EDITOR – OGFJ
Technology: So nice we wrote it twice
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 advencement. 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 technol-
ogies 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 implement-
ed– 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 Io T (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
Similar statistics were seen in Accenture’s survey. Rich Hols-
man, the digital leader in Accenture’s energy industry group said:
“Our survey respondents see big data and analytics, cloud, the
Internet of Things (Io T), 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 buzz-
words and actual value-added as it pertains to OFS digital offer-
ings. 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,
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, in-
creasing 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 Io T, cloud, big data
Philippe Herve, VP Solutions, SparkCognition Inc. said: “The
oil industry is now stabilizing from one of the most severe down-
turns it has ever seen. The simultaneous rise in big data, com-
puting power, and a data-friendly workforce has enabled AI to
take the role of the all-encompassing technological solution the
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—envi-
ronment, we see the industry being more aggressive in its will-
ingness 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.