Harnessing The Power Of Digitalisation To Thrive In The ‘New Normal’ Of Low Oil Prices

Harnessing The Power Of Digitalisation To Thrive In The ‘New Normal’ Of Low Oil Prices

The scope of what is required in deploying a digitalisation strategy across oil, gas or chemical (OGC) companies is immense and technological solutions are evolving at a fast pace. Contributed by ABB

The significant and sustained decline in commodity prices is forcing players throughout the hydrocarbon chain to rethink the way they have historically operated.


Digitalisation allows oil, gas or chemical (OGC) companies to get a highly granular view of their assets which, when viewed in conjunction with data from more traditional business systems, can generate quicker and better insights to drive competitive advantage.

Better connected oil fields, pipelines and refineries mean OGC companies are poised to take their performance and productivity to the next level of efficiency, safety and security. Increasingly cost-effective digital technology will facilitate improved monitoring, more collaborative and integrated operations and remote management to drive greater productivity at reduced costs and risk.

However, to benefit significantly from the potential offered, companies will need to embrace digitalisation on a bigger, much more holistic scale encompassing end-to-end processes throughout plants across the supply chain – not just in isolated pockets of change.

Network-connected assets, when thoroughly integrated, can significantly improve OGC risk, schedule and costs. Deploying the transformative power of digital, however, will not be easy. 

A dramatic, fourth industrial revolution is underway and, unless OGC players embrace the Industrial Internet of Things (IIoT) throughout their organisation, they not only risk delivering disappointing shareholder returns now but, longer term could put their companies in serious jeopardy.

OGC leaders need to make the right investments today to set them up for long-term success that can weather the industry’s cyclical ups and downs.

They need to take a hard look at how they will deploy technology to transform the rulebook by which they, and their customers, manage their operations to reduce costs and drive sustained profitability.


Oil, Gas And Chemicals: An Industry In Transition

Since 2000, international oil prices have been characterised by steep increases and a consider- able amount of volatility. During these boom years, the focus was on production – almost at any cost. The oil price crash in late 2014, however, has heralded a heightened interest in cost reduction and production efficiency while maintaining ever higher safety standards.

To cope, there have been considerable industry layoffs and a dramatic shutdown of rigs across the globe, bringing levels down to those not seen since the turn of the century.

The fall in rig utilisation rates, the ratio of working rigs to the number of available ones, has been consistently steep across various types.

But are such tried and tested responses to the downturn enough in the modern world? How sustainable is such a model long term, especially as the aging workforce retires and potential new workers may be put off, not only by the isolated location of many rig sites, but also by the industry’s pattern of boom and bust?

Strategy & research suggests the performance of upstream, midstream and oilfield services companies (OFS) demands a new approach. For example, while revenues of these companies declined 40 percent between the third quarters of 2014 and 2015, operating expenses (OPEX), only fell nine percent.


Digitalisation Offers New Options – Digital Solutions For Old Problems.

The fourth industrial revolution is set to transform businesses worldwide by making dumb machines smart, using sensors and advanced technology. Over the Internet of Things (IoT), smart assets and systems will communicate and cooperate not only with each other but also with humans in real time to improve performance through the entire value chain.

In this new world, OGC information systems can now create virtual copies of the physical world by enriching digital plant models with sensor data.

These smart ecosystems can help human operators by aggregating, visualising, analysing and prioritising big data sets to help people make informed decisions and solve problems quickly.

Increasingly these smart ecosystems are making decisions on their own and performing tasks quite autonomously – only escalating issues for human resolution when necessary (eg: conflicting goals, unusual results outside expected parameters).

These smart machines can further help humans by conducting a range of tasks that are unpleasant, exhausting, or dangerous. They will also be self-aware enough to tell operators when they need servicing, triggering maintenance on a just-in-time basis and facilitating near zero downtime.

Essentially, businesses are in the process of creating intelligent networks along the entire value chain that can control each other autonomously freeing up human operators for more value-added activities in safer environments.

From an OGC perspective the fourth industrial revolution is making it easier for companies to keep production going with fewer workers and increased safety – even during tough times.

