It’s not news that the global energy sector is facing its biggest challenge in recent history, driven by simultaneous demand and supply shocks that have yielded rapid fluctuations in price. Leaders in the energy industry, regardless of the company’s size or position in the value chain, must decide how best to balance uncertainties on the supply side with the constantly changing demands of a growing global population.
The natural tendency for leaders may be to respond as they did to a previous energy demand or supply shock crisis, because those approaches are tried and tested. But the future is unlikely to be a continuation of the past. The time is ripe for innovation and transformation, rather than a minor reset. We strongly believe that this transformation must be a digital one.
Digital transformation is already speeding up
Over the past year, we have seen the industry react traditionally with cost reductions, but also in previously unimagined ways, speeding up years of experimentation with new services and business models. These tactics have ranged from adopting business continuity tools overnight to embracing novel, highly scalable collaboration tools across enterprises without a hitch. Companies that apply these new insights and ways of working for the long term will create competitive differentiation, a point underscored by the CEOs of many integrated oil and gas, exploration and production, and oil field services companies. Their reports make it clear that the current energy crisis has accelerated the adoption of digital technologies by the industry to increase safety, drive efficiency, and lower costs.
We have the opportunity to build a stronger future
Despite major investments over the years in IT infrastructure, equipment, and operational technology, many industry processes remain manual, disconnected, and inefficient. Data is siloed. Simulations are lengthy. Applications and infrastructure are legacy-based. Performing risk assessments, asset integrity inspections, and tracking safety incidents are costly and time consuming.
Energy industry leaders now have the chance to create a strong foundation, not just to meet immediate challenges, but also to instill strength and flexibility that will allow their businesses to grow and adapt to whatever the future may bring.
Rather than thinking about their future just once a year, contemporary companies should be constantly modeling different scenarios based on optimizing their own assets and resources, such as wells, reservoirs, and production systems, in near real time. Regular, dynamic planning based on real-time data, including nontraditional information such as social media trends and sentiment analysis, allows companies to better respond to volatility in the market, which is likely to continue into the foreseeable future.
The sector should keep an eye on new technologies that can realize innovative but previously impractical ideas. For example, a decade ago, futurists first talked about self-optimizing oil fields, which use sensors to record, analyze, and regulate information to and from individual wells and production systems in remote locations. Today that blue-sky thinking has become reality, allowing energy companies to increase efficiency, return on investment, and worker safety.
Reshaping business models
Leaders must recognize that digital technology will shape the form of the company’s future, at the same time the company’s future will shape the form of the digital transformation. New technologies have redefined the energy ecosystem, democratizing access and allowing participants to move away from costly, complicated, and time-consuming procurement processes toward Software as a Service (SaaS) offerings. Shifting operations to the cloud can cut costs and improve efficiency, data capture, decision-making, and modeling.
For example, analytics tools for production monitoring and optimization of wells can now be offered to energy companies instantaneously, driving immediate insights and impact without compromising security. Similarly, energy companies can have instantaneous access to new (micro-) services allowing them to compare and contrast their own proprietary models with state-of-the-art models. A one million core full waveform inversion (FWI) modeling in the upstream domain is a pointer click away on a pay-as-you-go model, without the need to exchange large volumes of data.
The way forward
We are optimistic about the future of the industry. It has a long history of innovating in order to address the ever-growing demand for energy in a responsible way. But it will require a change in leadership, behavior, and attitude to embrace digital transformation. The companies that survive this energy crisis will be the ones that can quickly change existing paradigms and spur the acceleration that will propel the industry forward. It’s time to reset, recalibrate, and boldly face the future with creativity and innovation.
As the world’s population continues to grow, so does the world’s energy consumption. To meet these growing energy needs, Amazon Web Services (AWS) provides energy companies the foundation to transform complex business and operational systems while accelerating the transition to a more sustainable energy future. AWS delivers the broadest and deepest cloud offering and industry solutions for energy companies to transform legacy operations, helping organizations reduce their carbon intensity and accelerate the development of innovative renewable energy businesses and business models. Transform the core and build the future of your energy business.