Getting ready for the next digital wave

By Energy Connects

Aug 12, 2020

By: Bjorn Ewers, Managing Director & Partner BCG, Jean-Christophe Bernardini, Partner and Associate Director BCG and Marinos Constantinou, Consultant BCG

Are companies ready for the digital wave?

More and more companies are positioning themselves for the digital wave, while some are already fully prepared. Operators such as Shell, Equinor, and BOP are ahead of the field in exploiting the benefits of digitalisation, and readiness to do so is characterised around five main pillars.

The first is a value-driven mindset, which is the ability to define problem statements and solutions with a focus on value generation rather than good-to-have technical improvements. Second is the capability to develop ideas quickly through minimum viable products and agile methods, as such approaches accelerate value generation and allow companies to eliminate non-value adding ideas faster. The third pillar is fit-for-purpose data governance and IT architecture, which is needed to enable the delivery of robust and stable digital solutions to ensure user adoption and value delivery.

Next up is a digitally-enabled operating model, which is crucial in ensuring that the digital solution is embedded in the operating rhythm and generates value without creating more work. The final pillar is a value-tracking mentality, which is also essential. This revolves around being committed to tracking value generation consistently to apply a self-funding approach for scaling digital solutions and identifying initiatives that need to be stopped. More often than not, the main challenges for companies are being able to scale MVP’s to business unit and company-wide level. Ultimately, scale requires mastering these five pillars.

How is the oil and gas landscape changing through digital technology?

Digital technology is enabling the industry to undergo a fundamental transformation. Oil and gas companies tend to be data-centric, and operators are now leveraging the full power of data integration and analytics to make the fastest decisions possible. The transformation is occurring through three main pillars, the first being the operating model and philosophy. We are seeing more and more companies shifting towards unmanned operations and campaign mode interventions because the significant cost reduction achievable through leveraging digital technologies is being realized. Equinor is a prominent example and the development of Oseberg H, which will be the first fully automated offshore platform.

It is important to appreciate that with the current market conditions due to COVID-19, there has been an underlying need for operators to transform their operating models. Digital is a key enabler to drive necessary change as it reduces costs and exposure risks – limiting the amount of hours personnel spend on production sites, reducing the numbers on production sites, and accelerating the development of unmanned facilities.

The second main pillar is the required profiles and competencies impacting the organisational structure. According to OPITO’s Skills Landscape 2019-2025 report, it is estimated the oil and gas industry needs to attract 25,000 new people, and 4,500 of those will be in entirely new roles that don’t currently exist in areas such as data science, automation, and new materials.

And finally, transformation in the way data is utilised by oil and gas operators forms the third pillar. As previously mentioned, oil and gas companies tend to be data-centric, because the nature of the industry has always been data-centric with a focus on data acquisition for physical modelling to predict and optimise field performance. That being said, this was primarily done on a discipline basis and data was used for specific modelling. Through digital technology, operators are now leveraging the full power of data integration, contextualisation and analytics, generating a multitude of insights that are focused on taking faster decisions on disciplinary and multi-disciplinary levels.

How will the digital oilfield improve the workflows of operators?

The digital oilfield will improve the workflows of operators in several ways. At this moment in time, a plant generates a tremendous amount of information, which ultimately creates more confusion, rather than helping decision-makers to act. With digital solutions, they can be leveraged solely to provide relevant and useful information, which will accelerate decision-making and value generation. This applies to every level of an organisation, from managers to control room operators, and is especially true for troubleshooting in operations as the response time of operators can significantly affect production on a daily basis.

Another impact of digital solutions, and most likely the greatest, will come from breaking down the traditional oil and gas siloed workflows. Data contextualisation and collaborative tools across organisations can ensure teams focus on value-adding activities, rather than process-driven activities in design and execution timeframes. This applies to large coordination environments in particular, such as offshore operations. Imagine a campaign or shutdown that involves cross-entity collaboration, including maintenance, inspection, drilling, wells intervention, base operations, and engineering and construction. An operation such as this can be scoped and scheduled in a single tool that leverages synergies across the participating entities. Innovative solutions can increase synergies by sharing resources and boosting productivity by 10-20 per cent in some cases.

Moreover, digital solutions will also provide transparency on personnel and field performance, expose inefficiencies, and concentrate on value-generating workflows or identifying and eliminating inefficient processes. This has significant potential for cost reduction by optimising workforce and vendor utilisation across entities.

What are the main technology components of a digital oilfield?

There are three main technology components that will deliver the most value for digital oilfield operators. Automation will serve as the fundamental basis in two dimensions. Firstly, strong monitoring capabilities on which to build further digital solutions leveraging modelling, machine learning, and AI solutions. Secondly, excellent remote-control capability, which will be the catalyst in moving towards unmanned operations and reducing costs and health, safety, security, and environment (HSSE) risks.

Next is Digital Twin technology. Besides offering a stable and realistic modelling basis on which to develop multiple value-driven use cases, it will represent the physical asset’s real condition at any point in time. The industry is already moving towards this technology with significant momentum, spearheaded by Shell’s Digital Twin of the Nyhamna gas facility, Equinor’s Johan Sverdrup field, and BP’s APEX in the North Sea.

Thirdly, machine learning and AI solutions will be crucial in providing the technological advantage over traditional physical modelling. These will enable much deeper insights at a fraction of the time, but more importantly, they can give predictive capabilities for solving problems before they arise. An array of predictive maintenance solutions are already in place within the industry from established service companies such as GE and AVEVA, as well as data-analytics specialist companies such as SparkCognition.

What advantages can technology offer in terms of efficiency?

Digital technology can bring about efficiency across all value levers within an oil and gas operation by increasing production, reducing OPEX and CAPEX, and improving HSSE performance. At BCG, we have worked with clients who have, through leveraging digital technologies, achieved increases in production up to two percent and reductions by as much as 10 and 15 percent in OPEX and CAPEX, respectively. Moreover, BCG analysis shows that digitally mature operators drive higher value, enjoying up to 30 percent lower break-even prices and up to three times higher free cash flow.

With regards to production, efficiency can be driven by modelling the integrated production system from reservoir to export and providing a common platform for all disciplines to address production optimisation. Identifying bottlenecks within the chain also bring about efficiency through production uptime, and systems such as BP’s APEX and Shell’s Production Universe are prime examples of such efforts.

In terms of OPEX, the majority of efficiency gains will most likely come from reducing maintenance costs. Systems such as SAP and Maximo have been established in the industry for several years, and SCADA and Historian systems provide the perfect basis from which to leverage machine learning and AI methods to predict failure. This allows organizations to streamline their maintenance philosophy and strike a cost-optimised balance between time-based, condition-based, and predictive maintenance.

Meanwhile, CAPEX efficiencies will primarily be realised on the detailed design and execution phases, particularly through the digital twin technology. Faster decision making and clashes identification will substantially accelerate both phases, delivering cheaper projects and unlocking resources previously too costly to produce. Equinor’s Johan Sverdup project is a prime example, with digitalisation saving at least one month of the execution phase.

It is worth pointing out that HSSE practices will also be enhanced tremendously. By providing transparency across operations, risks will be identified well before work execution, limiting incidents, delays, and increasing focus across the organisation. New and exciting technologies, such as natural language processing, are now in play in the area of predicting incidents, as is drone technology, which is now widely used within the industry for inspection to limit personnel exposure.