It is not always easy to look at the bright side of things, especially when an entire industry is being turned upside down by the Covid-19 pandemic. With the fall in global energy demand due to lockdowns and the subsequent fall in oil prices, companies have had to abandon their plans and forecasts.
But there is indeed a bright side.
While the use of technologies like IoT (Internet of Things) and cloud computing were already growing in the oil and gas industry, the global pandemic gave way to the fast-tracking of several digital innovations. In just a matter of months, digital innovations that were merely agendas for future consideration and deliberation, were implemented in operations. Greater reliance on digital solutions is helping boost efficiency and accelerate the drive towards a more sustainable oil and gas sector.
Innovation and modern technologies are enabling the oil industry operators to move forward by cutting costs, addressing health and safety issues and continually improving the existing systems with the help of data and analytics. With the coronavirus pandemic leading to uncertainty and crash in demand for oil, the initiation of new technologies and digitalization will play a crucial role in successfully tackling these issues. For the oil and gas industry, CAPEX and supply chain have been the major costs, which has only been rising recently. Because of the complex nature of operations, outsourcing and absence of digitalization, the supply chain inefficiencies lead to project delays and greater cost implications. It is estimated, if companies embrace innovative technologies, the potential financial value of oil and gas digital transformation could be anywhere between $1.6 trillion to $2.5 trillion.
And it isn’t just the financial benefits and cost cuts that make it lucrative, embracing digitalization could mean drastic reduction in tons of carbon emissions, millions of gallons of water and barrels of oil, due to oil spills.
The above factors and in large part, the global pandemic, has led to the key industry players to introduce and implement newer technologies. A good example of this would be the introduction of Digital Twins, a concept first envisioned by the computer scientist and author David Gelernter in his book Mirror Worlds. However, it was General Electric (GE) who have been the early pioneers in bringing digital twins to the oil and gas industry. Simply put, Digital Twins is a virtual model, that brings together the physical and virtual world, for data analysis and system monitoring with an aim to improve operations, reduce downtime and lower costs. Digital twins provide users with interactive 3D simulations that site managers and engineers can use to monitor and control the oil rigs and plants from a remote location. Digital twins are not a recent innovation, but due to the pandemic, companies are finding it increasingly beneficial where engineers cannot reach their rigs physically. So due to the advancements in computing technology and benefits these modern technologies has to offer, many players in the oil and gas industry have started implementing these in their operations.
Another area that has seen tremendous advancements is the use of data and analytics. The major players in the oil industry use advanced analytics and modelling in some form or the other. This collection, mining and analysis of data has in large part enabled the digitalization of the oil industry.
For oil and gas projects, the crucial issue is project completion, as several projects run into delays, primarily due to inefficient data and analysis, in turn exceeding their budget. Inefficient data analytics could be anything from the lack of centralized and reliable data and ineffective processes to the need for physically transferring data. Sometimes, even ineffective communication and delay in issue reporting can lead to failures.
If anything, with the pandemic plummeting demand for oil and gas, operators in the oil sector have understood that in order to stay afloat and face these challenges successfully, it is crucial to embrace and implement digital innovation and modern technologies. During this pandemic, companies have thus rushed to acquire and invest moderately in newer technologies to keep going. Digital transformation is a team activity, and the role of the CTO (Chief Technical Officer) or CIO (Chief Information Officer) is more important now than ever. They need to build the foundation of trust in digital, by being a bridge-builder between the complex and technical components of the transformation strategy, and their impact on people and processes in a specific context.
While the global pandemic has hit the oil and gas industry hard, drastically reducing demand and hindering production in several parts of the world, it has brought along some benefits too. For instance, the Covid-19 pandemic has made investing in digital more urgent, significantly accelerating the digital adoption timeline from five years to three months. The cost benefits digital can bring is crucial for surviving in the low-price regime. But what is important to keep in mind is to be able to unlock the potential of these digital innovations and make most use of these technologies, oil and gas companies would need to urgently reskill their workforce.