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Digital Transformation Advances Reshaping the Oil and Gas Industry

The oil and gas industry is one of the most capital-intensive industries in the world. Together with the automotive and aeronautical industries, the oil and gas industry operates at such a massive scale that adjusting to emerging trends has proven difficult. In fact, although the Organization of Petroleum Exporting Countries (OPEC) notes that technological advancements have more than doubled Ultimately Recoverable Resources (URR) since 1980, many activities in the industry still operate as those from 30 years ago.

Digital transformation, while rapidly sweeping other industries, has encountered significant resistance from the oil and gas industry. Some of the main reasons for this resistance include entrenched mindsets, massive legacy investments in non-digitized equipment and processes, a non-digitally native workforce and regulatory issues surrounding safety, environmental protection and access to new drilling locations. However, this resistance does not mean digital transformation will not ultimately sweep the industry, as the following illustrations predict.

1. Artificial Intelligence (AI)

Despite massive advances in AI and machine learning (ML), the oil and gas industry still lags in the adoption of predictive modeling based on big data collection and analysis. Take for instance the fact that one oil rig generates terabytes of data per day, but only a fraction of this data is analyzed and utilized in predictive modeling and decision making. Or despite oil companies spending between a quarter and half a billion dollars to drill one offshore well, only between 20 and 25% of all drilled wells are successful.

Repsol, in collaboration with IBM, is seeking to disrupt this status quo by using predictive modeling cognitive technologies powered by AI. By enhancing current field productivity and significantly reducing exploration risks, the cognitive system will help bridge the gap between investments made in acquiring and utilizing new oil fields and the success rate captured from these activities.

2. Internet of Things (IoT)

Compared to other industries, the oil and gas industry stands to benefit the most from advances in IoT, especially in the field of Industrial IoT (IIoT). Due to the extensive use of machinery in drilling operations, utilization of sensors to monitor equipment performance, maintenance requirements and possible points of failure can have a massive impact on industry-wide operations.

For instance, BP, in partnership with Silicon Microgravity, has developed IIoT sensors able to measure up to a billionth part of the strength of Earth’s gravity, an advancement that makes it possible to monitor water and oil levels deep within boreholes, helping provide early alerts to water contamination of oil wells.

Another example of how IIoT is transforming the oil and gas industry is how Apache Corporation is using smart sensors and predictive analytics to monitor and anticipate the failure of electronic submersible pumps (ESPs), which costs the company on average 10,000 barrels a day. By mining data and analyzing it for patterns, it is possible for the oil and gas industry to reduce wastage, enhance utilization of existing assets and enhance safety and environmental stewardship.

3. Blockchain

An almost-immutable distributed ledger of records, blockchain has multiple possible applications in the oil and gas industry that could help reduce revenue leakage while enhancing supply chain operations. As the industry is heavily dependent on the collaboration of multiple vendors, use of smart contracts can help keep a clear record of transactions and reduce time and resources wasted in performing repetitive verification tasks.

Digital transformation also comes with the threat of malware and cyber attacks, an issue that blockchain can address effectively. By maintaining a distributed network of records of transactions carried out by smart systems, oil and gas organizations can significantly reduce such occurrences as each function executed would be verified by other blocks within the blockchain before execution.

4. Drones (UAV)

While drones (Unmanned Aerial Vehicles) are currently utilized to monitor, examine and report on remote oil fields, pipelines, and other assets, this is but the tip of the iceberg in possible applications. Consider the combination of drones with robotics where a drone is capable of not only fly-bys but also to land, execute mechanical tasks and then take off. Such an application would be especially useful in situations where the drone flags a critical issue, and immediate action must be taken to avert disaster.

Further applications include data collection by drones on climatic, geological and seismic activity to identify patterns hard to spot from the ground. By analyzing and subjecting this data to predictive analytics, it is possible for an oil company to anticipate issues like pipeline leaks and seismic-triggered equipment damage. Overall, drones can improve efficiency, speed, and expenditure on risk assessment.

5. Autonomous Vehicles (AV)

The mining industry is perhaps the best known for utilizing AVs to carry out mining activities. With the use of AVs, the mining industry has seen a rise in productivity and a reduction in risk to human personnel. In the oil and gas industry, it is possible to see such gains through the adoption of AVs. One specific area of interest is the use of AVs to manage critical oil discovery operations for offshore rigs.

As oil exploration depths often exceed 2 kilometers below the surface, using Underwater Remotely Operated Vehicles (ROVs) can help improve efficiency and reduce risk associated with these often-dangerous activities. For operations in remote areas such as the Alberta tar sands, utilizing AV trucks may provide a sustainable solution to the massive amount of trucking required in such a hostile environment. Such developments create an opportunity for oil executives considering going after hard-to-access oil deposits that may currently not provide a favorable cost-to-benefit ratio.

6. Augmented Reality (AR)

One of the greatest concerns in the oil and gas industry is safety. Elaborate signage and checklists help ensure safety but only to a certain point. In most cases, the single point of failure is often because of a missed step in a procedure, or a critical failure of equipment. AR advances may help reduce such instances.

In one example of the use of AR to enhance safety, Schlumberger, in collaboration with Parsable, an AR startup, is developing smart wearables based on the concept pioneered by Google Glass. The wearables provide workers with always-on access to safety procedures, checklists, live gauge readings and other important data. The data that the worker is creating and observing is also transmitted in real-time to a command center that monitors for any anomalies. With such an implementation of AR, Schlumberger hopes to see a reduction in danger instances.

Conclusion

In a rapidly evolving world, these examples paint a picture of an industry that can massively benefit from digital transformation. Capitalizing on these changes is, however, only possible through innovation sponsorship beginning with top management. By fostering a culture of innovation and a push for digitization, senior executives can better position their companies to benefit from the emerging digital transformation shift in the oil and gas industry.

This shift, according to a Digital Transformation Initiative white paper by the World Economic Forum, will unlock up to $1.6 trillion in value for the industry. Moreover, this number almost doubles when full utilization of the technologies outlined in this article is factored in, something the Gartner Hype Cycle predicts will happen in the next 5-10 years.

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