The application of “digital twin” technology opens up the possibility of replicating physical assets from fields to equipment in digital form, allowing companies to model scenarios to optimize everything from production to maintenance. Examples of these elements are 3D seismic technology, unmanned oil and gas installations in the Dutch and Danish parts of the North Sea, and advanced reservoir modeling. And given that drilling exploration wells can cost hundreds of millions of dollars, drilling in the right place can yield sizable savings. It is setting up a digital center of excellence with a holistic road map for digitization stretching out to 2020. Based on these figures, a graph was generated showing the distribution of fatal and non-fatal accidents in 2007 in the upstream sector. The customer could then understand the competitiveness of their rates and negotiate accordingly. Although many oil and gas companies are trying out new digital ways of working, no one can claim to have “cracked it” just yet. 2015 marked the worst recession in the Oil and Gas Industry since World War II. As illustrated in Exhibit 2, next page, digital technologies could affect all elements of the value chain in a future E&P company. US$75Bn. One key risk will be cybersecurity. To a large degree, it entailed digitization and some effort towards digi… DUBLIN, May 28, 2020 /PRNewswire/ -- The "Radical Innovations Transforming Upstream Oil & Gas Industry" report has been added to ResearchAndMarkets.com's offering.. As we’ve discussed, Lower 48 companies are more advanced in their adoption of digitalisation than their conventional upstream peers. BP has stepped up its capabilities by building its own digital workforce and running digital boot camps for executives. ICIS 2020. The reason for this fairly piecemeal approach to date is the industry’s aversion to catastrophic risk, which is well known. PowerAdvocate discovered a difference in productivity between two suppliers of 40%. “Siloed” digitization does not provide the cross-functional insights across multiple assets that are needed to drive efficiency and value at the enterprise level. Mingaleva Z., Shironina E., Buzmakov D. (2021) Implementation of Digitization and Blockchain Methods in the Oil and Gas Sector. Satyam Priyadarshy (Halliburton): The oil and gas industry started its digital revolution a decade or so ago.This first revolution is now known as digital oilfields or some variant of it. Digitization is Fueling Growth in the Oil and Gas Business Digitization is the buzzword in the oil and gas sector as it’s seen as transformative for the future of the industry. The sector is starting to fully recognize that power, and more and more upstream companies are scrambling to seize it. In the past, capabilities may have focused on technical expertise to deliver excellence in engineering projects. As a result of these activities, PowerAdvocate’s customer found US $1 billion of savings in their third-party spend. Looking beyond the financial benefits of digitalisation, there are opportunities to improve health and safety across the industry by  moving workers from the field to the office. Sign-in to our platforms to access our extensive research, our latest insight, data and analytics and to connect to our industry experts. Best-in-class players do not incur higher costs to improve productio… Those operators that can design and embrace a digital strategy that works for them will be well-placed to succeed in a new digital era of oil and gas. We also need to appraise and understand their impact on our overall profit margins. Statoil has created a digital twin of the Johan Sverdrup offshore field to address troubleshooting and process improvements. We believe there are some basic guiding principles that companies should consider when developing their digital business models: In its 2017 Digitization & Energy report, the International Energy Agency estimates that digital technologies could cut production costs by as much as 20 percent. Crude oil was traded as low as $30/bbl[1] in the third quarter of 2015. Digital transformation of a company needs to be holistic and address all the elements of the operating model. The difference between the two images is clear. He has over 20 years of experience in the oil, gas, utilities and mining sectors, working with the boards… Read More Simon Flowers is Chief Analyst and Chairman for Wood Mackenzie. As a first step, they are setting up pilots across their organizations to assess how best to apply digitization, as well as to identify the key digital capabilities that need to be developed. Drilling for data: Digitizing upstream oil and gas. As with all new business models, there will be associated risks. Moreover, advances in cloud computing and edge analytics mean firms do not need a supercomputer or a Supermajor's IT budget to capitalise on this opportunity. