The Mena region can unlock $2.6 trillion in value through digitalisation by 2025, logistics giant DHL estimates. That is just four years away.
As market pressures intensify, no energy firm can afford to ignore this potential. The Middle East’s interest in digital tools that fall under the umbrella of the Fourth Industrial Revolution has been gradually increasing. But now appetite is soaring; energy stakeholders not investing in digitalisation are fast becoming outliers.
This is especially true in times of strain – and have no doubt, this is certainly one of them. Oil prices continue to hover between the $50s-$60s per barrel range and the International Energy Agency says at least $1 billion must be spent per year in the near-term to create an environmentally friendly energy economy.
Meanwhile, the International Monetary Fund warns of a ‘long and difficult ascent’ out of the global economic plunge that is being spurred by the Covid-19 pandemic. The squeeze on economics, operational norms and talent development is very real, particularly for nations that have had restricted travel and lockdowns over the last year.
These difficulties only emphasise the value of investing in digitalisation. For example, digital tools and technologies thread into each of the three traits that the Boston Consulting Group said the companies best able to rebound from the pandemic have: end-to-end supply chain transparency, agile operations and quickly digitised customer interactions.
The unpredictability wrought by Covid-19 has put many energy companies on a level playing field in the Middle East and beyond. But it has made it clearer than ever that the size of an energy company is not everything.
Firms’ growing appetite to ramp up digital growth together as they rebuild their economic robustness could organically nurture a digital ecosystem in the region. It makes sense to leverage each other’s expertise to accelerate progress as the global clock for energy security and decarbonisation ticks on relentlessly. Therein lies the rapid rise of digitally orientated partnerships across the region.
Many are now vigorously walking what has long been just digital talk in the GCC. In January, Saudi Aramco – the world’s biggest oil producer – launched Dammam 7, a new supercomputer which is among the top ten most powerful in the world. This boost for exploration and development marks the next step in Aramco’s digital transformation. Saudi Aramco Development Company, a subsidiary of Aramco, also signed a deal with Cognite to establish a new company that will focus on digitalisation in Saudi Arabia and the broader Mena region.
In the UAE, energy leader Adnoc has saved $2bn over the past five years by leveraging advanced technologies and digitalisation to enhance drilling efficiencies and optimise operations. It has also recently awarded a $519 million contract to further expand the world’s largest 3D seismic survey. And most recently, Adnoc teamed up with ExxonMobil to jointly identify areas where advanced technologies can further increase operational efficiencies and unlock value.
To the east, Petroleum Development Oman (PDO), the sultanate’s largest oil and gas exploration and production company, has wrapped up phase three of its Information Management digital transformation journey with Hexagon. This includes a single platform where all the lifecycle information is centralised for more than 4,100 employees and contractors – bolstering transparency and efficiency in one go.
The Middle East’s push is well-timed, for its progress is key to sustaining global competitiveness on both the energy and digital stage.
For example, 50 per cent of oil and gas respondents to a survey by Deloitte said their company is already investing in energy efficiency, cleaner fuels to power field operations, and acquiring businesses outside their core focus. And another 50 per cent of industry respondents polled by Deloitte said they would invest in digital technologies to boost energy efficiency and in operational technologies, such as carbon capture to reduce future emissions.
Another area that the region needs to keep abreast of? Cyber threats. Globally, across all industries, a staggering 36 billion records were exposed in data breaches in the first half of 2020, according to a report detailed by Risk Based. And last year was already the “worst year on record” by the end of the second quarter in terms of the total number of records exposed.
Far more digital sheriffs are needed to safeguard operations, especially as cybersecurity is fast being woven into energy companies’ competitiveness. Greater transparency and accountability are increasingly coveted by digitally aware investors. What were daily, or even weekly, checks must now be done on a minute-by-minute or second-by-second basis. In these times of both uncertainty and great growth, there is no such thing as excessive diligence.
The same applies to exploring and applying digital solutions. Considering 1 billion people worldwide still lack access to electricity and that we are lagging on the Paris Agreement goals, our exploration of digitalisation to streamline efficiency and bolster scalability should know no bounds.
Badar Chaudhry is senior vice president, sector head – Energy at Mashreq Bank