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May 02, 2016
The Digital Oil & Gas Sector: A sustainable path to growth
By: Jean-Marc Ollagnier

We’ve all seen the headlines about cancelled or postponed capital projects and workforce reductions in the oil and gas industry, but it’s still not enough. While necessary, these tactical cost cutting measures are not the answer by themselves. The lengthy price slump calls for re-planned portfolios, a greater degree of business transformation and restructured operating models.

These include continued digital transformation of field operations, assets, and oilfields, and a digitally-augmented workforce that goes far beyond what we have seen in recent years. Today, digital technology can assist producers to meet the requirement of cutting costs. But more than that, companies that use these technologies to simplify, automate and optimize operations will be at the forefront of transforming the industry to ensure they thrive in a volatile market.

This is now apparent among key decision makers.  A significant majority (72 percent) of oil and gas executives surveyed by Accenture and Microsoft this year identified cost reduction as the most important business challenge that digital can help address, with 50 percent planning to spend more or significantly more on digital technologies over the next three to five years than they do now.

However, time is short, if companies want to get the maximum benefit from digital technologies for managing a prolonged period of lower oil prices and for preparing for an industry up-cycle. They need to act now to start gaining the benefit. Many have already implemented and extracted value from digital initiatives, including technologies like the cloud and mobility in field operations, but in many cases these are simply opportunities for short-term cost reduction, rather than driving greater long-term value.

Based on the findings of our survey, we anticipate that over the next three to five years, many upstream oil companies will focus more heavily on technologies that will not only improve and speed up decision-making, but also give them far more agility.  Further exploitation of analytics and the Internet of Things (IoT) will be key in this regard.

One of the leaders in this area, Woodside, the Australian oil and gas company, is using an end-to-end predictive analytics solution for maintenance and process-control in production operations across its LNG assets. This is a major step toward delivering real-time actionable insights. In fact, Woodside is making analytics pervasive in decision-making and establishing models specifically to drive proactive maintenance strategies and support decisions to enhance production, safety and risk management capabilities.

Decision-making will not only become better but faster, with further implementation of IoT technologies and the rise of the connected asset and connected worker. Wearable technology, collecting data, will be aggregated with historical data from multiple sources, and through the prism of analytics, facilitate better decision-making in the field.

Once combined with low cost sensors, network communications and cloud platforms, many thousand more oil wells can be instrumented and managed effectively and at low cost. And once this scale is achieved, data can be gathered, evaluated and mined to gain even greater business insights.

We’ll also see more autonomous operations with the advent of robotics, including aerial drones and artificial intelligence. And everything done with digital technologies will require cyber security detection and protection, as I described in last month’s Forbes article.

It’s encouraging that a number of upstream oil companies, like Woodside, have been innovators, pushing the boundaries to break new ground in challenging environments. While some may have been slower to embrace digital than in more consumer-facing industries, energy companies need to be firmly in the race now. It’s a valuable way to weather the current storm, and ultimately thrive in a fast-changing future dictated by volatile commodity prices.

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