The value of data analytics is potentially transformative in the oil and gas industry. Distribution of injuries and illnesses with days away from work in drilling oil and gas wells, by event, 2007. 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. 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. With a total impact of $930 billion estimated from oil and gas within the next decade, it’s little surprise that the industry is showing huge interest in leveraging IoT. 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. 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. 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. In the past, capabilities may have focused on technical expertise to deliver excellence in engineering projects. As illustrated in Exhibit 2, next page, digital technologies could affect all elements of the value chain in a future E&P company. Digital has the power to help the sector reap the most from its boom periods and avoid the worst damage when things go bust. 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. US$75Bn. 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. The customer could then understand the competitiveness of their rates and negotiate accordingly. PowerAdvocate did this by creating cost models for the customer’s key procured goods and services. Submit your details to find out more about how we can help you and your organisation. All rights reserved. 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. That said, there is an enormous amount of interest in and expectation around the benefits that digital solutions can bring. 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. As we’ve discussed, Lower 48 companies are more advanced in their adoption of digitalisation than their conventional upstream peers. 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 … 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. 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. 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. Statoil has created a digital twin of the Johan Sverdrup offshore field to address troubleshooting and process improvements. This unconventional producer found US $1 billion of savings in their third party spend. 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. 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. The analysis unlocked by this dataset was telling: PowerAdvocate found that hundreds of millions of dollars were incorrectly understood. 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. Recently, PowerAdvocate worked with a US-based unconventional producer to transform the way the producer understood and analysed third-party supplier costs. Senior executives need to make sure they have the right capabilities in place when it comes to the mix of engineers and data scientists. Some oil and gas companies still view digital technology as something peripheral to the core business. 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. Digital transformation is not a technology-led solution. 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. While large volumes of data in the past could be a problem, Big Data is now an asset. 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. Microsoft Azure, Amazon Web Services and Google Cloud make cloud storage and analytical engines available to everyone. The Real-Time Production Optimization solution helps reduce deferred production by moving more oil, condensate or gas from wells to sales export. Conventional upstream has likely made the least progress, despite the size of the potential gains. Often during the time of crisis Operator companies such as Shell, Exxon Mobile, ENI, ADNOC, ARAMCO etc. The reason for this fairly piecemeal approach to date is the industry’s aversion to catastrophic risk, which is well known. The oil and gas industry is not a stranger to this and is progressing towards digital maturity. A coherent road map could help make sense of the digital muddle and drive more value. PowerAdvocate, Wood Mackenzie’s sister company, does exactly this. By continuing to browse the site you are agreeing to our use of cookies. Why are we nonetheless seeing a gradual awakening in this sector? Production of natural gas began in 1967 with the West Sole field in the Southern North Sea. The sector is starting to fully recognize that power, and more and more upstream companies are scrambling to seize it. We help our clients address their most pressing strategic and commercial challenges. PowerAdvocate believes that the foundation of successful digitalisation is good data. We use cookies on the public areas of our website. Learn more. And produced hydrocarbons from the nanodarcy permeability of shale rock. Note the iconic hires for the NCS, such as Statoil recruiting a new chief digital officer. The company has committed an investment of 1 billion to 2 billion Norwegian kroner ($128 million to $257 million) in digital and emerging technologies, to be executed through the center of excellence. 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. But how close is the industry to achieving this? The difference between the two images is clear. 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. In many such cases, interest in digital transformation was triggered by the perceived threat of new entrants as much as by a desire to cut costs. 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. 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. Businesses stand to benefit from the sharing of data, knowledge, experience and insights as cross-functional teams form. 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. The company is encouraging its employees to develop apps stored on common platforms to improve workflow processes. OEMs and rig owners are also at a crossroads as upstream oil and gas faces digitization. For example, Aker Solutions is working closely with Statoil to develop the Johan Sverdrup field using data from a common digital twin. 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. Our own experience confirms this significant potential. 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. look towards cutting cost, slashing jobs and requesting heavy discounts prices from the service providing companies such as … All dimensions of a company and its operating ecosystem (its suppliers and external partners) need to be digitally enabled. Offshore oil production began with the Argyll field in the Central North Sea (CNS) in 1975. We've extracted oil from deep underground in the harshest offshore environments. 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. And how digitalisation saved one unconventional producer US $1 billion. Oil and gas companies were pioneers of the first digital age in the 1980s and 1990s. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. But it will. Buy our reports to address business challenges and make better commercial decisions with objective insights, analyses and data. Digital solutions need to be holistic. Drilling, performance monitoring, and production optimization could become highly automated. 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. Getting the right weighting between technical (the engineers) and technology (the data scientists and software engineers) capabilities is critical. From a technology perspective, the growth of data analytics coupled with the industrial IoT is generating new ways of optimizing workflows. Now upstream companies can maximize oil production while minimizing gas lift, flare, energy consumption or other constraints. That era also saw the development of a number o… It is a business-led transformation that leverages technology. 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. “Siloed” digitization does not provide the cross-functional insights across multiple assets that are needed to drive efficiency and value at the enterprise level. PowerAdvocate discovered a difference in productivity between two suppliers of 40%. 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