CROSS INDUSTRY INSIGHT
The sector faces new challenges so we need to do things differently
The sector faces new challenges, so we need to do things differently. Find out more in this special feature.
As low oil prices continue to drive anxiety and uncertainty, industry leaders met in early November 2015 as part of the Oil & Gas Technology Radar executive briefing series, hosted by Lloyd’s Register Energy. The event, in London, followed the publication of new research into the impact of the low oil price environment and prolonged uncertainty on innovation throughout the sector.
Industry expert Denis McCauley, formerly the energy director at the Economist Intelligence Unit, invited guests to consider three key issues facing the sector: the opportunities for and benefits of open innovation; the potential impacts of data technologies; and the increasing risks around cybersecurity, and what is being done to mitigate them. Open innovation The topic of open innovation enjoyed broad consensus that there is value in collaboration, although the challenges are significant and sometimes appear to be insurmountable. Nonetheless, there are circumstances that are ripe for open innovation - where companies are not directly competing ( e. g., collaboration involving software and applications), or when the new technology is at an advanced stage
on the development curve ( e. g., at the standardisation phase). For all businesses, the need to protect intellectual property is a major driver; as one participant explained: “If you’re at the cutting edge of technology and early on in the development, you just won’t want to share or collaborate because you’d be exposing your IP and capability which could be stolen or copied. You’re more likely to collaborate when you’re further along.” For this reason, participants felt that the propensity to collaborate varies throughout the value chain with one noting that: “It’s very relevant for areas such as safety and security, where there is not a competitive environment between the operators. But in areas related to wells, drilling and production there is much less interest.”
“At the very least, we should be open about the problems that need to be solved – then different organisations will drive forward solutions in their own ways.”
Roles for non- commercial stakeholders
Nonetheless, most participants supported the research finding that, in a low oil price environment, innovation is vital to commercial viability and that new, more efficient ways must be vigorously explored. On this point, it was felt that there is a significant role for non- commercial stakeholders.
“Universities and governments can provide neutral environments to discuss ideas and opportunities,” said one participant. “This enables people from industry and outside of it to get together and drive the development of new concepts quickly, effectively, and without prejudice.” Unsurprisingly, the economic dynamics were central to the discussion. One participant, Ben Burgess from William Hackett Chains, observed a pattern referred to as a ‘ necessity index’. He said: “Cost management has been an ever- present factor in recent decades. What we are seeing now is cost cutting, which will deliver short- term benefits in year one. In year two the savings are less and the cuts tend to have a negative effect on the longer term operating costs as they are deferral of essential tasks. Then, at a point in year two, this is recognised and a third year of cost cutting is not seen as viable from an operational and health and safety perspective. At this point, the ‘ necessity index’ is so heightened that businesses turn to innovation and collaboration to survive. As an industry, we need to learn lessons from other industries such as
Aerospace and Technology and adopt these practices earlier.”
The opportunities to apply learnings from other industries was a recurring theme. Besides applying specific processes and technologies from other industries, there was also a feeling that collaboration with third parties, with no or limited involvement in energy, carries less risk and is therefore much more viable.
Despite the many complexities around open innovation, most participants echoed the research which found that, across the sector, there is great appetite for collaboration even if the obstacles cannot always be overcome. Summing up, one participant said: “At the very least, we should be open about the problems that need to be solved – then different organisations will drive forward solutions in their own ways.”
Data technologies in the digital oilfield
The topic of data technologies stimulated just as much debate but less agreement. “Data technologies are game- changing, and the rate of influence will be exponential over the next five years,” said one participant. Whilst most shared this vision of the future, in which data speeds up processes and supports decision- making and investment, it was accepted there are some very real challenges. Some felt strongly that data quality is and will continue to be a major issue and that the ‘ garbage in, garbage out’ principle applies. Others disagreed, arguing that data is simply mathematical patterns and repeat analysis will flush out errors. According to that view, today’s analytics tools and data analysts are adept at dealing with errors and gaps, therefore companies shouldn’t need to invest time and resources on cleaning and integration.
Nonetheless the potential for performance improvements, by utilising live process data as an input to operation, was uncontested. On the whole, it was largely agreed that data is now essential to improving operational performance and that data technologies provide opportunities for more accurate risk assessment and control of safety- critical systems. However, it is analytics and the interpretation of data that has the potential to be a game changer – and this relies on how successfully the industry can secure and grow access to the right skills. One participant commented: “In engineering, you’re taught how to work with a physical model but in the future we will rely on data – which needs intuitive translation of results.”
To a large extent, data technologies are already disruptive from processes and decision making, to entire business models. Describing the impact of data technologies on the digital oilfield, a participant explained: “Data allows better decision making across the supply chain, from the drilling of wells to production, facilities management and exports. We can now develop an integrity plan that helps us identify and reduce the safety risks before they escalate.”
Furthermore, value can be extracted from historical data as well as newly captured data. For example, the re- examination of old seismic data can lead to big discoveries, as was the recent case for Norway’s Johan Sverdrup.
Not there yet
However, despite these advances, data technologies have yet to reach maturity in the sector. Integration, access to skills, quality assurance, and deployment risk were all raised as blockers that must first be overcome before the sector can reap the rewards that can be observed in other sectors.
One participant shared an observation of analytics specialists being brought in from sectors that have traditionally shared little crossover with the oil and gas sector, such as retail. He said: “We can learn a lot from companies that are really investing in data and making it work for them and their customers.”