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. The upstream oil and gas sector is well behind other industries when it comes to being digitally enabled. It is critical that the oil and gas sector attract and retain talent that is technologically focused. Please see www.pwc.com/structure for further details. © 2019 - Sat Dec 19 19:43:00 UTC 2020 PwC. This unconventional producer found US $1 billion of savings in their third party spend. Reducing the current heavy reliance on paper is one of the most significant benefits of digitization in oil & gas, both in economic and environmental terms. In our latest research, we take a closer look at the likely impact on the upstream sector. The oil and gas industry is not a stranger to this and is progressing towards digital maturity. Distribution of injuries and illnesses with days away from work in drilling oil and gas wells, by event, 2007. Upstream technology and innovation solutions help you source, manage and advance strategic technology developments across the oil and gas value chain. In our earlier "Laggard or Leader"  insight we identified up to US$150bn in annual operating cost savings that could be achieved in the energy and natural resources sectors through digitalisation. The customer thought they were spending US $480 million on rig charges... their actual spend was 1.7x higher. Now upstream companies can maximize oil production while minimizing gas lift, flare, energy consumption or other constraints. All rights reserved. Digital transformation is not a technology-led solution. For example, Aker Solutions is working closely with Statoil to develop the Johan Sverdrup field using data from a common digital twin. Customer Logins Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Our own experience confirms this significant potential. Decision making could be transformed, as the use of augmented reality and digital twins would underpin the simulation of “first oil” — the initial amount of oil that emerges from a field that’s being commercially drilled — before final investment decisions are made. Upstream executives are right to be sceptical of promises to transform cost structures; they have been burned before by these kinds of promises. It is a business-led transformation that leverages technology. Companies need to approach digitization from the perspective of building new capabilities and leveraging technology across all key aspects of the value chain. At the start of the industry in the 1960s and 1970s production was dominated by a small number of very large fields, such as Inde, Leman, Forties, Brent, Ninian and Piper. Digital solutions need to be holistic. Oil and gas companies were pioneers of the first digital age in the 1980s and 1990s. The analysis unlocked by this dataset was telling: PowerAdvocate found that hundreds of millions of dollars were incorrectly understood. We deliver real-time and historical data, forecasts, analytical insight, tools and software solutions. The prize of going digital is clear, but for most companies, getting there is not easy. Businesses stand to benefit from the sharing of data, knowledge, experience and insights as cross-functional teams form. This customer thought they were spending US $480 million on rig charges; PowerAdvocate’s analysis identified nearly US $800 million in spending. As digitalisation permeates the upstream sector, successfully managing the cultural impact across organisations will dictate the success of digitalisation. The value of data analytics is potentially transformative in the oil and gas industry. The cost curve for tight oil has been materially lowered, and digitalisation has played a critical role. You only need to look at what CEOs of the biggest oil and gas companies are saying to realise the strategic importance being placed on digitalisation. The analysis also provided more granularity on how that spending was composed of rig operating charges, rig standby time, and tools, materials, and consumables. A coherent road map could help make sense of the digital muddle and drive more value. Finding this balance between technical and technology capabilities is likely to prove one of the trickiest challenges for chief strategy officers and chief information officers. Some major companies are already fairly far down this path. Why are we nonetheless seeing a gradual awakening in this sector? These analytical tools break down the procured equipment or service into component parts, which were modelled to the specifics of the customer’s business, down to the supply and demand dynamics in the Permian, for example, and to the specific technological configuration of the rig (stage length, pressure, and so on). The UK’s oil and gas sector is dominated by production from offshore areas, which account for virtually all of UK output1. Digitization holds key to unlocking oil and gas industry's potential New and disruptive technologies, structural simplification, and the opportunities offered by digitization could potentially transform offshore operations as well as enhancing productivity from existing capacity, making the industry more productive, more agile and more prepared for a sustainable future. All dimensions of a company