A Comprehensive Guide to Digital Transformation in Oil and Gas
Digital transformation in the oil and gas industry is no longer an option. Especially considering the need for increased efficiency in the current unpredictable market.
Unfortunately, recent data indicates companies in this industry are slower to adopt new technology. As a result, they have been missing out on opportunities that can help them unlock value.
The Case for Digital Transformation in Oil and Gas
There’s a high and constant demand for greater efficiency, streamlined services, increased ROI, and higher production in the O&G industry. COVID-19 further added heightened the urgency for these over the past two years.
On the topic of current events, the global tension in Ukraine and overseas mandates the shift to innovative, seamless technologies. With these, companies can bring down costs in an industry still shaky post-pandemic.
Another aspect driving digital transformation in oil and gas is the current workforce. Companies need to meet the needs of younger, tech-savvy employees. Especially potential ones as technological advancement is one of the aspects which attract new recruits.
An EY study also highlighted the following reasons for O&G to invest in innovation.
- To integrate field operations technology for creating a seamless equipment rental process
- To digitally transform scheduling and dispatch, enabling companies to remain informed of job-related data
- To enhance invoicing capabilities and, therefore, reduce customer pushback, support invoicing requirements, and decrease time to payment
- To reduce inconsistencies or time gaps while collecting data, therefore improving compliance with industry regulations
- To utilize digital tools and IoT for asset maintenance purposes while decreasing labor costs, increasing asset uptime, and improving output
Challenges Impacting the Pace of O&G Digital Transformation
Tech and innovation are far from new to the oil and gas industry. In fact, NASA has worked closely with the industry’s technologists to leverage their intellectual property. Despite all this, the sector took much longer to catch up with Industry 4.0.
According to PwC, three challenges hamper digital transformation in oil and gas –
- Data and Infrastructure – This is a constant concern for decision makers as data tends to be scattered across multiple systems. Moreover, data may not be structured, integrated, or ready for use in cloud strategies.
- Business Case Realization – Companies have a tough time trying to build a business case that can secure stakeholder buy-in. Further adding to the complexity of this task is difference levels of digital maturity and digital infrastructure across business units.
- People, Organization, and Culture – The current workforce may lack the behaviors and methodologies required to embrace digital technologies and solutions, impacting user acceptance levels. O&G companies are apparently also facing challenges ensuring talent is in the right area.
Additional Concerns O&G Companies Have About Digital Transformation
In addition to the above, digital transformation in oil and gas may be affected by several concerns companies themselves have.
Implementation Across Multiple Locations
The decentralized nature of O&G operations can be an obstacle for timely and consistent digital transformation. Moreover, each site is bound to have unique considerations to determine how effective the new changes can be. For instance, weather and temperatures can affect equipment.
The time digital transformation will take makes companies hesitate. Especially since remote locations need more time just for planning. Due to slow and lengthy rollouts, technology can quickly become outdated. New solutions are constantly coming up, rendering older ones irrelevant.
Low Digital Maturity
Unfortunately, oil and gas companies have a 5/10 rating in terms of digital maturity. This means they aren’t data-driven, lack flexible IT systems, and have a lower familiarity for tech across the organization.
This can negatively impact any digital transformation in oil and gas program due to internal resistance. As a result, it generates poor results. There’s also the risk of conceptual problems watering down transformation concepts.
Lack of Technical Expertise on the Leadership Side
Not many O&G companies value deep technical knowledge when it comes to leadership roles. This, in turn, eliminates their role as mediators who can bridge communication gaps between resources and transformation teams.
Weak leadership will also be a disadvantage as review cycles with stakeholders will take longer. Not only can this drive up costs, but it can also cause transformative efforts to fail.
O&G Companies Can Successfully Pull Off Transformative Efforts
Many oil and gas companies have successfully achieved their digital transformation goals.
Take for instance British Petroleum (BP) –
- BP has embraced cloud and digital solutions and services, allowing it to reengineer its on-field and office processes.
- It has created autonomous platforms for managing day-to-day operations using artificial intelligence.
- It’s using machine learning to enhance the efficiency of scheduling transport ships. That way, it can reduce energy consumption.
