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July 22, 2016
Ignite the digital fuse: Why upstream oil and gas CEOs should look to digital as a key strategy for success
By: Vivek Chidambram

In the future, powered by digital, exploration and production companies can profit from the ability to analyze massive amounts of data in real-time, and harness machine-learning and artificial intelligence for better and faster decisions. In addition to providing customers with energy and services (e.g., renewables, hydrocarbons and storage), companies in the E&P ecosystem also could profit by establishing business units to manage, process and sell troves of upstream data.

Technology breakthroughs transformed businesses in the 20th century, and the pace of innovation continues to accelerate. As digital technologies become more pervasive, data creation and replication are expanding exponentially. It is estimated that 90 percent of global data supply has been created in the past two years,[1] with 2.5 quintillion bytes created daily.[2]

Digital will help enable E&P companies to achieve goals such as these using less than a third of the capital demanded by the hydrocarbon economy per unit of revenue. This achievement, however, begins with leaders understanding emerging developments and effectively communicating the possibilities to inspire digital transformation.

Chief executive officers can lead the digital charge across five areas (see diagram):

Agile business models. Companies that win will be fast at identifying opportunities and flexible in capturing value (e.g., PE ownership and expert operator model; basin pooling of resources).

D3 power. That’s shorthand for digital-data-driven capabilities. Organizations will capture and share information across departmental boundaries, thereby strengthening competencies, collaboration and common purpose.

Decision making in real time. Integration of digital data is a prerequisite for automated classification, machine learning and artificial intelligence, all of which can be aligned to support better business decisions in real time.

Liquid workforce. Organizational boundaries will be increasingly fluid and, as the pace of innovation accelerates, oil and gas organizations need employees, service suppliers and contingent workers who embrace change and adapt.

Flexible partner ecosystem. The more liquid nature of the future workforce is a quality that also will be seen among partners and customers. Roles are blurring and responsibilities are shifting due to trends such as asset sharing, data access, mobility and distributed generation.

Successful adaptation will require fundamental shifts in strategy and operating models. Exploration and production companies that continue to rely on asset ownership, rather than focusing on highly effective service delivery, are likely to be at greatest risk amid digitally powered disruption.


Footnotes:

[1] "Big Data and What it Means, September 9th 2015 " US Chamber of Commerce, © 2016 US Chamber of Commerce Foundation, https://www.uschamberfoundation.org/sites/default/files/article/foundation/BigData.pdf

[2] "Breaking Down the Basics of Big Data" US Chamber of Commerce, © 2014 US Chamber of Commerce Foundation, https://www.uschamberfoundation.org/blog/post/breaking-down-basics-big-data/34378

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