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The oil and gas industry has embraced digitalization over the
past few years as an effective means for managing costs and raising
efficiencies in a challenging oil price environment. IHS Markit
documents individual cases in which these efforts have helped to
reduce costs by 10 to 25 percent, increase productivities upwards
of 8 to 10 percent, and enable safer and more environmentally-sound
operations―impressive results.
At the same time, IHS Markit notes that this isn't the first
time that upstream players have turned to digitalization as a
vehicle for transforming how they develop and operate their oil and
gas resources. An earlier wave during the early- and mid-2000s
resulted in similarly impressive one-off gains, but often struggled
to achieve organization-wide acceptance and thus failed to move the
needle on overall corporate performance. Senior management
subsequently shuttered many of these ambitious and integrated
programs (e.g., i-fields, Integrated Operations) in favor of more
focused and discrete initiatives.
Now several years into this renewed digitalization push, it may
be an appropriate time to assess whether it is delivering as
expected. A good place to start the discussion is a consideration
of where previous efforts sometimes fell short:
Business acceptance. Engineering and other
technical staff incorporate developed solutions into existing work
flows, and readily introduce new operating practices that are
enabled by them.
Sustainability. Solutions are regularly
maintained and updated, and program support continues even as
management turns over.
Integration. E&P organizations pursue
high-value solutions that span organizational and E&P lifecycle
boundaries, in addition to those initiatives targeting discrete
functional opportunities.
Acknowledging these earlier challenges, E&P organizations
are taking a different tact with a new set of enhanced technical
and organizational approaches that aim to anticipate and avoid
them.
Emerging enabling technologies. The new suite
of digital technologies (e.g., advanced analytics, machine
learning, digital twins) are in many practical ways similar to
those of the previous generation ― reliant on seamless access to
well-conditioned data to perform their analysis, and serving a
demanding workforce that expects ease-of-use. What is changing,
however, are the underlying technologies that companies are putting
in place to address these needs, including more flexible data
architectures, cloud computing infrastructure, and mobile computing
platforms.
New organizational models. Companies are
re-positioning themselves to help ensure greater business
acceptance and accelerated value capture from deployed solutions,
including by 1) strengthening ties between technology organizations
and operating staff via improved organizational positioning and
cross-pollination of personnel, and 2) establishing cross-asset
operational support centers in key functional areas (e.g.,
drilling, artificial lift) that facilitate rapid technology
deployment and refinement.
Expanded industry partnerships. With a growing
recognition that digital expertise is just as likely to reside
outside organizational (and even industry) boundaries, upstream
players have been more apt to tap such external capability by 1)
partnering with traditional oilfield services firms, technology
companies, and E&P-focused start-ups to jointly develop
advanced digital solutions, and 2) leveraging digitally-enabled
supplier service offerings in discrete areas (e.g., equipment
surveillance), while also considering more transformative business
models (e.g., buying capacity rather than buying equipment).
IHS Markit observes a range of "digitalization models" emerging
amongst E&P firms to execute these ambitious strategies (see
Figure 1). Where a company falls within the spectrum appears to be
influenced by past digitalization experiences, inherent upstream
organizational structures, and broader corporate pressures. It
should also be noted that E&P firms typically pursue hybrid
approaches, with a single dominant model often emerging.
Figure 1: Upstream
digitalization models