- Using AI, BP is working on a project that allows it to forecast how much potential oil and gas they can extract from underground deposits.
Like BP, Shell has achieved success while implementing digital transformation. In their case, the company required a solution that can quickly capture and store data from geoscientists. That way, it could automate manual tasks, eliminate human error, and prevent data loss.
Shell now uses a virtual knowledge capture assistant that uses AI, speech, and natural language technologies. In addition to real-time voice input, it can interpret geological/geoscience terms into text. It also integrated with existing systems for knowledge storage.
Even Total PARCO – a subsidiary of TotalEnergies and Pakistan’s second biggest OMC – was able to step towards digital transformation with our help. In addition to devising strategies aimed at profitability, revenue generation, and operational excellence, we established a digital lab for innovation.
Here’s a video explaining this in more detail.
Keys to Efficient Digital Transformation in Oil and Gas Companies
Like BP and Shell, many organizations can effectively navigate around the complexities of digital transformation. Helping them succeed are strategies such as the following.
- Ensure Master Data Management and Governance – Data needs to be processed and accessible to truly be of any value. With master data management and governance, the security of data will also be achievable.
- Map and Optimize Digital Architecture – Digital architecture is defined as the layout and integration of sensors, apps, databases, systems, and networks across an organization. With this in place, organizations can identify optimization and integration opportunities.
- Have a Cloud Strategy in Place – Unfortunately, majority of organizations are yet to have a formal cloud strategy that defines cloud usage. As a result, they may miss out on several opportunities including AI and machine learning.
- Go For SaaS Applications – Software as a Service (SaaS) apps instill standardization and configuration as opposed to customization. Therefore, it can help ensure faster time-to-delivery, quicker customer adoption, and easier version migration.
- Establish Strategic Partnerships – To win at digital transformation, O&G organizations should consider partnering with tech innovators instead of building in-house. This can ensure the roll-out of high ROI solutions quicker.
- Adopt Agile Culture – Agile cultures not only support rapid innovation, but they also allow organizations to fail fast. This is imperative to reassess where they stand and begin working in the right direction.
- Begin Upskilling Using a Layered Approach – To meet new needs, it’s imperative to invest in capability-building across the organization. However, a layered approach has proven to be more effective as it ensures everyone receives at least basic digital awareness.
How to Prevent Digital Transformation Initiatives from Failing
According to McKinsey, 70% of digital transformations fail. Industry leaders such as GE, Ford, and Proctor & Gamble were unable to achieve their goals. These failures resulted in CEOs being forced out and stock prices dropping dramatically.
So, to ensure value from digital transformation, oil and gas companies should consider the following.
- Look for Results, Not Just Potential Benefits – Just deploying new technologies isn’t enough. Companies should be able to pinpoint tangible bottom-line impact.
- Ensure People Don’t Go Back to Business as Usual – The individuals charged with running new tech shouldn’t drift back to previous work practices. Otherwise, your transformation will wind down rather than kick into high gear.
- Focus on Quality Rather than Quantity – Don’t try doing too much without a strategic focus in any area. Especially if your organization is too large to transform all at once.
- Be on the Lookout for Cyber Risk – The Colonial pipeline incident was a reminder that digital transformation efforts come with cyber risk. Interestingly, this risk can arise due to non-tech reasons such as untrained people and inefficient processes. Therefore, risk management is a must.
- Factor in the Behavioral Element – Companies should understand why operators fail to capture value in the technology. Without understanding their behaviors, companies won’t effectively align problems with solutions.
- Avoid Having an Overly Structure Approach – Transformation demand innovative experimental efforts. An overly structured approach can be lethal to it, so embrace a change in mindset.
- Expect Resistance – Ideally, you should test your company’s readiness for change. That way, you can assess how much friction and resistance different groups in the company may face. With this data in mind, you can manage risks caused by people who want to preserve what they have.
Looking for a Tech Partner to Drive Your Digital Transformation?
DPL has the expertise in fueling digital transformation in oil and gas. We further have the skill to create the solutions you need and cultivate the culture that goes with them.
So, get in touch via the form below to start your transformation journey.