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Digitalization in Energy: Disrupt or Be Disrupted

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The oil and gas industry is not seen as an industry quick to embrace new technologies. Several factors influence this conservative attitude, including safety challenges, complex systems, and a vast amount of investment. But if there’s any doubt about the changing landscape, a panel of experts at this year’s Offshore Technology Conference (OTC) in Houston gathered to put that to rest.

“The Digital Disruption Is Here” was the name of the panel discussion, and executives from throughout the oil and gas supply chain chimed in to back that up. “We have an opportunity not only to work on efficiency, but to transform the work itself,” commented Eric Abecassis, chief information officer at Schlumberger. “That is the challenge we have in front of us.”

Digital transformation is not just about a greater use of robotics and other automation technologies. It’s about Big Data and analytics, the Internet of Things (IoT), and artificial intelligence (AI) and machine learning.

Schlumberger, which has been developing software for many years to automate its tasks, is delving more and more into the AI space. Where the industrial revolution was geared toward amplifying human muscle, new capabilities are enabling the amplification of the human brain, Abecassis said. “Machines can discover things that the humans don’t always have the process for,” he explained. “We are thinking by analogy. But the computer is thinking outside the box, coming up with the most efficient solution.”

The oil and gas industry has long gathered tons of data from the field. But making sense of all that data is another thing entirely. In 2012, Schlumberger began a data lake approach to gain new insights into its business. “We got a new understanding of our business and new capabilities of how to organize our work,” Abecassis said. “Now we take a cloud-first strategy and mobility-first strategy.”

Abecassis shared an example around Schlumberger’s seismic data. “The volume of data that we’re dealing with has been constantly increasing, with orders of magnitude more data over the last decade,” he described. “We’ve been struggling to process all this information. We are nowhere near something like real time.”

Over the past two years, Schlumberger has tapped into cloud computing capabilities to significantly accelerate the way it processes data out of the seismic vessel. “Combined with machine learning, we will be able to produce much closer to real-time seismic processing as we’re doing the survey,” Abecassis said. “It’s really changing the way we’re conducting seismic surveys in the future.”

Schlumberger has many more projects ongoing, Abecassis added, that will enable the company to rethink many of its processes.

What audience members saw as the biggest benefit of digital transformation was clear. In a poll conducted during the panel discussion, 61 percent of the audience pointed to increased productivity. Democratized, real-time access to information was next in line with 25 percent.

Despite the pull of increased productivity, concerns are widespread, the audience spreading their responses evenly among the four options for biggest risk of digital transformation: traditional industry collapse under pressure, job destruction, complete loss of privacy, and machine taking over the world.

“Food for thought for our panelists: People seem to be worried across the spectrum,” commented Shell’s Hani Elshahawi, who moderated the discussion along with Indranil Roy, project manager for Schlumberger.

The digital disruptor

According to Pierre Nanterme, chairman and CEO of Accenture, digital is the main reason just over half of the companies on the Fortune 500 list have disappeared since 2000.

“The key disruptor isn’t the technology. It’s really about how we use the technology to transform our business models, our businesses, and ultimately our industry,” said Archie Deskus, vice president and chief information officer at Baker Hughes. “The companies that fell out weren’t able to disrupt themselves.”

Companies need to be able to react quickly and make the changes needed to stay relevant. “If we don’t cause this type of disruption ourselves, somebody else will come along and do it,” Deskus added.

Though the oil industry is going digital—with more sensors and more data—Deskus argued that the technology is delivering only incremental improvements. “An automated rig is better and safer, but not truly disruptive,” she said.

The lower price of oil is having an influence, but there’s still further to go. “We’ve had a couple tough years, and I think it’s started to shape some of the conversations that we have,” Deskus said. “But we’re not really there yet.”

With the merger of Baker Hughes and GE Oil & Gas, Deskus expects to be able to create the kind of transformation that’s needed. “We have begun the digital journey in our industry,” she said. “But the next challenge is to move beyond digitalization to disruption.”