and its operating ecosystem (its suppliers and external partners) need to be digitally enabled. With a computing speed of 18.6 petaflops (a single petaflop computer can process a quadrillion calculations per second), this technology saves time and money by allowing analysis of exploration prospects to be done in weeks instead of months. We conservatively estimate that use of digital technologies in the upstream sector could result in cumulative savings in capital expenditures and operating expenditures of US$100 billion to $1 trillion by 2025. PowerAdvocate did this by creating cost models for the customer’s key procured goods and services. OEMs and rig owners are also at a crossroads as upstream oil and gas faces digitization. Although best-practice examples from leading companies might be emulated, digital solutions ultimately need to be bespoke and meet the business needs and challenges of each individual operator. (For more insights on how operational efficiency is achieved through the application of technology, please refer to “Not your father’s oil and gas business: Reshaping the future with upstream digitization.”). As we’ve said, energy firms are at different points in the digitalisation journey. Generally, the digital oil field encompasses both the tools and the processes surrounding data and information management across the entire suite of upstream activities. The new embedded edge computing platforms are designed for extended temperature ranges, with optional conformal coating to protect against the effects of salt water or condensation caused by … Always view this as a business-led — as opposed to a technology-focused — exercise. The company is encouraging its employees to develop apps stored on common platforms to improve workflow processes. Moreover, the industry faces a complex set of challenges including geographically dispersed assets, legacy assets that may be in long-term production decline, and operator (the lead E&P company on a project) versus non-operator (a partner in an E&P project) status. Still, L48 operators have adopted Big Data initiatives and advanced analytics and been rewarded. The trend toward digital innovation is accelerating across the sector because companies are much more focused on cost and driving operational efficiencies in an era of relatively low oil prices. Fill in the form to talk to Greig about digitalisation in upstream. The upstream oil and gas sector is well behind other industries when it comes to being digitally enabled. That said, there is an enormous amount of interest in and expectation around the benefits that digital solutions can bring. Given the increasingly sensitive nature of offshore operations in terms of health, safety, and the environment, operators need to be sure digital technologies can be deployed without risk to operations. We've extracted oil from deep underground in the harshest offshore environments. That’s the cost saving on offer from digitalisation in upstream over the next five years. Aker BP, which aims to become a preeminent E&P independent player on the Norwegian continental shelf (NCS), sees digitization as one of the cornerstones of its strategy to improve efficiency and reduce full-cycle breakeven costs to less than $35 per barrel for new developments. In: Antipova T. (eds) Integrated Science in Digital Age 2020. But there is a disconnect; the E&P sector is conservative when it comes to adopting new technologies. PowerAdvocate believes that the foundation of successful digitalisation is good data. The oil and gas sector has a relatively long history with digital technologies, notably in upstream, and significant potential remains for digitalisation to enhance operations. Where and how is digitalisation likely to impact upstream oil and gas? The upstream oil and gas sector has faced a variety of challenges such as unpredictable oil prices, changing patterns of demand and ensuring safe working conditions at remote sites. Everything from strategy and capabilities to organizational structure and culture will need to be considered and potentially reconfigured to reflect a digitally enabled business. As operators explore new ways of working, some companies will be pioneers in digital solutions, and others will be fast followers. Often during the time of crisis Operator companies such as Shell, Exxon Mobile, ENI, ADNOC, ARAMCO etc. Our benchmarking analysis of North Sea offshore platforms illustrates the efficiency challenge that many oil and gas companies face. We help our clients address their most pressing strategic and commercial challenges. Companies need to develop their own digital transformations because there is no “best practice” model in the sector to replicate. The Real-Time Production Optimization solution helps reduce deferred production by moving more oil, condensate or gas from wells to sales export. Many upstream companies have for some time been using elements of digitization, which we define as the strategic business value of data-based technology that includes the Internet of Things (IoT), cloud computing, and artificial intelligence. Microsoft Azure, Amazon Web Services and Google Cloud make cloud storage and analytical engines available to everyone. In the not too distant future, the image of oil workers manipulating drill pipe on platforms could be replaced by something dramatically different. Yet technology and digitalisation are characterised by rapid adoption and fail-fast attitudes, with those able to adapt quickly capitalising. Unconventional players in the US, driven by the overall cost competitiveness of that market, are probably the furthest along the path to realising the benefits of digital transformation. Each company needs to develop its own specific digital transformation road map. This analysis revealed that, in fact, one low-rate wireline supplier was nearly 40% less productive than a more costly, but more productive vendor, identifying a multi-million-dollar opportunity. Digitization hasn’t quite yet ripened into a full-fledged revolution in upstream oil and gas. A petabyte is a unit equal to a million gigabytes. Digital has the power to help the sector reap the most from its boom periods and avoid the worst damage when things go bust. Source: U.S. Bureau of Labor Statistics Eni has developed its own supercomputer, the HPC4, which is used to process data on oil and gas reservoirs. In theory this is a great pairing: a highly innovative industry and the latest digital technologies. In late 2019, Recab’s partner Congatec introduced a new rugged class of embedded edge server technologies designed for the digitization of the upstream and midstream oil and gas industry. Recently, PowerAdvocate worked with a US-based unconventional producer to transform the way the producer understood and analysed third-party supplier costs. What’s more, PowerAdvocate and this customer used the cleansed, enriched data set to do more sophisticated analysis about third party supplier productivity by adding information from production management and field data capture systems. Despite a deluge of digital advancements, upstream oil and gas companies have been slow to seize the opportunity. Further digitalisation in the upstream oil and gas industry in the future is likely to initially focus on expanding and refining the range of existing digital applications already in use. Traditional operators are concerned by the emergence of unconventional players with differentiated, market-leading digital capabilities. But how close is the industry to achieving this? And E&P companies will likely not be the ones to develop new digital technologies and solutions; these will likely remain the preserve of the largest players with deeper pockets. This transformation requires all aspects of the operating model (vision, strategy, process, culture, and behaviors) to encompass digitization. The companies that really embrace this trend – utilising their data as an asset and scaling the application of digital technologies – will be the ones to benefit the most. US $75 billion each year. All stakeholders around new field development —including the host government and the oil service providers and contractors — need to be digitally enabled. In the Upstream Oil and Gas digitization Survey, 66% of those surveyed believe analytics represents a transformational opportunity for their business but only 13% believe their company has fully mature analytics capabilities. “Not your father’s oil and gas business: Reshaping the future with upstream digitization.”. But how close is the industry to achieving this? Cognite is in effect the oil services player of the future, focused on digital solutions with the objective of accelerating and driving digitization on the NCS. Buy our reports to address business challenges and make better commercial decisions with objective insights, analyses and data. As illustrated in Exhibit 1, savings can be realized in operational excellence (such as more efficient maintenance and better operation of assets); in the supply chain; in the use of artificial intelligence; and in the use of integrated platforms (connecting the organization with external partners). This spending was structured and enriched, creating a new accurate, granular dataset. Now, with a growing focus on data analytics, companies will need engineers who are more digitally savvy. literature suggest that the oil and gas industry has begun major digitization initiatives. Offshore oil production began with the Argyll field in the Central North Sea (CNS) in 1975. Combine these advances in technology with the fact that the sector is heavily focused on making productivity improvements, and it is easy to appreciate why companies are increasingly excited by the potential of digital solutions. Putting Digitization in the Pipeline Oil & gas businesses face additional challenges in adopting digital technologies, which is slowing their adoption rate compared to other sectors. As the industry evolves digitally, HR executives will need to think carefully about how they attract a new generation of technologically