Innovation that will transform the energy future — Part 2

ABB Australia Pty Ltd

Wednesday, 27 February, 2019

How digitalisation enables oil and gas operators to transition to a new energy ecosystem.

In Part 1 of this article, we discussed the changing landscape for the energy industries, and how oil and gas companies are beginning to transition to strategies to migrate their core business to new energy sources. But there are many hurdles to overcome, and new digital strategies need to be adopted.

Hurdles ahead

Oil and gas companies face significant hurdles to realising the full value of the digital initiatives, not only in any future energy ecosystem, but also in their current exploration and production environment. Some of the more regularly debated barriers are detailed below. One common thread is that collaboration throughout the entire supply chain is critical to help overcome these hurdles.

Regulation

Some commentators believe that today’s data security regulations are not fit for purpose and that much effort is needed to ensure this happens in the new world order. This can only be addressed through technology, as well as due diligence in the operational use of data and a recognition that compromise is not an option.

It has been recognised that the industry does not have global standardisation and that there was a need to develop an ‘ISO-like standard’ to which the high-performance industries can adhere.

Also, intellectual property frameworks have not yet adapted to a new era of data sharing along value chains, in which companies must feel confident that, by dispersing their data, they are not compromising it.

Lack of standardisation

Much of the data coming from sensors is not standardised or integrated across platforms. Moreover, ownership of, or access to, data between suppliers, operators and contractors is often uncertain. Even when data is accessible, it is often too complex or large, obscuring any clear insights.

ExxonMobil’s work with Lockheed Martin — to develop an open standard, open architecture control system that runs on commercial software and hardware — is an excellent example of how the oil and gas industry can embrace the proven digital strategies of other industries to improve performance.

Energy ecosystem

For digitalisation to deliver all its potential benefits, it must be integrated throughout an industry. For oil and gas, efficiency, productivity and health and safety will only be maximised if systems, equipment and sensors from across the industry’s value chain are sharing data and learning from one another.

An integrated information system is essential as companies move into the digitalisation age. The exploration and production (E&P) departments of oil companies often do not share data, even between themselves. This must change, especially as the transition is seeing a move from the once dominant ‘exploration’ departments to an era where the ‘production’ departments are the value drivers.

Business models

Unless work processes and business models are changed, oil and gas companies risk losing out to new rivals from inside and outside the industry. Companies from other sectors have often already adapted to changing markets by embracing new business models and integrating information technology (IT) with operational technology (OT) in an effort to reduce costs and boost efficiencies. According to Accenture¹ “transforming current operating models to one increasingly enabled by technology might include narrowing the business scope to the most profitable assets; gaining efficiencies from repetitive, standardised designs and processes; increasing automation; outsourcing core functions; engaging in a more variable approach to cost (such as linking service contracts to wells and production instead of day rates); and using analytics to optimise day-to-day operations”.

Culture and mindset

Oil and gas companies tend to be capital and technology centric, while, at the same time, being people intensive.

Future concerns include how many people will be needed, the training that they should be given and the types of people that should be hired who are fit for purpose.

Executives can no longer afford to be sceptical about digital and de-prioritise automation in relation to other parts of the business deemed to be more critical, such as geology, well services or turbomachinery. When digital changes are proposed that challenge existing work models, it is imperative that the stakeholders most likely to recognise the impact are included in discussions about it.

In response to other technologies, many disparate small systems and solutions have cropped up to deal with local problems; and, lower down in the organisations, employees often use manual workarounds and are distrustful of technology and its proponents.

Furthermore, the industry is inherently unable to take more of an experimental, ‘fail-fast’ approach because of its conservative nature and concern about the potential consequences of change. It is important to start now in preparing the workforce to manage and operate new technologies and digital plants of the future.

Talent

Technology and innovation often fail, not through lack of investment or weakness in the technology, but through a lack of cultural change.

Tomorrow’s digital worker must be engaged and prepared today. However, the next generation of engineers often favour working in industries perceived to be ‘greener’ than oil and gas.

It is important that today’s workforce is training in new technologies and to help them embrace and adapt to new technologies and the changing demands of their workplace and roles.

Furthermore, workforces, particularly in manufacturing and process industries, are ageing, and consideration needs to be given on how to avoid the loss of valuable knowledge and experience to retirement. It is important to actively capture process knowledge by converting data collection and analysis practices into software applications that can be deployed remotely. These ‘advanced digital service’ developments are fundamental to the collaborative operations way of working described earlier.

