Much has been written about the need to invest in automation and digital technologies. As every business becomes increasingly volatile and unpredictable, industry leaders are investing in systems and processes to improve business agility. A good strategy starts with looking at how to streamline operations. The Oil & Gas industry is now investing in digital transformation to achieve automation success. One example is RPA (see: 2023 RPA Investment in The Upstream Oil Industry to Boom). Another is the implementation of automated systems that are programmed to respond when triggered by other applications, third-party notifications, or alerts when incidents occur.
There are many reasons why oil and gas companies are investing heavily in technology-based solutions. Digital tools can have a dramatic impact on identifying new drilling sites, evaluating land lease and title agreements, and managing rental equipment used in upstream operations. As explained in this article, technology can improve safety, cut risk, and standardize oil & gas operations.
Here are five examples of how automation success can be achieved across many parts of an oil and gas enterprise.
1. Logistics and Fleet Management
Automating end-to-end logistics can have a profound impact on business responsiveness. Greater visibility of the supply chain enables better tracking of materials to avoid costly delays. Delivery logistics are especially costly for remote unconventional and offshore sites. The total cost savings can range from 10 percent to 15 percent of total production costs (source).
According to McKinsey, implementing new digital systems and automation technologies can have a big impact. Benefits include cutting the cost of delivery vehicle service by 20 percent and materials cost by 2 percent. By investing in these technologies, staffing requirements and emissions output can both be reduced. And capital utilization rates can be improved by reducing downtime or travel time.
2. Regulatory Compliance
The Oil & Gas industry is heavily regulated. Sustainability and de-carbonization initiatives will only further complicate these programs adding new reporting requirements will dictate investment in new, cleaner processes. Interestingly, a compelling case can be made to automate regulatory compliance processes to ensure standardization with these regulations.
Compliance automation success can help protect oil & gas operations by creating audit traceability while putting safeguards in place to ensure operations comply with all regulations based on rules-based process guidelines. Alerts can be programmed to instantly signal that a non-compliance event occurred. The first notification could go to those with the right knowledge and expertise to address the issue quickly helping to avoid a future bigger program. This could also help to avoid costly fines and eliminate incidences of potential violations. A potentially costly impact on reputation could be avoided, helping to avoid an impact on the bottom line.
3. Back-office Automation Success
The pandemic created an urgency to explore how to perform a variety of operations remotely. From that experience, we learned that many tasks can be done without a physical presence. Part of this capability was enabled by the use of automation.
Back office operations are a prime candidate to invest in new systems to improve performance. Apply automation to many operations. Examples include sales, marketing, new employee onboarding, payroll management, invoice reconciliation, and financial reporting. Not only can these processes be automated and managed from virtually anywhere, but the accuracy of how each process is performed will also improve. Employees spend more time focusing on overall process efficiency. Productivity improves by not spending time checking data input.
Pricing is a difficult task when the cost of raw materials fluctuates often and the market price for finished goods gyrates frequently. Anything that can be done to automate how costs and prices are calculated can deliver significant cost savings. To start, fewer employee resources are required to perform what has traditionally been a manual process.
Further, a complex pricing strategy can be difficult to understand. With a lack of standardizing guidelines negotiated during deals, calculating how much to charge can be highly complex when based on legacy contractual arrangements. Traditional cost + margin pricing models are ineffective. The use of strategic pricing tools based on real-time market variables, however, can simplify the process while improving calculation accuracy.
5. Order Processing
Automating the order process is another area where oil and gas companies can achieve efficiency gains. Those organizations that are still reliant upon paper or manual processes have a big opportunity to streamline performance and reduce waste. Traditional ordering processes are characterized by frequent changes and historical data that can sometimes be difficult to find. Implementing an automated system with RPA components to help with the inputting process can make a big impact on reducing overall costs while improving agility to respond quickly to new terms, vendors, or market conditions.
Upstream oil organizations interested in learning more can explore this article, 5 Ways to Master Automation in Upstream Oil Operations.
There are many ways automation success can be achieved across oil & gas organizations – provided a modern IT infrastructure exists. Systems must interoperate with other applications ideally on a cloud-based architecture. A continuous strategy of reinvestment and process automation can improve how quickly it is possible to respond to change. Given what has been learned over the past few years, this strategy should be a pretty safe bet.