Businesses across all sectors are undergoing extreme digital transformation with the fourth wave of the industrial revolution, commonly referred to as Industry 4.0. This wave of digitalization is driven by technologies such as the Internet of Things (IoT), Artificial Intelligence (AI), advanced analytics and robotics. A report by IDC shows that global spending on digital transformation will amount to $2.3 trillion by 2023. Industry 4.0 has accelerated a major-shift to real-time data access and intelligence, thus, redefining the way enterprises conduct their business activities. While this digital revolution is impacting all businesses, in this article we look at how it is becoming a game changer for the Oil and Gas Industry.
Industry 4.0 in Upstream Oil and Gas
The oil and gas industry has been witnessing major upgrades in adopting new technology over the years but with its share of hiccups. The oil price drop in 2014 put restrictions on budgets however, in the face of the volatile work conditions and the constantly increasing regulations, companies have been forced to leverage Industry 4.0 technologies like advanced analytics, IoT, AI, and robotics to cut costs, improve operational efficiencies and remain competitive.
The future outlook of the oil and gas industry looks challenging owing to factors such as low oil prices, emergence of new hydrocarbon sources, improved energy storage technology, increasing penetration of renewable energy, electric vehicles, and strict carbon regulations. One way for upstream oil and gas companies to overcome these challenges is to improve their efficiencies and support profitable growth. It is here that Industry 4.0 can help.
Industry 4.0: A Game-Changer For The Upstream Oil and Gas Industry
According to the International Energy Agency, adoption of Industry 4.0 technologies will empower oil and gas companies to reduce their production costs by about 10% to 20%. Major players in this industry are seen to be investing in applications for logistics and inventory management, and predictive maintenance for digital process optimization and equipment, among others. Beyond that, sensor data is finding use in determining the drilling methods for production and seismic imaging technology is being used to create 4D models in exploration processes.
The upstream oil and gas sector is leveraging the disruptive potential of Industry 4.0 across its value chains in diverse areas including but not limited to finance, sales, human resources and research and development.
Upstream oil exploration companies have to leverage massive amount of geological data. Digitalizing all such data and applying advanced machine learning techniques will provide them with precise and meaningful insights to support decision-making.
Advanced analytics and digital modelling will extensively be used to design, evaluate and choose the best project based on predefined parameters. These technologies, when applied to various data inputs, create a digital framework, which can then be used to evaluate a huge number of projects and then choose the one that best meets business needs.
Digital solutions can also be used to support and improve coordination amongst all the stakeholders involved in automating drilling. To illustrate this with an example, blockchain technology can be used to set the standards amongst the service providers and other stakeholders. This technology can greatly improve data security by ensuring secure sharing of sensitive data and also help to save costs by eliminating several associated costs such as transaction fees.
Last but not the least upstream oil and gas companies, or even oil and gas outsourcing companies can digitally connect their operational assets and assess their performance as also their efficiency, damage and their maintenance needs. As a case point, IoT sensors and drones can be used to gather operational data in real-time, thus, providing greater insights into ground-level operations. These technologies can have a positive impact on the top and bottom-line profits.
Creating A Roadmap For Successful Industry 4.0 Implementation
The benefits apart, it is to be noted that Industry 4.0 implementation in upstream oil and gas service providers, as in the case of other industries, is still in the nascent stages with very few use cases. While these disruptive technologies do help to improve operations, their implementation is far from simple. Effective implementation demands well-designed corporate strategies for which companies need to first understand and evaluate how Industry 4.0 aligns with their organizational culture, strengths, and future goals. Thus, it is important to design an implementation roadmap based on a complete understanding of the organization including its priorities, capabilities, future oil and gas jobs and level of digital maturity. Studies show that integrated and connected assets can help companies generate as much a 1.5 terabytes of data per day. However, to reap benefits, an enterprise-wide holistic approach is needed for Industry 4.0 implementation. The Industry 4.0 Maturity Index provides a useful framework for upstream oil and gas companies to evaluate their current maturity and draw a roadmap for successful implementation.