What does digital transformation in oil and gas look like?
In this article, we will look at a high-level overview of digital transformation in the oil and gas industry.
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Let’s start by reviewing some research by Deloitte.
Digital Transformation in Oil and Gas
Deloitte has performed some detailed analyses of the oil and gas industry, offering its perspectives on:
- The state of digital transformation in the oil and gas industry
- A roadmap for digital transformation and maturity
- Where oil and gas companies are in their journeys
The three core stages of digitalization or digital maturity, according to Deloitte, are:
- Physical to digital. These core stages revolve around mechanization, sensor technology, and transmission technology. As we will see below, each of these stages affects different phases of the oil and gas workflow “pipeline.” Each phase, such as seismic imaging or exploratory drilling, would proceed through these three stages, as it progresses towards digital maturity.
- Digital. Deloitte includes four sub-stages in the “digital” stage: integrate, analyze, visualize, and augment. As with the other two stages mentioned here, each sub-stage represents growth stages that are progressively more and more digitally mature.
- Digital to physical. Finally, this stage includes three sub-stages: robotize, craft, and virtualize. This is when oil and gas companies have become more digitally mature and can fully exploit software and hardware to maximize efficiency and output.
For oil and gas specifically, each of these stages applies to the industry’s standard phases of operations.
That is, their workflow “pipeline” follows these steps:
- Exploration. This includes geological prospecting, seismic imaging, and exploratory drilling.
- Development. Development also has three stages: field planning, engineering and construction, and development drilling.
- Production. Finally, production focuses on well completion, production operations, and well intervention or workover.
Each stage of digital maturity applies to each phase of the oil and gas workflow “pipeline.”
According to Deloitte’s analysis, most organizations are not far along their journey – most hover somewhere in the first two stages of digital transformation.
In their article on digital transformation in the oil and gas industry, they go into much more detail around recommendations, descriptions of the stages involved, and how oil and gas companies can make forward progress.
Digital Transformation in Oil and Gas, According to the World Economic Forum
The World Economic Forum also performed a detailed analysis of digital transformation in the oil and gas industry.
Their report suggests that the oil and gas industry stands at the threshold of a new age.
The coming waves of technology – both digital and physical – will reshape the oil and gas sector completely.
Three major trends driving this digital transformation include:
- Disruption in supply, demand, and commodity prices. Today’s downturn is being driven by a supply-side disruption, which is expected to be followed by another disruption – peak demand for oil. To compensate, the oil and gas industry will need to focus intensely on reforming their portfolios and playing a greater role in the energy transition.
- Rapid technological advances. Technology itself is fueling transition in the way every business operates, including oil and gas. Surveillance, connectivity, mobility, and storage technologies are enhancing companies’ ability to analyze and respond to data in real time.
- Changing needs and expectations of consumers. Customers across the globe are expecting more engagement, personalization, and speed. And, when it comes to oil and gas, environmental issues also play a role in customer decision-making.
These trends are pressuring oil and gas companies to make organizational changes.
However, the World Economic Forum suggests that businesses often aren’t adapting quickly enough.
Incremental changes may be too slow – to truly become digital and modern, oil and gas companies may need to pursue a “revolutionary agenda with digital as a backbone.”
The report identified four digital themes that are central to the digital transformation of oil and gas in the coming decade:
- Digital asset life cycle management. Implementing new software and technology to transform business operations, increase agility, inform strategic decision-making, and create new business models.
- Circular collaborative ecosystem. Use integrated digital platforms to enhance collaboration, cut costs, and increase operational transparency.
- Beyond the barrel. On the customer side, oil and gas will be able to employ digital technologies to personalize experiences, open up new revenue opportunities, and deliver new services.
- Energizing new energies. New energy sources and carriers present us with innovative models for optimizing and marketing energy. To stay relevant, oil and gas companies must understand how these new entrants will impact the entire energy ecosystem.
The report makes a number of recommendations, both for the industry as well as for governments, policy-makers, and society.
For oil and gas companies in the industry, for example, they suggest:
- Making digital a priority for senior executives
- Driving a culture of innovation and technology adoption
- Investing in human capital and development programs that promote digital thinking
- Instituting methodical approaches for developing new capabilities
- Reforming companies’ data architecture
- Identifying opportunities to deepen collaboration and understanding of sharing-economy platforms
More information can be found at the World Economic Forum’s website.
While oil and gas may not be as digitally mature as many companies in the private sector, the roadmap is clear.
Digital transformation is a requirement for companies that want to:
- Stay relevant in the evolving energy ecosystem
- Meet the changing needs and demands of their customers
- Use digital technology to maximize profits, increase efficiency, and transform business operations
In the coming years, we will likely see oil and gas companies make digital transformation a top priority.
Given the benefits of digital transformation – and the drawbacks of not making progress – the industry will have little choice but to move forward.