As recently as the early 2010s, many of the major operators still viewed ‘digital’ as just one of their R&D programmes. Something standalone, competing for funds alongside seismic, enhanced oil recovery, deepwater facilities etc. Some operators focused their digital investment in production management and surveillance, others in drilling data visualisation and automation, still others in inspection and infrastructure monitoring.
But the way we look at digital today, as an enabler of almost every other technology, and with the potential to improve every aspect of managing oil and gas assets, is relatively new.
Like many of our sector’s major shifts, this changing view of digital from around 2016, was sparked by a collapse in oil price – with digital seen as the industry’s saviour as both capital and operating costs came under increased scrutiny.
During the past fifteen years, we have helped operators deliver dramatic results through deployment of digital technologies, and acceleration over the past five years, but the paths they have taken to transform have been different. Here are a few we have observed.
Model 1: Leadership-led transformation
A visionary CEO or CTO sets a new strategy and the organisation aligns to execute. Because so much of oil and gas operations depends on physical, manual activity, digital represents considerable disruption to existing ways of working – beyond the technology itself. But with strong leadership and vision, execution in both technology and culture change is possible.
Examples
When bp’s Bernard Looney took the upstream helm in 2016, he set a clear objective to build the leading digital upstream company. In spite – or maybe because of – immense cost pressure following Brent’s fall below $30 a barrel earlier that year, bp’s upstream bet its future on deployment of digital technologies, focused on cost reduction and production acceleration.
In a similar way, ADNOC, the Abu Dhabi National Oil Company, has over the years set ambitious goals for its various digital programmes in pursuit of very high recovery factors (>70%) of its giant onshore and offshore oilfields. Significant value has been unlocked by ADNOC onshore and offshore companies through big data, predictive analytics and Panorama, its digital command centre. Now it is shifting to technology development through huge investment in AI. Execution follows vision and leadership.
Eigen’s observations
In this model of digital transformation, clarity, communication and a high degree of charisma are required to make the shift from vision to implementation. Considerable emphasis is made to explain the ‘why’, supported by both emotional and rational cases. Whilst there can be a rush to achieve too much, too quickly – particularly in mature operations – a focus on delivering defined metrics helps keep digital transformation on track.
Model 2: Programme-led transformation
A second delivery model of digital transformation set up with central direction and investment (as well as high expectations) is the programme-led transformation.
Often ringfenced, the programme tends to be an assembly of bright young things – or an aggregation of existing digital projects – into a single organisation unit or centre of expertise to accelerate development, demonstration and deployment.
This model was deployed by many of the majors in the early days of digital oilfield projects and continues to be a model of choice for many operators today, as both an efficient mechanism to pool scarce talent and to centralise and create focus.
Examples
In the early 2000s, most of the major operators organised their digital oilfield programmes this way (Shell’s Smart Field, Chevron’s i-field, bp’s Field of the Future). And today, the model persists: a recent OGUK survey revealed that 60% operators have formed digital transformation programmes, with most less than three years old. Many today seem to have a narrower focus than the early pioneers, e.g. Total’s Digital Factory, Shell’s Subsea Digitization Programme, OMV’s DigitUP programme focused on rig data.
Eigen’s observations
Today’s programmes are characterised by much greater industry collaboration than the earlier programmes. But they face the same challenges of focus, return on investment and high expectations. They can also act as a temporary drain of domain-rich talent from business-as usual. These programmes are a big bet that can accelerate transformation – but they require patience to deliver value.
Model 3: Engineer-led transformation
Many of the big digital oilfield programmes started life as one-off projects developed by individuals or small teams trying to solve a specific problem. This kind of ‘grass-roots’ digital transformation relies on credible experts, usually engineers, who have an interest, or faith, in the power of digital technologies to transform existing processes and tools.
Sometimes devised under the radar, in skunkworks far from the centre, they prove themselves in live environments before they are revealed as ‘digital successes’ to the rest of the company – and offered for scale. Funding can be a constraint for these engineer-led digital transformations, but individuals and teams who demonstrate resourcefulness in external funding, sponsorship, co-development with vendors etc., can effect real change.
Examples
Smaller operators, with limited or distributed portfolios, tend to be less centralised, allowing for greater entrepreneurialism and creativity closer to the end user.
When a digital project is successful in one asset, other asset teams begin to take note, with the original asset team held up as visionaries and problem-solvers, pushed to submit technical papers and help build the operator’s innovation credentials.
This approach is also common in many service companies, where a single technology pilot for one client operator expands in scope as value is proven, leading to productisation and commercialisation.
Eigen’s observations
This model depends on a special kind of talent within a team, trusted to experiment, with a high degree of autonomy. Domain expertise is critical – meaning solutions are more likely to succeed as they are built from a position of in-the-field knowhow.
This model is, in many ways, the opposite of the central digital programme which can feel imposed. Although pace can be slower than better resourced central programmes, today’s low code/no-code technologies can help these domain experts leverage their own numerical and physics-based capabilities to dramatic effect – and scale much faster.
Model 4: Concept-led transformation
Many of the larger operators, concerned with introducing new technologies that may increase operational risk or impact much needed production, experiment with ‘digital concept platforms’ to trial and deploy new digital technologies.
This approach works especially well in greenfield projects, where digital technologies can be ‘designed-in’ at much lower cost and risk than in brownfield environments. However, many operators have been able to carve out areas of brownfield platforms to pilot small-scale digital projects that can later be scaled up.
With this model the rest of an operator’s asset portfolio – and in many cases the industry – act as observers of the concept platform and learn faster through demonstration and experience and can leapfrog any teething troubles in V1.
Such concept platforms are undoubtedly costly, although savings are expected at the portfolio level as other platforms level up faster and more cost-effectively. In addition, there can be PR and business development potential from these concept platforms which operators can leverage in licence rounds, investor relations, talent acquisition etc.
Examples
For many years, bp viewed its Atlantis platform in the Gulf of Mexico as something of a concept platform to prove emerging digital technologies for reservoir characterisation, imaging and Internet of Things projects, Equinor’s Johan Sverdrup is described as “a showcase of digital technologies” and its Oseberg H “the world’s first fully automated oil and gas platform”.
Eigen’s observations
This model certainly creates an opportunity to be more experimental, push boundaries and tolerate more failure by investing in learning at the portfolio level. But the concept model can still runs the risk of “not invented here” in scaling up across the portfolio – particularly in mature brownfield operations.
Summary
There has never been a single, or right, way to change and digital transformation is no exception. It depends on context, culture, commitment – and funding.
What’s clear is new and improving digital technologies – and growing experience within the sector – mean transformation can proceed faster, with less disruption, fewer risks and more value on offer than ever before.
Moreover, the options operators have today for collaboration are much greater than ever before as digital specialists like Google and C3.ai enter the market, driving innovation and ambition. However, domain understanding in this complex world of oil and gas, is always likely to trump more generic digital innovation.
Whichever model an operator or service company selects, there is a degree of inevitability now when it comes to digital. The benefits are clear to both business and to people adopting and using digital technologies. In many cases new talent judges where it chooses to work, based on the technology and commitment to innovate and invest. Different models will appeal to different people and to different organisations, and new models may emerge, as our sector learns from others. Today, we reap the rewards of those pioneers in the early 2000s who set the sector on its path to digital transformation, and perhaps more than ever, faced with challenges of cost and climate, as an industry, we will continue to embrace digital as our primary solution provider.
For more information on Digital Twin technologies and how Eigen can help, contact info@eigen.co
