The oil and gas industry is playing a game of digital catch-up, with billions of dollars in savings on the line.
Technology is playing a larger role – particularly on the analytics side – but the industry as a whole needs a complete solution, said Alisa Choong, Shell’s executive vice president for technical and competitive IT.
She said that with automation of well drilling, costs could be cut by 50 per cent. “Costs can come down quite significantly, but the minimum improvement we’re looking for is 25 per cent,” Ms Choong said.
The American consultancy firm McKinsey said that an oil and gas company could save nearly US$1 billion, or reduce about 20 per cent of capital expenditure, by incorporating more digital technologies. However, the industry’s reluctance to adopt a more streamlined, analytics-based approach is partly the result of the low oil prices and competing internal IT projects.
And digitalisation is considered the next frontier for slashing capital expenditures when companies have cut to the bone in every other area.
This comes at a critical time with the disappearance of the $110-per-barrel heyday from more than two years ago. The tumble in prices has given a new normal of sorts with Brent crude, the international benchmark, averaging between $40 and $50 per barrel.
This has led to budget constraints resulting in hundreds of thousands of job losses, renegotiated contracts and the slowing or even cancelling of projects.
Shell spends about $1bn annually on research and development, and while part of that figure goes into hard research such as molecular compounds, a greater portion of that investment has been allocated to knowledge and data.
“Due to the world that we live in being so connected, there’s so much more data that needs to be analysed and decisions that need to be made at a faster speed,” said Ms Choong.
She said that the industry has changed its position on innovation, becoming more focused. Previously, innovation solved the most complex and difficult problems, including enhanced oil recovery techniques such as using natural gas to reinject into a well to produce more oil. “Now we’re using innovation, especially digitalisation, to improve daily activities,” she said.
Ms Choong said there are other obstacles that need to be addressed. “Shell as an organisation can share challenges, but what we would like to see is an ecosystem partner picking up those challenges,” she said.
Putting data in the cloud – or over the internet rather than on a hard drive, which cuts costs of implementing a data centre – gives easy access to users that may need to move information from one location to another. However, in the oil and gas industry that becomes more difficult. If a firm is drilling a deepwater well, access to the cloud is not possible without a fibre optic cable, which requires another player on the field. The main issue is that someone should be in charge of putting all of these players together to make sure the standards are met so that it was an easier process.
Ms Choong said that the digitisation, or rather “Industry 4.0”, was ready for its next revolution. The technology to accomplish this is already in the market being used in everyday applications around the world throughout various sectors, so there is no question as to the viability.
Yet the oil and gas industry needs to find a way to harness this at a quicker speed that will translate to greater savings in the long term.
“We still as an industry need to get more mature,” Ms Choong said.
lgraves@thenational.ae
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