That disruption has to have the end consumer in mind. “We have a bigger mission to enable safe, affordable energy, and improve people’s lives,” Deskus said. “We’ve been in this business for 100 years, we know what we’re doing, and we’re going to take it to the next level.”

Tom Moroney, vice president of deepwater, wells and water technologies at Shell Projects & Technology, put a lot of emphasis as well on how digitalization should affect end consumers in the energy industry. Posing the challenge of a world population of 9 billion by 2050, with energy demand up 200 percent, oil and gas companies need to think about how the delivery and access to energy will change over time.

“I don’t think we have really thought about how the energy business model will change over the next several decades,” Moroney said. “The challenge for us is to think about the business models in finding, producing, developing and delivering energy out to consumers.”

Where’s the value?

Finding the return on investment is key. “We have to find the ROI in IoT,” Moroney said. “I certainly believe that point very much. Where is it in this complex value stream? There’s lots of complexity and lots of uncertainty. Where can the digital technologies really add value?”

“Digital disruption is here. That is not the question. But are we really thinking about the energy landscape as we look over the next several decades? Have we really thought about those things that are going to disrupt our business?

Though the oil and gas industry has adopted digital strategies at various points along the value chain, Moroney argued that the industry hasn’t really digitized.

Shell is looking at digital investments—advanced analysis, computational technology, robotics, etc.—that can help to improve the cost of operations, availability, productivity and process safety. But major investments are needed to truly digitalize in an end-to-end manner, Moroney said.

“Digital disruption is here. That is not the question,” he said. “But are we really thinking about the energy landscape as we look over the next several decades? Have we really thought about those things that are going to disrupt our business? We need to think about how we deliver value.”

Getting past risk aversion

It’s all good to talk about the need for digitalization, but how should companies actually start? How should they put together a strategy to achieve what digital can do?

These were questions posed by Adeeb Gharzouzi, principal of digital practice for Accenture Strategy Energy, which was Schlumberger Business Consulting until acquired by Accenture in late 2015. “We are not new to data,” he said. “But how much of the data drives how we use our assets? This is where we lag.”

The oil and gas industry does a lot of digital work, but it’s always taken a very piecemeal approach—what Gharzouzi referred to as the Shiny Object Syndrome. “We do it in a very siloed manner, without understanding how we can really make all these technologies work together. We need to work more holistically.”

It will require overcoming some natural tendencies—the idea that risk is much greater than it is in the consumer world, for example. “Amazon runs about 200 different experiments on their customers a day,” Gharzouzi commented. “They might get a pissed off customer. For us, the consequences might be much more dire.”

But that doesn’t mean an energy company can’t start prototyping and testing digital technologies. “Don’t wait until you get a solution 100 percent figured out and proven before you start deploying,” Gharzouzi urged.

Oil and gas is an insular industry, with little breadth throughout its organizations in terms of experience from other industries, according to Deskus. “Other industries and leaders, they look at risk differently,” she said. “They’re looking at the risk of not surviving or not creating something. Will we even exist?”

Rather than always looking at the risk of doing something, oil and gas needs to look at the risk of not doing something, Moroney said. “A lot of times, we in the industry, rather than managing risk, we want to eliminate risk,” he said. “This is about managing risk.”

Other industries are also more open in terms of collaborating outside what they know, Deskus said. They will bring in outside capabilities to achieve their goals.

The industry needs to get past what is a “combative ecosystem with limited collaboration,” Gharzouzi argued. “No company in digital can actually achieve the full value alone,” he said. “We will not be able to succeed without everybody coming together to push in the same direction.”

The well as customer

Though when thinking of disruptors, the conversation often turns to companies like Uber or Netflix or Amazon, that doesn’t mean there isn’t something to be learned for B2B business as well. “Why not think of our well as becoming our customer? We need to collect a boatload of data from our customer,” Gharzouzi said. “Start running analytics on this information, and we can start predicting what the well is telling us it actually needs. Artificial intelligence can start becoming a triage mechanism. Let the computer make these decisions for you. For decisions that need human intervention, pass it on to the operator to make the decision.”

