seeing digital maturity compressing with a drop of almost 3% in the refiners categorizing themselves as mature to semi mature.
Scope of digital technology evolving
Digital, defined here to encompass all digital technologies, is not new in refining. Many refiners claim high digital maturity as forms of artificial intelligence (AI) and automation have long been a bedrock of improvement in the areas of process controls and automation. However, as refiners increase their play in digital, we have seen four key investments categories:
- Further Advancing Process Controls: Most refiners are enhancing their existing digital technologies of process automation with big data and advanced analytics which has helped them shift from reactive solutions to proactive and predictive capabilities. Integrating analytics, ERP/next-generation platforms and IOT has enabled harnessing of physical data, visualization and alerting capabilities and building of accurate predictive models leading to increased reliability, better yield and savings on maintenance. In a recent Accenture survey of refiners, advanced data analytics is cited as the number one focus for margin improvement from digital with 62% of refiners stating this was driving the greatest improvement in 2019. Further, tools allowing collection of data in the field that have been in place for years are now demonstrating efficiency gains and added functionality. Further, with increasing AI / ML (machine learning) capabilities, we expect an increase in investments focused on enhancing real-time operational visibility, controlling variability, and improving yields and quality.
- Adjacent Tech: As digital technologies have improved in pricing and accessibility, many have been evaluating and expanding the use of digital leveraging data availability and analytics. With a focus on driving improved reliability and efficiency, some areas that have seen increasing maturity are predictive maintenance through enhanced asset analytics, increased plant automation and concepts like contractor tracking and enhanced mobile applications, which allow for increased time on tools across the workforce. As most look to expand the digital scope, the survey mentioned above reveals that 43% of the refiners aim to invest in greater plant automation while 26% are focused on worker mobility and tracking.
- Frontier areas: The next wave of technologies like quantum computing and augmented reality are rapidly taking shape with the potential to offer even more value for downstream companies who are poised to exploit them.
- Value chain integrators: An emerging focus has been the refinery’s role in the broader downstream value chain, with many players thinking more about the end to end process and how digital can help optimize the whole enterprise in addition to the previously mentioned advances inside the gates. Based on our experience, we believe that done right, a truly optimized end-to-end value chain can achieve 10 - 15% improvement in margins for downstream companies, but it is not an easy process.
While all the categories have differing approaches to leveraging digital technologies, they are consistently focused on the key value drivers of the asset—production planning and execution, maintenance and reliability, and engineering and capital projects efficiency.
Scaling of digital technologies remains a challenge
The perennial challenge remains in demonstrating and capturing the value expected from digital technologies as refiners struggle to integrate digital into their existing plant infrastructure and architecture.
However, the challenges to realizing scale goes beyond technologies and disparate configuration and architectures. We believe the core of the challenge lies in organizational complexities, from articulating value potential, to leadership alignment, to adoption intensity, to leveraging the right ecosystem.
Successful digital transformations in refining need to go beyond technology. Capturing and sustaining value is dependent on building strong and agile operating models to flexibly incorporate changes to process, workforce and mindset. Key success factors include:
- Value potential: Define a strategy focused on business value
- Leadership focus: Ownership of digital transformations at leadership level and executive commitment to a new culture
- Talent readiness: Build agile organizations to match agile implementations
- Ecosystem maturity: Leverage the digital ecosystem, for example?
- Adoption intensity: Focus on driving change to the front line and learn from doing
We will explore each of these in upcoming releases.