Decision making could be transformed, as the use of augmented reality and digital twins would underpin the simulation of “first oil” — the initial amount of oil that emerges from a field that’s being commercially drilled — before final investment decisions are made. Unconventional players in the US, driven by the overall cost competitiveness of that market, are probably the furthest along the path to realising the benefits of digital transformation. Where and how is digitalisation likely to impact upstream oil and gas? The value of data analytics is potentially transformative in the oil and gas industry. Distribution of injuries and illnesses with days away from work in drilling oil and gas wells, by event, 2007. Yet technology and digitalisation are characterised by rapid adoption and fail-fast attitudes, with those able to adapt quickly capitalising. In the not too distant future, the image of oil workers manipulating drill pipe on platforms could be replaced by something dramatically different. The upstream oil and gas sector is well behind other industries when it comes to being digitally enabled. The UK’s oil and gas sector is dominated by production from offshore areas, which account for virtually all of UK output1. The oil and gas industry is not a stranger to this and is progressing towards digital maturity. Traditional operators are concerned by the emergence of unconventional players with differentiated, market-leading digital capabilities. The oil and gas sector has a relatively long history with digital technologies, notably in upstream, and significant potential remains for digitalisation to enhance operations. “Siloed” digitization does not provide the cross-functional insights across multiple assets that are needed to drive efficiency and value at the enterprise level. From your experience, how should oil and gas companies see the current digital evolutions and how will business models in the oil and gas industry be impacted and changed? Research shows that average production efficiency dropped in the past decade, while the performance gap between industry leaders and other companies widened, from 22 percentage points in 2000 to around 40 percentage points in 2012. Statoil has launched a centralized and integrated digital improvement program. The trend toward digital innovation is accelerating across the sector because companies are much more focused on cost and driving operational efficiencies in an era of relatively low oil prices. In so doing, it offers increased safety of our operations and profitability of our businesses. We use cookies on the public areas of our website. Yet look at a modern-day automotive manufacturing plant, where lines of workers assembling individual car parts already have been largely replaced by robots. Accenture's energy consulting services in the oil and gas industry can help you company thrive in the digital world. In the Upstream Oil and Gas digitization Survey, 66% of those surveyed believe analytics represents a transformational opportunity for their business but only 13% believe their company has fully mature analytics capabilities. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. As illustrated in Exhibit 1, savings can be realized in operational excellence (such as more efficient maintenance and better operation of assets); in the supply chain; in the use of artificial intelligence; and in the use of integrated platforms (connecting the organization with external partners). The iconic image of “roughnecks” — overall-clad workers with oil-stained faces handling equipment on a drilling rig — has not changed much over the past few decades, even as the industry is recognized for its technological innovation. Submit your details to find out more about how we can help you and your organisation. Note the iconic hires for the NCS, such as Statoil recruiting a new chief digital officer. More specifically, digital oil field technologies allow companies to capture more data, with greater frequency, from all parts of the oil and gas value chain and analyse it in real or near-real time. At its heart, digital technology offers the industry, the opportunity to increase predictability, productivity and efficiency at all stages of the upstream value chain. This customer thought they were spending US $480 million on rig charges; PowerAdvocate’s analysis identified nearly US $800 million in spending. The application of “digital twin” technology opens up the possibility of replicating physical assets from fields to equipment in digital form, allowing companies to model scenarios to optimize everything from production to maintenance. With a computing speed of 18.6 petaflops (a single petaflop computer can process a quadrillion calculations per second), this technology saves time and money by allowing analysis of exploration prospects to be done in weeks instead of months. The company is encouraging its employees to develop apps stored on common platforms to improve workflow processes. The sector is starting to fully recognize that power, and more and more upstream companies are scrambling to seize it. At the start of the industry in the 1960s and 1970s production was dominated by a small number of very large fields, such as Inde, Leman, Forties, Brent, Ninian and Piper. OEMs and rig owners are also at a crossroads as upstream oil and gas faces digitization. As digitalisation permeates the upstream sector, successfully managing the cultural impact across organisations will dictate the success of digitalisation. Similarly, Aker has a stake in the new technology startup mentioned above, Cognite, which is headed by a former Microsoft executive. Oil and gas companies were pioneers of the first digital age in the 1980s and 1990s. Buy our reports to address business challenges and make better commercial decisions with objective