The sec­tor faces new chal­lenges so we need to do things dif­fer­ently

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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.”

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