Digital Transformation in the Oil and Gas Industry - HashedIn Technologies

Digital Transformation in the Oil and Gas Industry

Business - 15 Sep 2017
Harish Thyagarajan

Digital transformation is becoming a driving factor that is bringing about a change in the world around us. Connectivity has not only shown the potential to empower thousands of people but has also provided businesses with fantastic opportunities for value creation. The Oil and Gas industry has played a significant role in transforming the economic condition of the world over the years. At present, it has the potential to redefine its boundaries using the power of digitization. Digitization can act as an enabler for tackling challenges and providing value to all the stakeholders.

Though digitization could be a great source of positive change, there are a lot of challenges that have to be overcome in order to realize its fullest potential for both businesses as well as the society. The exponential increase in the global information flows has brought in new risks around security and data privacy. The businesses across various sectors are now grappling with challenges related to transforming customer expectations, outdated regulation and skill shortages, to name a few.

In the year 2014, General Electricals closely examined some disruptive forces of innovation that could drive the future of work and they are as follows:

  • The industrial internet: It combines the big data and the cloud-based analytics with the industrial machinery, resulting in better efficiency and improved operating performance
  • The advanced manufacturing: It brings together, the design, product engineering, supply chain, manufacturing and servicing into a single intelligent system, delivering faster speed and flexibility at lower costs.

Currently, breakthroughs in the Oil and Gas digital technologies are a part of a broader transformation in the industry. The emergence of the industrial internet and the advancement in computing and analytics hold the commitment of delivering economic value across all industries by enhancing productivity and efficiency across operations. A rapid increase in the digital information has helped industries across the globe with a plethora of data along with the ability to capture and analyze it to get clear and actionable insights. The below-mentioned observations will help in understanding as to how industrial internet will have a significant impact on the industry as a whole.

The past several years have seen a sharp reduction in the cost of sensors, in the cost of retrieving, storing and processing data. The cloud-based technologies have made this possible. The maintenance of the existing infrastructure has thereby become much more cost-effective, and the data-driven insights can also be obtained at a lower cost.

GE has estimated that the industrial solutions already delivered and deployed by the company across various industries are yielding an average of 20 percent performance improvement for their customers. Improvements of this magnitude, whether delivered through cost savings or greater uptime and output make a major difference to the competitiveness and profitability.

GE is now witnessing an industrial-apps economy. Applications have played a significant role in driving the growth as well as the geographical spread of new solutions in the consumer space, which is now leading to a great rise in the revenues. The company has now built Predix, an operating system for the industrial internet. This cloud-based highly secure platform will be open to third parties to develop apps for industrial use. As per an estimation, by the year 2020, more than 100,000 software developers will build apps on Predix and will be generating approximately $225 billion in economic value. The industrial app economy will generate an increasingly growing number of industrial apps, propelling the pace at which efficiency gains can be delivered.

How Can Digitization Help?

The oil and gas industry will be benefitted by digitization in the below mentioned areas

  • Asset management: Increasing reliability, minimizing cost and maximizing the performance of an equipment
  • Optimizing Operations: Improvements to the production facility and effective lifecycle management with reduced risk and operating costs
  • Enterprise Optimization: Linking demand and supply operations for optimizing the portfolio of cash generating assets

Asset Management

Asset performance management is certainly one of the best benefits of the industrial internet solution. It has considerably brought down the equipment downtime through an effective condition-based maintenance. The advancement in predictive analytics can now determine and notify when an equipment is likely to experience a failure so that the maintenance can be planned well ahead. This prevents downtime and optimizes the performance of the equipment. The condition based maintenance can help in saving huge costs involved in the maintenance of equipment in the oil and gas industry. For instance, an LNG (Liquefied Natural Gas) facility is currently losing out nearly $150 million every year because of the unplanned outage. The predictive maintenance can actually save these companies several million in unplanned repairs.

Operations Optimization

There is a big value creation opportunity in operations optimization, especially creating an integrated approach for optimizing the hydrocarbon process. At present, the operations landscape consists of fragmented solutions that each addresses a certain operational need. For instance, there may be a tool that manages the data during a drilling process, another tool that manages the logistics and so on, however, the actual value creation opportunity exists in linking these silos and collaborating it across upstream and downstream workflows. By doing so, companies will enjoy the following benefits.

  • Lower operating and maintenance costs: Effective data analytics and management delivers enhanced visibility across the network of operations. This will offer a much efficient capital, human resource allocation and better maintenance decisions. For instance, a good understanding of the performance of various onshore wells can certainly help in optimizing the crew deployment process, sending them to locations where the interventions can be highly beneficial rather than marking wasteful transit routes and dispatching them from one place to another. Similarly, a clear visibility and better understanding of risk factors across networks can help operators to deploy crews and physical assets most effectively to bring down risks in a cost-effective manner.
  • Increased workforce productivity: This industry is at a risk of losing out on a major portion of its expertise to retirement in the coming years. A lot of multi-million dollar companies are heavily dependant on a few individuals whose expertise can be extremely hard to replace. The digital knowledge capture, as well as the case management capabilities, give firms the ability to retain knowledge that they would otherwise be losing out when these experts retire. Adding to this, knowledge can be shared very effectively via the workforce, across various divisions and business units.
  • Optimal operational performance: Digital tools can provide oil and gas companies a clearly linked view across multiple business units and locations. This would allow firms to identify what practices are driving optimal performance and then implement those best practices to the other lesser performing facilities.

Enterprise Optimization

As processes, equipment and the operations are digitized, the operator will be able to clearly understand the real-time status of the operations to make informed decisions that affect the financial performance of the company. Now, make an assumption that you can actually make constraint-based decisions on increasing the operating hours of an offshore production hub to effectively capitalize on the rise in the spot price. Now assume that you are able to clearly weigh this decision across other fleets of assets constrained by reliability. If an operator is able to utilize data for driving just 1 percentage of improvement in the fleet reliability, then the impact can be measured in several millions of dollars/year.

The oil and gas industry is at a critical juncture. Coping up with lower oil prices in a way that does not affect the future performance is a serious challenge, however, it is not the only one. The health-safety concerns and an aging workforce are all serious challenges that businesses need to address.

The industrial internet revolution offers the tools for meeting the challenges in the industry and to effectively exploit the opportunities ahead. Digital solutions can provide substantial cost savings and improvements in the operations management, investment strategies, and asset management.

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