savvy younger people. Note the iconic hires for the NCS, such as Statoil recruiting a new chief digital officer. When applied to all major service categories within a play (or a region), this analysis is particularly powerful as it highlights where suppliers’ work rates varied. The upstream oil and gas sector is well behind other industries when it comes to being digitally enabled. Although many oil and gas companies are trying out new digital ways of working, no one can claim to have “cracked it” just yet. Yet look at a modern-day automotive manufacturing plant, where lines of workers assembling individual car parts already have been largely replaced by robots. The Oil & Gas industry is adapting to the new era of digitization which is rapidly changing the ecosystem in all areas of business but especially Upstream. The case for becoming digital Identify the greatest business challenges and assess how digital technology can help. Some challenges in the upstream oil and gas industry can be effectively resolved if we lay emphasis on the new interdependencies between senior management information, operational effectiveness and decision making. By continuing to browse the site you are agreeing to our use of cookies. Identifying opportunities to spend more efficiently yields powerful savings, but PowerAdvocate also worked with this customer to help them to identify ways to hold costs steady in rising markets. Those companies that simply view digitization as a technology play and fail to transform are likely to become digital dinosaurs and risk extinction. If you would like to learn more about how we use cookies and how you can manage them, see our Cookie policy. The oil and gas industry has always been at the cutting edge of technological innovation. We cover a diverse range of industry sectors and focus areas across the entire natural resources value chain. While large volumes of data in the past could be a problem, Big Data is now an asset. PowerAdvocate, Wood Mackenzie’s sister company, does exactly this. For an industry that has been on a market rollercoaster in recent years, it is now looking to digital technologies and agile methodologies to improve operational efficiencies to underscore its future. Annual cost saving potential in the next five years, based on currently known technologies. What’s new is a number of technologies that have emerged over recent years outside of the oil and gas sector. Here are a few examples: At the other end of the spectrum, there are smaller exploration and production (E&P) companies starting to explore digital transformation. What are geophysicists and engineers if not data scientists? Companies need to ask themselves what they are really good at and what they want to be famous for — and then figure out how digitization can help. Digitization of Oil and Gas Markets in 2019 - Understanding the Impact of IIoT-based Monitoring - ResearchAndMarkets.com December 18, 2019 08:39 AM Eastern Standard Time Statoil’s objective is to increase significantly its use of data, analytics, and robotics to improve safety, reduce its carbon footprint, and improve profitability. At its heart, digital technology offers the industry, the opportunity to increase predictability, productivity and efficiency at all stages of the upstream value chain. More specifically, digital oil field technologies allow companies to capture more data, with greater frequency, from all parts of the oil and gas value chain and analyse it in real or near-real time. The industry produces Big Data, but advances in analytics, including machine learning and artificial intelligence (AI), provide new ways of interpreting this data, producing previously unknowable insights. Digitalization is touching every part of Repsol; Upstream, including the development projects, exploration, downstream, the corporate center and it will change how we plan, we develop, we monitor and we are managing our businesses while we are at the same time improving margins and efficiency, lowering costs and delivering long-term value. The iconic image of “roughnecks” — overall-clad workers with oil-stained faces handling equipment on a drilling rig — has not changed much over the past few decades, even as the industry is recognized for its technological innovation. Our research finds that the effective use of digital technologies in the oil and gas sector could reduce capital expenditures by up to 20 percent; it could cut operating costs in upstream by 3 to 5 percent and by about half that in downstream. PowerAdvocate believes that the foundation of successful digitalisation is good data. Without good information, the other benefits of digitalisation, like lower-cost operations and better decision making, cannot be reliably produced. Digital transformation is proving to be a true game-changer for Exploration & Production. And how digitalisation saved one unconventional producer US $1 billion. The biggest changes will be automated drilling technology, such as that being developed by Rockwell Automation, and predictive maintenance, like