Around 88 per cent of Gulf-based refiners say lack of investment in digital technology poses a significant threat to improving margins and lowers their competitive advantage, according to an industry survey.
The lack of integrated digitalisation strategies and fear of the unknown are the key barriers preventing digital adoption among refiners, according to a poll by the Gulf Downstream Association and Boston Consulting Group (BCG).
“The study highlighted that 67 per cent of GCC refiners hope that digital technologies will solve their top two challenges: reliability and product optimisation,” said GDA secretary general Audah Al Ahmadi.
The downstream sector, which refers to the refining and chemicals component of the energy value chain, has boomed in recent years. Several national oil companies in the Gulf are looking to develop greater downstream potential as they look to diversify into new product streams to earn more revenue. With declining growth in demand for crude as well as volatile oil prices, petrochemicals are seen as a more viable, and lucrative sector, for the regional energy industry.
Saudi Aramco, the world's largest oil-exporting company, now has a 70 per cent stake in Sabic, the region's biggest petrochemicals firm as it looks at developing specialty chemicals to widen its interests. Meanwhile the Abu Dhabi National Oil Company is investing $45bn alongside its partners over the next five years in boosting its downstream capabilities. The state-owned company plans to double refining and treble petrochemicals capacities, with plans to build the world's largest integrated refinery.
The Middle East continues to remain a hotspot for greater downstream investment, with new technologies such as oil-to-chemicals being deployed in planned schemes such as the $20bn project being developed at Yanbu on the east coast of Saudi Arabia.
However, the study by GDA noted that 50 per cent of refiners stated that a lack of proven technology is the biggest challenge to digital investments within the industry. Around 25 per cent stated difficulties in estimating a robust business case upfront when considering investments to digitalise, with an equal proportion citing a lack of short-term benefit.
“Unlocking digital [capabilities] requires pinpointing the most important areas to apply digital technologies, and these are maintenance, operations, and production planning,” said BCG managing director and partner Mirko Rubeis.
“The shift from being aware of digital use and piloting digital applications to industrialisation is slow in maintenance and operations, despite 20 per cent of respondents expressing awareness of more than ten digital applications," he added.