Cybersecurity

Many traditional cybersecurity best practices do not apply to industrial control systems. For today’s industrial control systems there is a greater scope of impact as systems expand to include connected computing devices, personnel, equipment infrastructure, applications, services and telecoms. In a control room companies cannot expect every user — at shift handover — to log off their system so that operators can track the actions of every individual. Use of cryptography to protect data in transit could mean time constraints are not met in control system communications. Many intrusion detection systems do not speak the communication languages of today’s industrial control systems. A malicious command sent to an industrial device often looks identical to a legitimate command. There needs to be a better understanding of pattern-of-life analysis.

Generally, national and international oil companies adopt a ‘keep data within our gates’ policy. There are many reasons ranging from close ties to government, sensitive commercial data and international conflicts. Many of these reasons are not related to cybersecurity issues but follow a ‘better safe than sorry’ approach which, in effect, limits the usefulness of the digital ecosystem.

IT/OT integration

A key benefit of IT/OT data integration is that it addresses the challenges of managing ever increasing costs, minimising schedule overruns, mitigating risk, optimising or maximising production and 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 spreadsheets combined with human expertise for crucial decision support. But, things are changing with companies now taking steps to implement IT/OT data integration. These players have a consolidated view of production systems and the most advanced can dynamically view and adjust operations across the value chain.

IT and OT cannot operate in silos if good shareholder returns are to be delivered in light of increasingly difficult and uncertain 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 telecom systems.

Building a digital strategy for energy transition

Success during the energy transition relies heavily on the creation of a robust digital strategy that has buy-in from the boardroom. Here are some key considerations that will help avoid investing scarce resources without realising the benefits.

Prepare and retrain executives

The energy transition’s success resides on an effective digital transformation roadmap, driven by a culture of innovation and technology adoption. Boardrooms need to act decisively and embrace digital by:

setting a clear vision — according to Accenture1 those embedding digital and technology as a strategy beyond efficiency are finding that digitalisation can create synergies across business, reduce duplications of investment and open their business to new opportunities;
committing funding and resources;
actively championing change management and encouraging new ways of working;
accepting a flatter organisation where decisions can be made by well-informed colleagues deeper in the organisation;
being receptive to new ideas and ways of working by collaborating with the supply chain;
forming digitally powered, multidisciplinary teams with the freedom to think differently.

Invest in talent

The fall in the oil price forced the industry to think differently. It introduced new technologies which depend on a new breed of engineer to fully understand the impact on a business. As the world transitions towards a different energy mix, this talent pool will evolve, and even more new skills will be needed. Companies need to continually assess the current skill levels and rapidly identify any gaps. They need to build a digital strategic workforce plan to address any shortage of skills.

Continually explore the potential of digital

Building an end-to-end digital infrastructure that connects all data sources into a centralised platform needs much investment, both in time and resources. It is important to start now and identify the true cost implication so that realistic budgets can be set and a quantifiable return on investment established. Going forward, many oil and gas companies will not have full control over the supply chain, with distribution networks owned by partners. This alone will require a robust digital infrastructure where collaboration is essential.

Assess and benchmark current data architecture

Data and software integration is the number one area for consideration. There is an abundance of critical, yet disparate, software applications deeply embedded within operations. Using digital technology to integrate these software platforms is a significant area for improvement. However, unless highly reliable data is commonplace across systems and databases, users will mistrust it. Creating a strong culture of data integrity while ensuring data confidentiality and security concerns are effectively managed is, therefore, the most significant single digital investment companies can make. Without a strong foundation in capturing, safeguarding and sharing data, potentially business-transforming insights are lost. Without adequate integration, new investments will be wasted as they will not be able to rely on historic data and will merely add fresh, high-quality, insufficiently used data to the rest.

Work the data harder

Today’s analytics are more sophisticated at diagnosing, sorting, comparing and identifying cost savings and performance improvement areas than ever before, and certainly at a pace far faster than the average employee. These include visualisation tools, predictive analytics, cloud-based analytics, machine learning and artificial intelligence. They simply allow oil and gas operators to do much more. Using digital insights to automate processes boosts throughput by eliminating delays from human decision-making and frees up employees to focus on higher value-adding activities.

Collaborate

Changing consumer preferences, such as the sharing economy, will bring challenges not yet apparent. Developing collaborative partnerships with peers and suppliers to innovate, develop digital capabilities quickly and capitalise on new business models will be core to the success of the new world energy companies. Harnessing innovative ideas and, more importantly, turning them into reality will not be possible without industry collaboration both by production companies and suppliers along the value chain. Only in doing so will oil and gas companies drive innovation in the industry and secure competitiveness.