Remote management, increased automation and cloud-based computing will enable companies to deploy fewer experts across a wider set of assets.

Additionally, machine learning and self-diagnosing equipment will help companies take action – the right action at the right time– significantly reducing operational expenditures while avoiding revenues lost due to unplanned shut-downs.

Extensive data analytics will help optimise daily operations across the hydrocarbon chain from drilling and artificial lifting, routing pipeline output in the most profit-maximising manner or adjusting manufacturing levels to suit changing end-user demand.

Eventually boundaries between individual rigs, pipelines and factories will no longer exist. Instead, they will be interconnected across multiple sites or even geographical regions scaling production up or down as best suits existing market conditions.

While the transition to a more digitalised OGC environment is exciting, it will not be easy.

Winners in this new world will be those who turn intention into reality and leverage the opportunity digitalisation provides to transform their companies – at a full enterprise level – to become leaner, quicker and safer as well as more responsive to supply- and demand-side conditions.

Those who use the current downturn to reimagine their complete business and operational processes will be those who will not only survive but also thrive as prices inevitably rebound. The time has never been better to invest in digital scale and drive better operational results and improve margins now and longer term.

Sensors and devices: the ‘things’ where information originates, such as a pressure or temperature, but also radio frequency identification (RFID) technology that uniquely identifies an object.

Edge computing: Often data needs to be processed at the edge to achieve enough speed or safety, like a compressor anti surge loop, a safety integrity level 2, 3 (SIL) loop or an electronic lock. Edge computing may happen in the device ‘thing’ itself or across multiple things. In process control this is the distributed control system. 

Connectivity is what ties the devices, edge and the cloud together across many standards and systems to one homogenous system. It may be integrated with the cloud such as the ABB Ability cloud based on Microsoft Azure.

The cloud is the secure but open central repository where all information is stored accessible to users and applications of many types. In other architectures, this was called a ‘Historian’, a ‘SCADA Database’ or a ‘Central Database’.

Analytics or big data analytics are the many applications that process information in the cloud to deliver information about equipment diagnostics, logistics and inventory, trends and analysis; for example, data such as “this type of motor from manufacturer xx has an excessive failure rate when used for YY” or “use of consumable AA is particularly high on BB so we need to stock up before”


Four Imperatives For OGC To Thrive During The Fourth Industrial Revolution

While specific challenges and solutions may vary by segment, we predict four imperatives will distinguish the winners from the losers in OGC’s fourth industrial revolution.

Enterprise-Wide Digitalisation And Connectivity

The true benefits of digitalisation will only be realised if it spans across the organisation – beyond an individual piece of equipment, an individual plant or even an individual country. 

Winners will have a holistic view of their entire operations. While operators onsite will have more accurate information than ever before, technicians at remote control centres – and managers throughout the organisation– will have a similarly clear picture of what is going on.

Machines will communicate with each other to optimise production and reduce risks, escalating issues requiring human intervention to the right individuals at the right time in a prioritised manner.

It will no longer be sufficient to have pockets of machine intelligence in an organisation. For maximum results an entire ecosystem of smart equipment and appropriately informed human operators will need to be created. Over time those who take a piece-meal approach will be leapfrogged by those who deploy digitalisation throughout the length and breadth of the operation.

That is not to say, however, that an entire organisation must be digitalised all at once, however. Unless you are dealing with a greenfield site, this would be extremely difficult and costly. What successful companies will do, however, is have enterprise-wide digitalisation as a defined long- term goal with a specific plan of how to get there in stages.


Bringing Together Information And Operational Technologies

The fourth industrial revolution provides greater integration visibility and intelligence within and among the Operational Technology (OT), production control systems and Information Technology (IT) that manage a company’s critical assets, logistics, planning and operations. The result is unprecedented agility in operations as well as to supply and demand fluctuations throughout the hydrocarbon chain.

