The digital tidal wave is here. Whether it’s monitoring home energy consumption using smart meters, or recording a TV program on the set-top box at home while at office, or hailing a cab using Uber, digital has already profoundly impacted the way we live, work and interact with others.
The oil sector is no different. And, it is no stranger to the world of digital given its experience with digital oil fields. Digital providers are bombarding firms with bright ideas to apply across their value chain from exploration to refining to logistics to retail. But few ideas have matured into a sustainable and scalable global solution. Innovative petroleum firms that can identify a clear link to safety, efficiency or financial metrics from digital investments will gain a competitive advantage in 2018 and beyond.
What solutions will emerge first?
Many oil executives and technologists ask if it’s worth investing in digital technologies to gather more raw data through “Internet-of-Things” sensors, drones or smartphones, when only 15% of data that is currently collected in upstream is even used. How much should firms spend on automation and artificial-intelligence (AI) applications, like chat-bots, to take over mundane administrative tasks, leaving staff to concentrate on higher-value activities? To what extent should they use the cloud to store and manage data? Big-data analytics may be valuable in looking for patterns in the unstructured world of social media, but most data in petroleum companies are fairly structured and in databases. What’s needed are sound analytics to intelligently predict future performance in operating equipment or predict delays in the delivery of raw materials through the complex supply chain.
I think the five front-runners in digitalization for the petroleum industry in 2018 will be as follows:
Chat-bots/ Artificial Intelligence
Those boxes that pop up ever more frequently on websites (“Can I help?”) are simple conversation-simulation tools (chat-bots) to lead you through a series of choices before diverting you to a live agent. Oil traders are trialling chat-bots to ensure they have all the relevant information (such as news, commodity prices, historical trading volumes) on their screen, based on what they say in a conversation with a counter-party. The chat-bot intelligently captures the details of the completed trade rather than at day’s end, even prompting for missing information necessary to successfully close the deal. This speeds up and improves the quality of the trading decision and reduces time and errors. Built-in AI self learns from the last conversation to add more relevant prompts for the next deal.
Fieldwork mobility solutions
First tested in the mining industry, the use of wearable devices will significantly increase in the petroleum industry. Not only can the devices monitor a person’s exact location, but they can also show their vital signs and environmental surroundings to confirm they are working within permitted limits and conditions, thus ensuring safety and regulatory compliance. Hand-held or wearable devices with augmented reality tools will enhance the productivity of workers in the field by up to 9 times.
Remote supply chain operations
Advances in network speeds and internet connectivity will allow companies to monitor operations remotely and in real-time. Until now, the end-of-day stock reports and regular phone calls to multiple terminals were standard operating procedure for an oil-product scheduler responsible for a network of oil pipelines and terminals. It is now possible to set up a central control hub with advanced visualization screens and Skype-like collaboration tools to allow monitoring and even remote control a large geographic area, entry/exit points, terminal fuel loadings, tank levels, and flow rates. It all lets the hub operator optimize inventory levels and truck schedules to respond to changing demand and competitor prices in hours, rather than days.
Replacing costly and time-consuming field trips with virtual reality-based learning (similar in concept to a cockpit simulator to train pilots) will become the norm in the petroleum industry for fieldwork training and employee induction.
Industry business platforms
Industry participants will set up business and data platforms, either in a consortium (benefiting the whole industry) or individually (giving them a competitive advantage). Examples are a block-chain trading platform being set up by BP, Statoil and Shell, or still-confidential projects underway in integrated oil players to enter electricity retailing and peer-to-peer electricity exchange, a hedge against the retail fuel mix shifting from conventional automotive fuel to electricity.
To stay competitive, the industry will need to place bets on a range of digitalization applications in 2018, with returns clearly tied to improvements in safety, efficiency, effectiveness or the bottom line. Chief executives will need to think carefully about the structural and cultural changes needed in their firms for successful adoption of these digital initiatives. It demands a different skillset from those that have previously helped the industry execute some of the world’s largest and costliest engineering feats.
Suraj is a Partner with the firm and has been instrumental in setting up the energy, utilities and commodities, trading & risk management practices for Infosys Consulting in Europe and currently handles some of our major clients in this sector. His industry focus is oil and gas predominately and areas of expertise include digital transformation, supply chain and TOM/IT Strategy.