insights, analyses and data. Senior executives need to make sure they have the right capabilities in place when it comes to the mix of engineers and data scientists. What’s more, PowerAdvocate and this customer used the cleansed, enriched data set to do more sophisticated analysis about third party supplier productivity by adding information from production management and field data capture systems. Digitization is Fueling Growth in the Oil and Gas Business Digitization is the buzzword in the oil and gas sector as it’s seen as transformative for the future of the industry. When applied to all major service categories within a play (or a region), this analysis is particularly powerful as it highlights where suppliers’ work rates varied. And given that drilling exploration wells can cost hundreds of millions of dollars, drilling in the right place can yield sizable savings. The case for becoming digital As the industry evolves digitally, HR executives will need to think carefully about how they attract a new generation of technologically savvy younger people. But how close is the industry to achieving this? But how close is the industry to achieving this? This information was powerful. PowerAdvocate believes that the foundation of successful digitalisation is good data. Here are a few examples: At the other end of the spectrum, there are smaller exploration and production (E&P) companies starting to explore digital transformation. Digital transformation of a company needs to be holistic and address all the elements of the operating model. One key risk will be cybersecurity. A coherent road map could help make sense of the digital muddle and drive more value. Annual cost saving potential in the next five years, based on currently known technologies. Digital transformation is not a technology-led solution. Some major companies are already fairly far down this path. IoT will enable companies to digitize, optimize and automate processes in mid-, up- and down-stream that were previously unconnected. Digital transformation is proving to be a true game-changer for Exploration & Production. Moreover, the industry faces a complex set of challenges including geographically dispersed assets, legacy assets that may be in long-term production decline, and operator (the lead E&P company on a project) versus non-operator (a partner in an E&P project) status. Those operators that can design and embrace a digital strategy that works for them will be well-placed to succeed in a new digital era of oil and gas. © 2019 - Sat Dec 19 19:43:00 UTC 2020 PwC. The analysis unlocked by this dataset was telling: PowerAdvocate found that hundreds of millions of dollars were incorrectly understood. Production of natural gas began in 1967 with the West Sole field in the Southern North Sea. This transformation requires all aspects of the operating model (vision, strategy, process, culture, and behaviors) to encompass digitization. The staggering complexity of tasks like these has engendered an industry of innovators and inventors. Please see www.pwc.com/structure for further details. We cover a diverse range of industry sectors and focus areas across the entire natural resources value chain. (For more insights on how operational efficiency is achieved through the application of technology, please refer to “Not your father’s oil and gas business: Reshaping the future with upstream digitization.”). BP has stepped up its capabilities by building its own digital workforce and running digital boot camps for executives. What are geophysicists and engineers if not data scientists? On that basis, anyone in the industry talking about digitalisation may legitimately ask, "what’s new?” What does seismic interpretation deal with if not Big Data? Although best-practice examples from leading companies might be emulated, digital solutions ultimately need to be bespoke and meet the business needs and challenges of each individual operator. Our own experience confirms this significant potential. But it will. Getting the right weighting between technical (the engineers) and technology (the data scientists and software engineers) capabilities is critical. PowerAdvocate discovered a difference in productivity between two suppliers of 40%. Building a digital organization needs to encompass stakeholders beyond the company itself if the full potential of efficient operations is to be unlocked. In theory this is a great pairing: a highly innovative industry and the latest digital technologies. Each company needs to develop its own specific digital transformation road map. The digital transformation in upstream oil and gas Industries are embracing technology to reshape their operating landscape and reap the benefits of improved productivity, higher efficiency, and increased cost savings. The analysis also provided more granularity on how that spending was composed of rig operating charges, rig standby time, and tools, materials, and consumables. Digitization hasn’t quite yet ripened into a full-fledged revolution in upstream oil and gas. Satyam Priyadarshy (Halliburton): The oil and gas industry started its digital revolution a decade or so ago.This first revolution is now known as digital oilfields or some variant of it. The customer thought they were spending US $480 million on rig charges... their actual spend was 1.7x higher. Generally, the digital oil field encompasses both the tools and the processes surrounding data and information management across the entire suite of upstream activities. Often during the time of crisis Operator companies such as Shell, Exxon Mobile, ENI, ADNOC, ARAMCO etc. We've extracted oil from deep underground in the harshest offshore environments. Aker BP, which aims to become a preeminent E&P independent player on the Norwegian continental shelf (NCS), sees digitization as one of the cornerstones of its