General Overview of Digitalization in the Oil & Gas Sector
While the concept of digitalization is not new, the recent emergence of the coronavirus (COVID-19) pandemic has brought it into the spotlight more than ever. Digitalization in the oil and gas sector has become a necessity as opposed to a mere option over the last several months. In fact, digitalization has been a topic of discussion over the last five decades. However, it is becoming more and more crucial for oil and gas companies to ensure that operations can continue without the physical presence of employees in case of emergency situation or lockdown. For these reasons, it is beneficial for companies in the oil and gas sector to recognize the technologies and softwares that are essential in promoting advancements in production and services.
There are many ways in which the oil and gas industry can implement advanced tools, equipment and data. According to a study conducted by Massachusetts Institute of Technology (MIT), the oil and gas industry was rated 4.7 out of 10 in this regard, which indicates that the industry has only embraced limited technological and digital implementation. While this rating is quite low, it leaves a massive potential for improvement; especially in a time when the digitalization shift will be more vital than ever.
Digitalization During a Global Pandemic
Nevertheless, the COVID-19 was not the first pandemic that resulted in an international lockdown. During the SARS and Ebola pandemics, the oil and gas industry also suffered damage due to lack of preparation. In fact, during the event of the swine flu in 2009, the oil and gas industry also suffered, not only due to the pandemic’s widespread, but also the economic crisis which affected services and production altogether. Additionally, it is found that the implementation of technologies could actually result in a cost reduction – due to limited physical presence – by nearly 36%. However, had companies and organisations in the industry been better prepared for the lack of physical presence needed on-site, the effect would have been minute.
The COVID-19 has yet again proven the need for digital platforms, as Microsoft confirms that the number of people using their online collaboration software has increased over 40% during the first week of March 2020 alone. Meetings, events, interviews and examinations take place through different communication platforms. This step alone shows how the lack of physical presence should not affect the workflow or decision-making processes within the industry. In fact, upstream operational costs could also be reduced by approximately 5% with the correct implementation of technological firmwares. According to Hassan Hafez, Country IT Manager of TOTAL, “The concerned party of implementing the digital transformation within the company should focus on the aim of using the digital solutions, not only for future improvements, but to a part of the daily business workflow and to emphasize on the crucial role of the digital transformation of increasing the revenue of each business along with its direct or indirect impact on ROIs.”
Useful Types of Softwares and Technologies
Consequently, some of the most crucial technologies in the oil and gas sector include the use of digital sensors, drones, wearable technologies, drilling automation equipment, 4D seismic images, mobile technologies and even cybersecurity solutions. Each type of emerging digital technology has a lot to offer in the industry. For example, drones – while often controversial in their applications – could be of benefit for monitoring operations in real-time; not only that, but enabling drones and digital sensors on-site promote proactive maintenance and even minimize the number of personnel present on dangerous locations or platforms.
Furthermore, the use of drilling automation equipment or machinery could not only be enabled remotely, but could also improve efficiency of work that used to be carried out by hand. In fact, companies have reported that, over the last several years, the use of drilling automation equipment have resulted in a reduction of capital expenditures by at least 25%. Digitalizing drilling also ensures a high level of performance in operations. At the moment, it is estimated that data collected on-site does not often exceed approximately 10 Gegabytes (GB) of space because the total entire set of data is available from multiple sources. However, if all the data is compiled in one place, a ‘user-centric’ domain is created; this allows professionals to work from the same platform, limiting errors in communication and data.
Moreover, other emerging technologies such as 4D seismic imagingand mobile technologies are encouraged and would be beneficial, especially during an international lockdown where movement is limited. For instance, the use of 4D seismic imaging differs from the conventional 3D imaging as the 4D version adds a time lapse layer, providing potential changes in fluid movement in reservoirs over a specified period of time. This feature gives companies a better overview of when action is necessary and when it is not; 4D seismic imaging is also reported to increase upstream revenue by nearly 5%. Also, enhanced mobile technologies (i.e. via smartphones or even wearable devices), promote efficiency as data is provided in real-time, potential errors are predicted and avoided, and safety is enhanced by communicating and acting remotely. Hafez added that “The use of the digital collaboration applications / systems within the company has increased significantly by almost 70% during the pandemic time until now.”
Finally, the use of cybersecurity solutions is no longer seen as an extravagant digital solution, but a necessity. In fact, the main concern most companies have with regards to shifting to digitalization, is the lack of security on data attained. For this reason, it is important to ensure that all confidential data attained via computers, mobiles, cameras, etc. are well-protected from cybercriminals aiming to steal data for competitive or even political purposes. There are several softwares available to prevent the hacking and the theft of confidential and unauthorized data. This is where the necessity of installing Intruder Detection Systems (IDS) and encryption technologies comes in; to prevent malwares and phishing campaigns. The more digitalized items become, the greater the risk of cyber-attacks; therefore, it was suggested that investing in a Security Operations Centre (SOC) – composed of industry professionals and experts – that is fully functional 24/7 across all operations could create a large obstacle for those attempting to hack the system.
Advantages & Disadvantages of a Digitalization Shift
It is essential to adequately analyze the advantages and disadvantages of having a digitalization shift before its execution. For example, there are many advantages of digitalization such as being prepared for lockdown situations and minimizing physical presence on-site; this is achieved by actively monitoring and taking decisions on actions remotely. Also, a shift to digitalization promotes the sustainability of production and efficiency of oil and gas companies, instead of closing down operations as the digital technologies allow for smooth operations regardless of external factors (i.e. pandemic, political instability, etc.). Additionally, essentially there would be a reduction in the initial capital costs, which would later be compromised in the added revenue attained. In terms of safety, on a daily basis, this would be entirely different as human presence around hazardous materials or dangerous equipment leaves a high probability for risks. Most importantly, there would be an overall change in the organizational focus as well as business models as professionals can focus on more important tasks and activities.
However, some disadvantages could include the high costs associated with implementing such technologies. It is important to recognize that the cost of the technologies installed is only a fraction in comparison to the operational and maintenance costs of the equipment as well as the training costs required to operate the technology. Many argue that while lockdowns do occur every now and then, they are uncommon and not worth the investment in digital technologies altogether. Additionally, human presence is required in the event of a technical failure, which could be seen as a drawback. Also, the reduction in jobs or increase in lay-offs could cause concern for the industry; many professionals have trained to carry out tasks machines can now perform faster and more efficiently. Finally, there is a high risk of data exposure where there are digital solutions installed. This is a more complex, yet understandable, disadvantage as it could not only lead to companies suffering from huge financial losses, but also years’ worth of confidential data and planning strategies would be compromised.
In conclusion, there seems to be a universal agreement that an industry shift towards digitalization is necessary to progress in the field. In fact, digitalization is viewed as an inevitable change that must be embraced with great care.There is a huge potential for improvement in the oil and gas sector with regards to international emergencies. It can be concluded that the benefits of implementing emerging and innovative digital technologies outweigh the drawbacks, especially when companies are prepared for emergency situations.