Contributors: Cole Jackson and Yei Sung Kim
Remote locations, siloed planning and isolationist practices currently make it challenging for upstream oil and gas supply chains to integrate complex networks of suppliers, logistics providers and service companies. Implementing advances in collaboration could result in major gains for upstream oil and gas ecosystem partners.
Innovative digital technologies are paving the way for tomorrow’s connected supply chain. Enabled by Internet of Things (IoT) sensors and cloud-based data architectures, exploration and production companies (E&Ps) and oilfield and equipment services (OFES) providers could benefit by collaborating to realize a holistic approach to data driven decision making throughout the value chain.
By gathering, sharing, and analyzing data across the full network of partners, the industry could create highly collaborative supply chains that improve time to revenue, maximize well-to-customer profitability for assets and optimize production throughout the well lifecycle. The Permian Basin, with its projected growth in drilling activity and complex system of ecosystem partners, is a great example of a region in which E&Ps and OFES providers have the opportunity to improve operations through collaboration. Accenture estimates the synergies over five years in the Permian Basin could unlock up to $11 billion in incremental value.
Many players view data as highly proprietary and hesitate to share it. Competing companies, for example, typically do not share drilling performance data for fear of losing competitive advantage. However, blockchain, a secure distributed-ledger technology that allows for safe transfer of data without the control of a central authority, could allow ecosystem partners to define who gains access to specific nodes of data, thereby eliminating the risk of unintended data leakage. Richer data and closer collaboration could enable parties to make well-informed decisions to optimize costs while delivering higher service quality, which by far will outweigh the perceived advantages of hoarding data.
The benefits of a well-connected ecosystem extend throughout the well lifecycle. Currently, in the capital project stage, the costs associated with delays in the development timeline are difficult to calculate, are not tracked, and are not modeled for proactive decision making. This leads to sub-optimal project planning and execution, which we calculate translates to roughly $2.5 billion in avoidable costs over the next five years. In a highly collaborative system, data could be instantly shared with E&P suppliers and integrated into demand plans, thereby allowing higher utilization of resources and equipment, and improving the ability to meet project timelines. Real-time sharing of data could, in essence, enable a “self-healing” supply chain in which vendors proactively forecast and communicate delays that trigger automated signals. Response options with built-in risk and cost models could allow E&P companies to make decisions that optimize capital-project execution and reach first oil more efficiently.
Today, when a well moves to the production stage, suppliers and customers use disparate systems. Holistic integration of historic and real-time production data at the field level, along with supplier performance trends, could enable analytics-powered insights that allow E&P companies to optimize production decisions and supplier choices. Deep learning technologies have the ability to automate and improve critical decisions, such as when to schedule maintenance or enhance production at a well. As decisions become increasingly automated and streamlined, blockchain technology can provide a frictionless, purchase-to-pay process by tracking transactions on a distributed ledger and completing them instantly, rather than continuing with today’s tedious invoicing process. Operators would be able to shift to profit-driven optimization for well-intervention plans, and OFES providers could improve fleet utilization to maximize return on capital employed (ROCE), which Accenture projects could capture up to $8.5 billion of incremental revenue.
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As the consortium of players expands to multiple E&Ps and OFES providers, the advantages of the connected upstream oil and gas supply chain will grow. Accenture analysis suggests that as early as 2023 in the Permian, $11 billion in incremental value could be captured: $2.5 billion in development costs and $8.5 billion in the production phase. An intelligent, self-healing and frictionless upstream supply-chain ecosystem, in which data is freely shared, will enable E&Ps and OFES providers to collaborate to optimize costs and deliver superior performance.
The upstream ecosystem is poised to adopt a collaborative mindset, and the E&P and OFES partners that embrace this concept early will be the leaders in capturing these benefits.