3 Factors Driving Digital Transformation in the Oil & Gas Industry

factors driving digital transformation in oil gas industry

Oil & Gas companies span disciplines ranging from the exploration, extraction, transportation, refinement, and delivery of petroleum-based products. These organizations operate in all areas of the globe – including many remote areas with harsh environments. The industry is undergoing many significant changes. This shift will change how the industry operates. One of the big changes is a closer examination of operations and efficiency compounded with elevated levels of regulatory and environmental compliance. Oil & Gas firms are accelerating investment in digital transformation to manage these changes while improving operational resilience.

What Is Digital Transformation?

Digital transformation is the adoption of digital technologies or systems to digitize non-digital products, services, or operations. Axis Smart Data Extraction™ is a great example. Manual or paper-based procedures replace automated processes that capture data and convert that information into intelligent processes. The objective is to generate business value, such as to reduce costs or increase performance. It can extend even greater value by improving customer satisfaction, changing how businesses operate, or even unlocking new business models.

The Oil & Gas industry must re-invent itself. The transformation into becoming an energy business, however, is very difficult, costly, and resource intensive. Significant capital investment and intellectual property currently support legacy business processes. Conditions are ripe for disruption and change.

1.    The Need for Better Data, Faster

Businesses generating high-profit margins focus on driving revenue and creating new business opportunities. These conditions are now changing. Margins are harder to predict with major pricing and supply chain disruptions. Significant new capital investment must fund new, cleaner energy sources. These and other factors have created a need to better manage operating margins to maximize free cash flow. Greater visibility of data will overcome this challenge.

Digital systems that interoperate with each other to automate processes must utilize common data models to best provide this visibility. Investment in data-driven decision support can achieve this goal. The total oil & gas automation market is now expanding, reflecting this change. According to Frost & Sullivan, this market will grow from $17.2 billion in 2020 to $24.6 billion in 2025, reflecting a compound annual growth rate of 7.5 percent (source).

Many areas in the Oil & Gas business could significantly benefit from better access and visibility to data.

One example is reporting associated with cost accounting and compliance. These reports must often be done in the field where access to current information is difficult. Systems interoperability only compounds the challenge. Investment in new, modern systems capable of generating accurate allocations and cost estimates can provide valuable insights into near real-time profitability. This intelligence can be used more cost-effectively to run operations.

2.    The Need for an Integrated Production Environment

Oil field operations are often managed with spreadsheets or siloed legacy systems. Data can be inconsistent or simply unavailable. This can cause delays and poor decisions that waste resources, time, or asset utilization. A digital ecosystem, however, can provide a more holistic perspective of all operating functions. Interoperating systems, such as those used to manage production processes, land acquisition, or other applications, operate with greater accuracy and efficiency. Oil well operations that are better understood are better predicted and managed.

Investment in integrated applications – combined with field data capture, drilling, production, analytical tools, and data management technologies – deliver substantial efficiency improvement and cost reduction. Further, an integration of these systems combined with the aggregate data collected could be fed to artificial intelligence and machine learning algorithms to provide predictive insights on how to drive even greater performance.

3.    The Need for Intelligent Data Transfer and Extraction

The process of identifying possible new well sites, the evaluation of land lease and title records, as well as the process of pulling permits in preparation for drilling new sites, can be costly, manual, and heavily paper-based. Companies may have hundreds of leases to manage. Some leases should be left inactive. Visibility to faster intelligence on current oil prices. As prices change, so too will the economics by lease.

A digital approach is to apply intelligent process automation to these steps to speed up the process while increasing data accuracy. Automating the collection and management of data – with associated actions set to occur with little manual intervention – is a way to increase responsiveness to change. Combined, this type of approach can yield significant performance improvement and operational agility.

Oil & Gas companies that can evaluate new possible well sites faster and with greater accuracy can quickly capture a competitive advantage. Improving production metrics can include faster time to output and revenue, greater resource efficiency, and lower costs.

Other Digital Transformation Use Cases

The scenarios described above are just a few of the ways that investing in digital transformation could have a big impact on how Oil & Gas companies operate. Capital and equipment can be monitored with greater precision and efficiency. Data can be collected from automated monitoring activities to extract new insights on how to maintain these assets better. Suggestions on when to best perform repairs could also be provided to deliver additional benefits.

More importantly, the collection and understanding of all this data will allow Oil & Gas companies to better understand how their business operates. Information can be collected from across the globe to yield new insights. This intelligence, however, is simply not possible when data is scattered across multiple systems and data repositories. Working with solution providers, such as Axis Technical Group, to integrate and modernize these systems could be the catalyst Oil & Gas companies seek in their journey to transform into becoming the next generation of energy providers.