As IT and OT convergence brings more information from real-time systems into IT software, the following are among the four benefits that will enhance efficiency, responsiveness and profitability across the OGC companies –irrespective of segment:

  • Smart production
  • Intelligent response to critical asset condition
  • Demand-driven planning
  • Reduced energy consumption and waste

Yet a major challenge in achieving these goals is a lack of integration between IT and OT systems. A growing number of OGC companies see the single leading benefit of IT/OT data integration as optimising for cost and efficiency. This directly addresses the challenges of:

  • Managing ever increasing costs
  • Minimising schedule overruns
  • Mitigating risk
  • Optimising or maximising production
  • Controlling energy expenditure and efficiency

Unfortunately, many companies have little or no data integration across the value chain and still operate in silos, with data not being shared with other departments. Many still rely on spread- sheets combined with human expertise for crucial decision support.

But, things are changing with several companies now taking steps to implement IT/OT data integration. These companies have a consolidated view of production systems and the most advanced can dynamically view and adjust operations across the value chain.

It would appear that a growing number of OGC operators understand that IT and OT cannot operate in silos if they are to continue to deliver good shareholder returns in light of increasingly difficult market realities.

Companies are coming to realise that addressing emerging challenges effectively, means transitioning to an environment which provides remote asset diagnostics, continuous automation and production optimisation made possible through a fully integrated approach to power, automation and telecommunication systems.


Simplification And Standardisation

To realise the objective of a fully digitalised organisation, processes and equipment must become simplified and standardised. Obviously, simple solutions are easier to replicate than complex ones while standard approaches and equipment are more straightforward and considerably cheaper to monitor, manage, maintain and upgrade.

The need for simplification and standardisation is best met by bundled, highly integrated solutions. For example, power, automation and telecommunications projects typically consist of nine packages:

  • Motors and drives (medium and low voltage)
  • Transformers (liquid-filled and dry-type)
  • E-houses / PDCs (switchgear, MCCs etc)
  • Substations (air or gas insulated)
  • Automation platform
  • Power management systems
  • Safety systems
  • Field telecommunications
  • Analyzers and instruments

Historically, nine different bids would be put out for such work and selections which may appear cost competitive when viewed individually often work out more expensive overall.

Bundling the above with one supplier can often reduce direct and indirect costs initially, and for the life of the project, by making it easier to streamline the effort, space and equipment needed. 

Such an integrated approach can also significantly mitigate risk through the elimination of disparate interfaces and data and by having a single point of accountability.


Deeper Partnerships With Suppliers

The scale of changes to come over the next 20 years of digitalisation-driven change will be so large and disruptive it will be impossible to go it alone. The need to standardise and simplify explained above means there will be an increasingly symbiotic relationship between customers and vendors in order to extract optimal results across the value-chain. To that end customers will need to carefully select their long term partners. Things to consider will include:

  • Breadth of portfolio: Many players exist who are experts in individual areas. The key will be to pick supplier partners who excel in more than one domain and can thus integrate multiple mission-critical elements
  • Likelihood of vendor remaining ahead on the technological front: Supplier decisions will be long lasting and far reaching so companies need to have confidence their partner will evolve with the times
  • Technical expertise and OGC track record: The more experience the supplier has, the more proven and effective the solutions are likely to be
  • Service capabilities and geographic coverage: Every hour of production lost is costly so responsiveness is key



The oil, gas and chemicals industry is going through a period of uncertainty.

During other similarly uncertain times, companies were able to increase productivity in ways which were disruptive at the time. For example, companies improved operations by using automation to scale up output at a reduced cost with greater quality. In the information era, further productivity improvements were achieved through process integration, centralising things where it made sense.

The current digital era is about turning the data made possible through the information era into action, increasing both the speed and quality of decision-making. It requires greater collaboration within companies and across the wider supply chain.

As discussed in this paper, companies need to react to the ‘new normal’ of low oil prices and adapt their business models yet again.

Fortunately, the technological solutions available today are sufficiently robust and cost-effective that, harnessed effectively, they offer companies the tools they need to thrive in these challenging conditions.

The question, however, is how willing are companies to change the way they operate and embrace digitalisation at an enterprise level?


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