This book written by Geoffrey Cann, a business adviser of international repute in the oil and gas industry and Rachel Goydan- a senior Deloitte consultant for multiple industries serves as a handbook for the Oil and Gas industry and IT professionals to understand how digitalization is impacting all the facets of the industry. It also empowers the decision makers and key managers of the industry with insightful strategies for a possible revamp of the industry.
Oil & Gas Industry- Adversely Impacted
The Oil and Gas industry which provides the essential energy inputs for improvement of the quality of life in modern times is in dire straits. Already seriously challenged following the economic slowdown in 2019 the crisis has aggravated by the onslaught of the COVID-19 pandemic right from the dawn of this year. Changing consumer demands, emergence of new energy resources, development of unconventional oil and gas resources, rising significance of emerging economies- China and India- and above all a host of internal factors contributed to depress the market. The ensuing COVID-19 pandemic has further dipped the demand due to extended periods of lockdown across industries and travel bans among nations. Oil demand is peaking in the developed world and prices have plunged well below the level needed to turn a profit. For survival, companies are reducing expenditure, bringing down capital investments and thus trying to drive down operating costs. Long gestation periods of new projects, regional geo-political uncertainties, unfriendly government policies, financial recessions, and natural disasters- are also set to weaken the financial performance of industry majors.
It is in this context that industry majors and oil and gas experts are seeking ways and means to contain the slump through a variety of cost reduction and efficiency improvement methods by automating operations well beyond existing instrument supports, handling of hazardous and repetitive tasks, storage, visualization and analysis of data to make smarter decisions and integrate operations with connected devices for greater efficiency. Oil and gas companies with the support of IT/ITES majors are investing in digital technologies like Data Analytics, Automation and Remote monitoring, Artificial intelligence, 3D printing and Industrial Internet of Things (IoT) in order to optimize production, maintenance, management of safety and environmental protection and better asset utilization. Digitalization is the new buzzword to unearth new business models and give stakeholders a better overview of operations, improve maintenance and inspection regimes and strengthen asset management. All these are expected to provide the industry with financial gains to tide over the present crisis and advance further to see the next boom.
The book detailing this transformation is laid out in well classified five chapters.
Chapter Wise Highlights
Chapter 1, is an overview of the Digital world, a primer to the advanced but well-known IT knowledge relating to data sensors, data accumulation, connectivity and data analysis. In the data processing arena, electronic chips are getting faster and smaller and programming languages are becoming easy and common. The industry is highly interconnected and very often new business models are emerging. Amidst cyber worries, which itself is curtailed at bay, digitalization, an admix of digital and operational technologies, often enables high speed networking in several of the daily industrial transactions at very low costs and at the same time with increased sustainability and unlocking its full-scale economic value. IT/ITES majors have already perfected their skills in bringing digital innovation to industries and are engaging with multinational clients to harness the business potential lying untapped. In this respect it is likely to hasten the economic progress not only of the hard-hit industry but also benefit investment starved and energy thirsty developing nations like India.
The second chapter entirely dwells upon the building blocks of the digital enterprise in the oil and gas industry. Here commercially viable and technically reliable digital tools like cloud computing, digitized ERP, AI, Sensor technologies and IIoT, Autonomous Technologies, 3D Printing, Digital Reality, Gamification, Blockchain and a combination these technologies are defined, explained and illustrated with case studies. The technological maturity of these tools, the benefits it imparts to the industry and its user segments at the operational and management level are also discussed here. The synergistic results that accrue when these tools are used in combination with each other is also revealed through case studies. This will be very useful to professionals at the decision-making level.
Impact of Digitalization
The third chapter titled, Long Fuse, Big Bang: discusses the impact of digitalization across the value chain in the oil and gas industry in terms of the speed (time slot) of its implementation, identified key technologies and the derived benefit. Unlike others, the value chain in the oil and gas sector indeed is quite long. Starting with exploration, it extends to production, field services, processing (refining), fuel retailing, managing capital projects and construction, turnaround management and a host of support functions. In all these domains, system specific digitalization tools find extensive applications in order to optimize operations, impart more reliability, reduce wastage of resources, avert abnormal situations and accidents, manage auxiliary supports, projects and turnarounds without time and cost overruns.
In the fourth chapter, the authors provide pragmatic ideas and essential ingredients for managers in the industry to organize digital programs. The digital journey, cautions the authors, is not going to be an easy ride. Major hurdles are lack of understanding of digital trends and their impact on the company, lack of strategic direction and organizational resistance to change. The investment, the timing, preparedness, workforce engagement and their agility, talent build up, cyber security are all important matters needing consideration at the top management level. Other barriers include the prevalent organizational IT culture, risk tolerance, confidence in the new generation digital technologies and compatibility with existing systems and practices. Tips for ensuring data quality, integrity and relevance, sound data management, managing cyber risks, developing the requisite talent pool with a vibrant, humane and business friendly culture are also included. Elements of an organizational implementation strategy and prescriptions for an effective change management and strategies for overcoming adoption hurdles are also addressed here. A case study of digitalization of fuel retail systems reveal that the risks and challenges are not different from other industries, getting started at the right place is important, greenfield assets are quick adapters and workmen shall be agile and an attitude for continuous learning for self-improvement.
Role of Top Management
The fifth and final chapter dwell upon the role of Board level management in the process of driving digitalization across the organization. Oil and Gas industry Boards these days are challenged on account of declining demand for fossil fuels, rising costs for water and emissions, competitive pressures, safety and social acceptance, talent build up and retention and so on. How to leverage digital innovation to address these challenges and optimize business of these companies is a priority for them. Members of the Board need adequate understanding about the possibilities that digitization throws up and also with regards to the concerns that are likely to surface. Prediction of a future business model in the oil and gas industry, indeed is difficult. Important trends need to be accommodated include demographic shifts, technology advances, climate change, shift in transportation trends and oil market shifts. The authors propose Board executives not to shy away and citing the Estonian insights on countrywide digitization and advise them to encourage managements to develop a fitting digital strategy for the organization considering various scenarios and looking at the present and future. Digital strategy is a set of reinforcing choices that direct the organization’s actions towards integrating digital technologies into its business. The technical feasibility, cost involved and economic and other gains along with inspirational and motivational goals are discussed in detail in the Board and the management is given a free hand for implementation of the adopted strategy. Ecosystems also have an important role to play in fostering innovation and digital transformation. The oil and gas companies, banks and funding agencies, professionals, entrepreneurs, universities and consultants have definitive roles in promoting innovation and to boot out prevailing orthodoxy in the industry.
In conclusion, the authors call for an industrywide change in mindset beginning with the Board to embrace digital innovation. It extends life of the fossil fuel energy system by lowering its cost to compete with renewables and also reducing its carbon footprint adopting an entirely new and disruptive business model.
The text is enriched with a glossary of terms and abbreviations, bibliography and is well indexed.
On the whole, this is a unique handbook, concise, well researched and with lot of practical insights and studded with case studies of topical interest and relevance. A must read for the academic and industrial practitioners in the Oil and Gas industry.
