The Oil and Gas industry has sometimes been characterized as 'slow to adopt' in certain areas, but technology has always played a role in its advancement. It was, in large part, the catalyst for the rise of unconventional assets in recent years. Now, a new wave of digital technologies is gaining ground.
In the past month alone I've seen reports detailing the way the "lower for longer" price environment is changing the way oil and gas companies think about growth and efficiencies. For my esteemed colleague, Don Stowers, the same. Read his Editor's Comment on the topic of technology from another source just four pages ahead.
Years into a downturn, one such report kicked off: "A more frugal E&P sector may accelerate the digitalization of the oilpatch. A shifting emphasis on returns over growth heightens the appeal of digital solutions that promise to maximize efficiency and optimize performance," this from an October oilfield services (OFS)-related note from Evercore ISI.
In other October news, a survey from Accenture and Microsoft reported that almost two-thirds of upstream firms see the value digital technologies deliver as low oil prices linger. Faster and better decision-making and shorter time to first oil and gas topped the list of expected benefits from digital technologies.
An oil and gas CEO survey from KPMG echoed the others. With breakeven points more sustainable, and the industry's emergence from a major downturn, "CEOs are bullish on growth outlook and are intensifying investment in emerging technologies and innovative solutions to lead the way."
Regina Mayor, global energy leader, KPMG, said: "The energy sector is an incredible place to be right now. Innovative technologies have the capacity to completely disrupt the way we operate, and it's clear from our study that global oil and gas executives recognize that these technologies - when properly implemented- put us in a position to make big change."
In the KPMG study of 51 global oil and gas CEOs, a majority said they expect to see their company grow over the next 12 months to three years. To achieve this, 88% of CEOs plan to invest in data and analytics tools, followed by IoT (82%), and cognitive automation (78%). Eighty-six percent say these investments will primarily focus on physical infrastructure, 71% say regulatory compliance, 59% point to innovation of new products and services.
Similar statistics were seen in Accenture's survey. Rich Holsman, the digital leader in Accenture's energy industry group said: "Our survey respondents see big data and analytics, cloud, the Internet of Things (IoT), mobility, high-performance computing (HPC) and cybersecurity as having the greatest potential to transform their businesses. In the next three to five years, 70% plan to spend more or significantly more on digital technologies, and the next wave includes HPC, wearables, robotics, artificial intelligence and blockchain."
The transformation certainly doesn't stop with the upstream sector. Building on the Evercore ISI note, an acceleration of the digital revolution most certainly weighs on OFS companies. "We are in the early innings of the upstream digital revolution, and many E&Ps are likely discovering the difference between buzzwords and actual value-added as it pertains to OFS digital offerings. The automation arms race has begun and when the dust settles there should be a clear bifurcation between the "haves" and "have-nots," the note offered.
I reached out to a few folks "in the field," the technology field, for comments.
Perry Turbes, Quorum president and CEO told me: "From startups to supermajors, three major trends have emerged that are driving the CEOs of energy companies to reconsider how they modernize their business: improving business agility, increasing operational efficiency, and transitioning their workforce. Digital transformation helps companies conquer these complex challenges with technologies that seamlessly integrate and simplify business operations by leveraging IoT, cloud, big data and mobility."
Philippe Herve, VP Solutions, SparkCognition Inc. said: "The oil industry is now stabilizing from one of the most severe downturns it has ever seen. The simultaneous rise in big data, computing power, and a data-friendly workforce has enabled AI to take the role of the all-encompassing technological solution the industry needs."
The industry has been mulling the data big picture for some time. In a 2016 interview, I asked KPMG's Mayor about data as a component in managing costs in the downturn. At the time, she said the benefits of certain investments in that direction were still 5-10 years down the road. Following the release of the new KPMG survey, I reached out to Mayor for an update.
"The industry has adopted so quickly," she told me. "When we talked in earlier 2016 it was more 'duck and cover.' Now that we're in this lower for longer-or perhaps lower forever-environment, we see the industry being more aggressive in its willingness to adopt less proven technology."
For one, she said, the price points have come down. And, perhaps, companies were more skeptical then, but the industry was "in the throes of facing massive drops…perhaps not knowing how to cope," she offered. Now, Mayor said, prices are more stable, and companies are grappling with what to do next. "We're seeing the pilots and proofs of concept bearing results. The survey bears out out what we're actually seeing in the marketplace," she said.
That's not to say the possibilities are without challenges. In addition to sheer integration, both KPMG and Accenture pointed to strategic digital talent as a potential barrier in the short term.
Ways to harness the power of an evolving digital landscape are still being uncovered, but many agree that there's something quite compelling underneath the layers.
