The rock star of oil & gas

The Press and Journal (Inverness) - - ENERGY - Si­mon Flow­ers Chair­man, Wood Macken­zie

The biggest cur­rent re­cruiter in up­stream? Dig­i­tal­i­sa­tion, by a dis­tance. Tech­nol­ogy is al­ready play­ing a part in down­stream’s re­cov­ery from its lows a few years ago. Up­stream, ur­gently seek­ing struc­tural so­lu­tions to its down cy­cle is fol­low­ing at quick­en­ing pace. Dig­i­tal­i­sa­tion is be­com­ing cen­tral to the plan.

A very dif­fer­ent mi­lieu fills the packed out dig­i­tal­i­sa­tion ses­sions at oil and gas con­fer­ences. Are th­ese dig­i­tal rock stars merely preach­ing to the con­verted, fel­low data sci­en­tists? There may be a few cu­ri­ous ca­reer up­stream peo­ple in there too, weigh­ing up their job se­cu­rity. With the story evolv­ing from con­cept to­wards im­ple­men­ta­tion, here are some thoughts af­ter meet­ing with tech­nol­ogy spe­cial­ists ear­lier this month.

Dig­i­tal­i­sa­tion is big data and an­a­lyt­ics, cloud com­put­ing and stor­age, vir­tual re­al­ity, drones, ro­bot­ics and au­to­ma­tion, and ma­chine learn­ing (ap­pli­ca­tions such as face recog­ni­tion and the rest). Th­ese are proven tech­nolo­gies al­ready em­bed­ded in other in­dus­trial sec­tors, au­to­mo­tive and aero­space among them, as well as down­stream.

The prize for up­stream will be in ap­ply­ing them ef­fec­tively to time-hon­oured pro­cesses – sub-sur­face and above ground, brown­field and fu­ture projects, and the sup­ply chain. How­ever new-age sound­ing some tech­nolo­gies may be, mea­sur­able suc­cess will be more pro­saic – higher cash flow. Up­stream wants tech­nol­ogy to max­imise re­serves and pro­duc­tion, min­imise costs, and do both whilst putting fewer peo­ple in dan­ger­ous places.

No one ex­pects dig­i­tal­i­sa­tion to solve all up­stream’s present chal­lenges. On its own it won’t trans­form the sub-par eco­nom­ics of pre-FID deep wa­ter projects left high and dry by US$50/bbl oil. And it won’t be in­stant – the full ben­e­fits of the trans­for­ma­tion may take years.

But there is a huge, po­ten­tially lu­cra­tive op­por­tu­nity in dig­i­tal­i­sa­tion to rein­vent the up­stream of the fu­ture, say start-up E&Ps – an even big­ger one, re-in­vig­o­rat­ing the old legacy busi­ness. There will also be com­men­su­rate chal­lenges.

First, the big data op­por­tu­nity in up­stream is in­cal­cu­la­ble. The data pool is so vast no-one knows how much there is. Data has been col­lected since the 1960s, prim­i­tively at first then in­tel­li­gently over time. Some may be more use now than the pur­pose for which it was meant. All of this data, from sub-sur­face to pro­duc­tion fa­cil­ity and be­yond, needs to be drawn to­gether, cleaned up, then stored in the cloud. Only then can the data sci­en­tists use­fully do their stuff and start mak­ing that data sing.

Sec­ond, the in­dus­try has to change the way it runs the E&P busi­ness. Right now its dys­func­tional, deep si­los are lit­ter­ing the value chain. Ex­plo­ration, ap­praisal, en­gi­neer­ing, con­struc­tion and op­er­a­tions do their own thing, as do in­di­vid­ual op­er­a­tors; and re­la­tion­ships with ser­vice com­pa­nies are typ­i­cally arms-length. Noone speaks to each other, let alone shares data or in­for­ma­tion. Uni­fi­ca­tion of mul­ti­ple com­pany-wide IT sys­tems into a sin­gle, cen­tral plat­form is the Holy Grail, open­ing up ac­cess to users (whether real peo­ple or ma­chines) and rel­e­vant part­ners. All the users can then work in con­cert to make things hap­pen.

Third, peo­ple will prove the biggest chal­lenge. There’s a ma­jor bat­tle ahead to win hearts and minds. Well-in­ten­tioned early dig­i­tal­i­sa­tion ini­tia­tives in up­stream have al­ready died a death in the mid­dle lay­ers of man­age­ment – the tur­keys wouldn’t vote for Christ­mas. The hard truth is un­avoid­able: the struc­tural change needed will leave legacy roles stranded. But dig­i­tal­i­sa­tion will also bring new ones. Given all this, ex­ec­u­tive lead­er­ship needs a clear strat­egy and plan of ac­tion. Crit­i­cally, a cross-func­tional im­ple­men­ta­tion team needs to be em­pow­ered to make de­ci­sions and take risks. Fail­ure will be part of the learn­ing ex­pe­ri­ence.

Scep­tics may ar­gue that dig­i­tal­i­sa­tion is part of a race to the bot­tom with neg­a­tive im­pli­ca­tions for price.

Maybe, but there’s no real choice. In a world of plen­ti­ful re­source, oil or gas, and de­mand growth un­der threat longer term, the low-cost pro­ducer wins. The man­age­ment teams that dig­i­talise most ef­fec­tively have the best chance of be­ing that low-cost win­ner.

What ad­vice then to un­der grad­u­ate ge­ol­o­gists, geo­physi­cists and pe­tro­leum engi­neers puz­zling where they fit into a fu­ture, dig­i­talised up­stream? Go get a Masters in pre­dic­tive an­a­lyt­ics. The in­dus­try will need data sci­en­tists, but bet­ter still, ones that un­der­stand how the E&P sec­tor works.

Dig­i­tal is where it’s at in the oil & gas in­dus­try

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