strategy to improve efficiency and reduce full-cycle breakeven costs to less than $35 per barrel for new developments. There is no one successful digital template to follow. By continuing to browse the site you are agreeing to our use of cookies. The difference between the two images is clear. Digitalization is touching every part of Repsol; Upstream, including the development projects, exploration, downstream, the corporate center and it will change how we plan, we develop, we monitor and we are managing our businesses while we are at the same time improving margins and efficiency, lowering costs and delivering long-term value. The iconic image of “roughnecks” — overall-clad workers with oil-stained faces handling equipment on a drilling rig — has not changed much over the past few decades, even as the industry is recognized for its technological innovation. Now, with a growing focus on data analytics, companies will need engineers who are more digitally savvy. In our earlier "Laggard or Leader"  insight we identified up to US$150bn in annual operating cost savings that could be achieved in the energy and natural resources sectors through digitalisation. Everything from strategy and capabilities to organizational structure and culture will need to be considered and potentially reconfigured to reflect a digitally enabled business. Companies need to develop their own digital transformations because there is no “best practice” model in the sector to replicate. The reason for this fairly piecemeal approach to date is the industry’s aversion to catastrophic risk, which is well known. The company has committed an investment of 1 billion to 2 billion Norwegian kroner ($128 million to $257 million) in digital and emerging technologies, to be executed through the center of excellence. In the past, capabilities may have focused on technical expertise to deliver excellence in engineering projects. From a technology perspective, the growth of data analytics coupled with the industrial IoT is generating new ways of optimizing workflows. Although many oil and gas companies are trying out new digital ways of working, no one can claim to have “cracked it” just yet. Digital has the power to help the sector reap the most from its boom periods and avoid the worst damage when things go bust. We believe there are huge prizes on offer at every stage of the upstream lifecycle. All dimensions of a company and its operating ecosystem (its suppliers and external partners) need to be digitally enabled. Identifying opportunities to spend more efficiently yields powerful savings, but PowerAdvocate also worked with this customer to help them to identify ways to hold costs steady in rising markets. Fill in the form to talk to Greig about digitalisation in upstream. PowerAdvocate believes that the foundation of successful digitalisation is good data. Businesses stand to benefit from the sharing of data, knowledge, experience and insights as cross-functional teams form. As we’ve discussed, Lower 48 companies are more advanced in their adoption of digitalisation than their conventional upstream peers. All stakeholders around new field development —including the host government and the oil service providers and contractors — need to be digitally enabled. Those companies that simply view digitization as a technology play and fail to transform are likely to become digital dinosaurs and risk extinction. That said, there is an enormous amount of interest in and expectation around the benefits that digital solutions can bring. PowerAdvocate, Wood Mackenzie’s sister company, does exactly this. Two good examples are Cognite, a technology company focused on upstream operations in the Norwegian part of the North Sea, and Baker Hughes General Electric, which was created in 2017 in an effort to industrialize digital capabilities. And produced hydrocarbons from the nanodarcy permeability of shale rock. In our latest research, we take a closer look at the likely impact on the upstream sector. That’s the cost saving on offer from digitalisation in upstream over the next five years. As a first step, they are setting up pilots across their organizations to assess how best to apply digitization, as well as to identify the key digital capabilities that need to be developed. The biggest changes will be automated drilling technology, such as that being developed by Rockwell Automation, and predictive maintenance, like the solution offered by MapR and Mtell. The customer could then understand the competitiveness of their rates and negotiate accordingly. Drilling, performance monitoring, and production optimization could become highly automated. The Oil & Gas industry is adapting to the new era of digitization which is rapidly changing the ecosystem in all areas of business but especially Upstream. As a result of these activities, PowerAdvocate’s customer found US $1 billion of savings in their third-party spend. PowerAdvocate did this by creating cost models for the customer’s key procured goods and services. The oil and gas industry has always been at the cutting edge of technological innovation. Recently, PowerAdvocate worked with a US-based unconventional producer to transform the way the producer understood and analysed third-party supplier costs. We conservatively estimate that use of digital technologies in the upstream sector could result in cumulative savings in capital expenditures and operating expenditures of US$100 billion to $1 trillion by 2025. Customer Logins Obtain the data you need to make the most informed decisions by accessing our extensive portfolio of information, analytics, and expertise. Moreover, advances in cloud computing and edge analytics mean firms do not need a supercomputer or a Supermajor's IT budget to capitalise on this opportunity. 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