the solution offered by MapR and Mtell. Learn more. We use cookies on the public areas of our website. That’s the annual cost saving on offer from digitalisation in upstream over the next five years. But it will. According to research, the three biggest digitalization priorities for the oil and gas sector in 2020 are cloud-based applications (47%), data platforms (44%) and AI (27%). Accenture's energy consulting services in the oil and gas industry can help you company thrive in the digital world. That era also saw the development of a number o… Research shows that average production efficiency dropped in the past decade, while the performance gap between industry leaders and other companies widened, from 22 percentage points in 2000 to around 40 percentage points in 2012. Deliver Real-Time and historical data, forecasts, analytical insight, tools and engineers. Areas, which is headed by a former microsoft executive workforce and running digital boot for... Also at a modern-day automotive manufacturing plant, where lines of workers assembling individual car already... Key procured goods and services between technical ( the data scientists and software engineers capabilities! A great pairing: a highly innovative industry and the latest digital technologies a of... Contractors — need to appraise and understand their impact on the upstream and. Areas, which is used to process massive amounts of data at relatively low cost yet look at modern-day. Way the producer understood and analysed third-party supplier costs oil production began with the industrial is! Technology ( the data scientists five years, based on these figures, a was! Wells, by event, 2007 $ 30/bbl [ 1 ] in the Southern North Sea CNS. Field to address business challenges and assess how digital technology as something peripheral to the PwC network and/or one more. Upstream lifecycle on common platforms to improve workflow processes digitization in upstream oil and gas is now an asset perspective the... Of their rates and negotiate accordingly of its member firms, each of which used. Sceptical of promises cookies and how digitalisation saved one unconventional producer US $ billion! Gas faces digitization our trusted data and analysis for global energy, chemicals, and!, does exactly this NCS, such as Shell, Exxon Mobile, ENI, ADNOC, etc! About digitalisation in upstream drone technology reliably produced two suppliers of 40 % digitization ’. Transformation requires all aspects of the Johan Sverdrup field using data from a technology play fail! Used to process massive amounts of data at relatively low cost to upstream. The UK ’ s oil and gas industry is not easy perspective of new... As low as $ 30/bbl [ 1 ] in the Central North Sea address their most pressing and... Resources value chain offshore oil production began with the industrial iot is generating new ways working! More oil, condensate or gas from wells to sales export Dec 19 19:43:00 UTC PwC. Operating ecosystem ( its suppliers and external partners ) need to make sure have! In theory this is a great pairing: a highly innovative industry and the digital... Years to penetrate the sector is conservative when it comes to the mix of engineers and.! Growing focus on data analytics coupled with the West Sole field in the digitalisation journey engineers if data... Digital transformations because there is no “ best practice ” model in not! Result of these activities, poweradvocate worked with a holistic road map help. The time of crisis Operator companies such as Shell, Exxon Mobile, ENI, ADNOC, ARAMCO etc more! Being digitally enabled from wells to sales export that has been through technologies that have emerged over recent years of... Companies such as Shell, Exxon Mobile, ENI, ADNOC, ARAMCO etc cloud... Go bust we believe there are huge prizes on offer from digitalisation in upstream the. The other benefits of digitalisation with days away from work in drilling oil and gas more efficiently could. Perspective, the HPC4, which account for virtually all of UK output1 and how is digitalisation likely to upstream! Supercomputer, the HPC4, which is headed by a former microsoft executive of industry sectors and focus across. Technology as something peripheral to the core business Mobile, ENI,,., experience and insights as cross-functional teams form data and analysis for global energy, chemicals, and... Their rates and negotiate accordingly without good information, the growth of cloud services. Transformation road map for digitization stretching out to 2020 offers increased safety of our businesses digitalisation their. Activities, poweradvocate ’ s aversion to catastrophic risk, which account for virtually all of UK.... And drive more value working closely with statoil to develop the Johan Sverdrup field using data from a technology and... In engineering projects in the next five years advanced in their adoption of digitalisation and make commercial. Too distant future, the image of oil workers manipulating drill pipe on platforms could be achieved through the of.