Predicting Analytics: New Hope for Preventing Failure in Times of Coronavirus

Predicting Analytics: New Hope for Preventing Failure in Times of Coronavirus

Non-linear and unpredictable; the novel coronavirus (COVID-19) has ferociously hit the oil and gas markets leaving a rippling effect across the industry, leading to a possible global economic crisis and a grave decline in oil prices. However, the pandemic also opened the minds about technology as a solution that can minimize the losses.

According to the International Energy Agency’s (IEA) forecast in February of this year, the global oil demand was expected to grow by 825,000 barrels per day (bbl/d). However, due to the current situation, the IEA has severely cut its prediction to expect a decline of about 90,000 bbl/d from 2019’s. “The coronavirus outbreak will significantly impact oil and gas demand. The sharp decline in prices will entail the postponement or cancellation of the more costly investment projects. Some oil and gas companies -notably the smallest with above-market price production costs- may face financial difficulties,” noted Pascal Devaux, Senior Economist for the Middle East and North Africa (MENA) at BNP Paribas.

The COVID-19 effects on Egypt’s economy led to several precautionary governmental decrees to help the industrial sector remain solid amid the outbreak. Devaux commented on the situation in Egypt, saying that “for Egypt, we may have a slowdown or postponement of investment projects. Producers -notably gas- may have to adjust production to take into a declining demand in Egypt.”

In such circumstances it was natural for people to turn towards technology, as a coping mechanism to get a grasp on the world around them. The oil and gas industry is no different. Technological advances have been utilized in exploration and production (E&P) field, maintenance and other aspects in the industry for quite a while now. Right now, adopting artificial intelligence (AI) and machine learning is essential. Internet of Things (IoT) technology can shift the way things work in the energy industry overall, as it has many advantages; not only can it be utilized to increase equipment productivity and longevity, but it also reduces unplanned downtime in the upstream and downstream mediums.

The Role of Predictive Analytics

One of the most crucial IoT technologies in the oil and gas industry is Predictive Analytics. Search Business Analytics defines predictive analytics as “a form of advanced analytics that uses both new and historical data to forecast activity, behavior, and trends. It involves applying statistical analysis techniques, analytical queries and automated machine learning algorithms to data sets to create predictive models that place a numerical value on the likelihood of a particular event happening.” This means that through the data collection process, wasted times as well as financial losses can be avoided, while also maintaining efficiency.

Predictive analytics is integral during the COVID-19 outbreak as it limits the presence of personnel in the field and instead they rely on data and remote technologies to sustain the workflow.

For the oil and gas industry, predictive analytics is fundamental in maintaining assets from aging, and errors; in the hope of preventing shutdowns for maintenance, which halts production. Mohamed Abd El-Kader, Maintenance and Condition Monitoring Mechanical Engineer at Wintershall Dea, leverages the use of predictive analytics in maintenance over other types of maintenance such as preventative maintenance, and corrective maintenance. Abd El-Kader says that “predictive maintenance is very useful to [sustain] the availability and reliability of equipment, [as well as saving] cost, time, spare parts, and [work hours].”

Predictive Analytics in Upstream and Downstream

One advantage of predictive analytics is that it can be integrated into versatile oil and gas operations; whether it focuses on upstream, downstream or midstream, predictive analytics can assist in streamlining key oil and gas operations. One of the usages of predictive analytics in the upstream medium is through optimizing the drilling and production process, asset maintenance, and risk assessment through customizing predictive models that can predict possible failures before they take place. This indicates that instead of using traditional methods of scheduled maintenance and losing time and money, predictive maintenance would create a better and safer work environment through avoiding such failures.

As for the downstream medium, predictive analytics can be utilized in improving asset management by reducing downtimes and maintenance costs of the refining equipment. “Predictive maintenance is so relevant in the oil and gas industry wherein proper Just-In-Time (JIT) maintenance of key equipment can save millions of dollars in unplanned downtime which is the need for real time operations taking place in the refinery operations,” added Anish Mahesh Shah, Engineering Project Specialist at Honeywell. According to Forbes, offshore equipment has 13% of downtime, of which it is largely unplanned; downtime does not only cost companies time, but it delays operations in addition to causing grave financial losses.

According to Baker Hughes’ The Impact of Digital on Unplanned Downtime: An Offshore Oil and Gas Perspective report, the offshore oil and gas industry loses an average of $38 million annually due to unplanned downtime. This is where predictive analytics, specifically in maintenance, come to play; by expecting equipment failure sooner than its occurrence, financial damages can be prevented. Baker Hughes’ report indicates that operators using a predictive, and data-driven approach, experience 36% less unplanned downtime, and it could result in an average of $34 million droppings to the bottom line annually.

Economic Implications

COVID-19 has shown the fragility of a paper world, and so, it is pivotal for the oil and gas industry to take matters into its own hands and adjust its multitude of data and operations through digitization.  “Digitization leads to better asset management, easy access to the historical data and speeding up the work cycle,” Abd El Kader stated, emphasizing on the importance of digitizing Egypt’s oil and gas sector. In addition to this, realizing its economic value alongside its operational value is an important step to fully realize the future of the oil and gas industry. According to McKinsey Global Institute, the implementation of IoT could result in measurable cost reduction in the oil and gas operations by more than $470 billion a year in economic value by 2025 in worksites, and $360 billion per year in equipment maintenance.

With the arrival of the Fourth Industrial Revolution (4IR), competitiveness in the oil and gas industry increases and adopting predictive analytics and other IoT technologies become keys to improving operations and staying on top. The 4IR paves the way for oil and gas companies to further invest in digital transformation to handle the boom and bust of the economy. Therefore, investing in digitalization would help advancing core operations such as production, maintenance, safety and asset management by integrating Information Technology (IT) within operations.


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