But Gharzouzi recommends taking it further. “Is there a way to use this information to rethink the way I manage and do maintenance on assets?” he asks. “We need to understand in real time what are some of the consequences of actions that we take; decisions that will impact production. Then we can start to connect the entire value chain in real time.”

The first question to answer, Gharzouzi said, is how you will use the technology to bring value. A key recommendation he makes is removing constraints. “We are a very rigid, process-driven organization,” he said. “We need to allow people to be a lot more open-minded.”

He also recommends engaging the vendor ecosystem. Start including vendors on your digital team, he said. “Bring them in and make them part of your team so they can help ideate about how digital will be used.”

It’s always good to start with key performance indicators, commented Setrag Khoshafian, chief evangelist and vice president of business process management (BPM) technology at Pegasystems. “Make it something that you’re trying to achieve as a return on investment,” he said. “Like cut costs, get into new markets or achieve regulatory compliance—something that is measurable.”

The biggest challenge, though, are the silos that Gharzouzi mentioned. “Businesses are organized vertically, but value streams go horizontally,” Khoshafian said. “The way to achieve this is to be able to come up with a digital model that drives the orchestration and collaboration of people, edge devices, etc., with complete transparency.”

The IoT World Forum Reference Model puts physical devices and controllers (the “things”) at the bottom of a stack that continues on with connectivity, edge computing, data accumulation, data abstraction, application, and collaboration and processes. “The last one is my favorite,” Khoshafian said. “That is where the IoT and digitalization value is achieved.”

automation world

16 Comments on "Digitalization in Energy: Disrupt or Be Disrupted"

  1. MASTERMIND on Sun, 18th Jun 2017 8:05 pm 

    Collapse of Global Civilization by 2020-Irrefutable Evidence

  2. rockman on Sun, 18th Jun 2017 8:21 pm 

    Another made up story. The oil patch has been digital for many years. For instance the Rockman has drilled dozen of wells in the last 25+ years. He’s run economic analysis on many times that number. He’s pulled the production histories of hundreds of wells during that time. He has also processed hundreds of miles of seismic data in that time.

    And not just some of that data was “digital”. And not half of it was “digital”. Not even 90% of the data was “digital”. Yes, every data point was digitally acquired, manipulated and analyzed. If fact, I honestly can’t remember the last time I worked with a hard copy of any specific data.

    Notice that most of the companies referenced sell the software. And sold the software I’ve used to handle digital data for decades. And are now just trying to sell their latest updated version of their newest software.

  3. ALCIADA-MOLE on Sun, 18th Jun 2017 8:22 pm 

    @mast thanks but I don’t like it because 2020 is a long wait for my gold stocks to go up.

  4. Anonymous on Sun, 18th Jun 2017 11:43 pm 

    “digital” is a fad

  5. twocats on Mon, 19th Jun 2017 6:45 am 

    could streamline project development and accelerate depletion.

    with new seismic technologies it seems like additional discoveries will be made.

    but given the absolute cratering of discoveries over the past several years I don’t think we are talking about a significant difference. and when you consider the cost outlay to implement new technologies and processes, it might be a net loser.

  6. deadlykillerbeaz on Mon, 19th Jun 2017 9:35 am 

    Even if digitalized is an improvement, it is not the problem solver. More oil will solve the problem, nothing else. No oil, problems galore.

    Still involves analysis, quantitative and qualitative. You have to have that, means petrochemistry.

    It’s after 5:OO AM, time for a drink.

  7. Dredd on Mon, 19th Jun 2017 9:44 am 

    The middle digit for Oil-Qaeda.

  8. rockman on Mon, 19th Jun 2017 9:51 am 

    “…with new seismic technologies it seems like additional discoveries will be made.” There’s been no major change in seismic data in a couple of decades since 3d acquisition became common. But like all software there’s been tweaking along the way. But THE big tech break thru that was a true game changer was 3d seismic. And it’s been common for many, many years. In fact it’s rare to find an area in the Gulf Coast (onshore and offshore) that has not been shot with 3d.

    Thought of another great example of the digitization of the drilling process. Long ago the Rockman was a PPA…Pore Pressure Analyst. The process is far too complex to explain here. But the primary goal is the prediction of the safe mud weight used to drill a well. Predrill I used offset well DIGITAL DATA to generate a predictive model. But when drilling a wildcat that still is not safe enough. Which is why the Rockman also worked as a wellsite PPA in the Deep Water GOM. I used the digital data from a variety of drilling metrics to monitor the correctness of the predrill model.

    But did this not only in the GOM but Deep Water Brazil. But not from the well site…from my living room. Another PPA monitored drilling at the office from 6am to 6pm while I handled the other 12 hours from home were I received the digital data in real time.

    And sure enough I saw a significant variation from the model at 2am one morning. The driller also saw something odd on the rig and pulled the bit back up 100′. At that point I woke up the senior engineers in Houston who woke up managers. After a couple of hours of a conference call with everyone we concluded it was a data error and a false alert. There was no problem and went back to drilling with no further problems. Other then it turned out to be a $154 million dry hole. LOL. BTW I handed my end of it in my underware.

    And that was almost 10 years ago. This bullsh*t that the petroleum industry has resisted the digital/computer age is just that…BULLSH*T.

  9. denial on Mon, 19th Jun 2017 9:52 am 

    Digital ? That sounds like a story from the 80’s … it?
    A lot of people on here a waiting for a a big thump crash but don’t realize that it is going to be a slow crash and it is already happening.

  10. bobinget on Mon, 19th Jun 2017 10:20 am 

    This just in:

    Short hairs:
    Russia declared a No Fly Zone:

    How has Russia responded?
    “Any aircraft, including planes and drones belonging to the international coalition operating west of the Euphrates river, will be tracked by Russian anti-aircraft forces in the sky and on the ground and treated as targets,” the Russian defence ministry said”.

    Long hairs

    And you thought it might bena bad thing US President Trump was in Putin’s pocket.

  11. bobinget on Mon, 19th Jun 2017 10:31 am 

    What could go wrong?
    How will a beleaguered President T respond if a US aircraft is shot at. God help us if a manned fighter jet is downed on either side.

    Putin has so much dirt on Trump it may be time for FBI, Senate, CIA, NSA, to go public before Putin threatens us again. (No Fly Zone In Fucking Deed)

    Trump needs to be exposed at once. Otherwise, Putin can continue to hold America hostage.

  12. Apneaman on Mon, 19th Jun 2017 11:09 am 

    Well at least it’s a change from the 100,000 articles over the last decade screaming “American energy independence” thanks to all that brand spanking new fracking technology.

  13. Outcast_Searcher on Mon, 19th Jun 2017 2:46 pm 

    “digital” is a fad.

    Yeah, just like “computers”, as in DIGITAL computers is a fad. Even as they continue to experience explosive growth and further integration into products and life in general, 50 years after they were seen as “a fad” or only for the “few” scientists/specialists who might want to use one.

  14. makati1 on Mon, 19th Jun 2017 7:42 pm 

    Outcast, computers and the internet are temporary. In my 70+ years, I have seen such fads come and go. They last only until they end. I see the internet fading already as more and more countries start censoring and designing cutoffs. I see computers disappearing as the world spirals down into chaos and the ability to even manufacture them slides into history. A world war that cuts the East from the West will end both fads. Wait and see.

  15. makati1 on Mon, 19th Jun 2017 7:46 pm 

    deadly, I set noon as the time, after which, I can enjoy a beer or glass of wine, not 5 pm. But then, I’m retired and don’t go to the office.

  16. Simon on Tue, 20th Jun 2017 1:11 pm 

    Hi Rock.

    I do not believe these guys are talking about, the same thing you are, when they get on this analytics kick they are looking at data sideways.
    For example, I heard of an analytics project that could read meteorological data and inform energy trades up to a week out, another that reads power output and ambient conditions, and can flag units for servicing. Roughly put they are derivatives, attempting to derive a value from data not necessarily related to the hoped for result, I do not know enough about your business to hazard a guess of the application for this discipline.


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