The oil and gas industry has a number of strengths that can be deployed in its battle to combat harmful emissions and decarbonise the sector. For a start its global supply, a chain developed and honed over decades, is one of the most comprehensive and is worth about $4tn, according to EY analysts. This is already equivalent to 4% of the global GDP.

However, it has the potential to realise an even higher valuation.

The World Economic Forum (WEF) believes digitalisation could provide savings of up to $1tn for the oil and gas supply chain, while Wood Mackenzie estimates it could save upstream oil and gas companies in Europe alone up to $73bn/y.

Huge cost savings potential
Initially, the adoption of digital technologies in the oil and gas sector was sporadic and focused mainly on critical equipment and workflows. A GlobalData study says one early hindrance was ‘a shortage of skilled technicians, concerns over data security and cost-benefit uncertainty for adapting ageing assets’. But this is starting to change as companies upgrade their assets with digital technologies for long-term gains.

The long-term effects of digitalisation throughout the oil and gas industry will be transformational. Emerging technical solutions offer ways to connect supply chains, improve productivity and enable huge cost savings. Digital solutions are also likely to have a positive environmental effect, enabling the oil and gas industry to future-proof.

Europe’s switch to LNG
In Europe, digitalisation of the energy space could become an unexpected bonus of Russia’s invasion of Ukraine. This is due to the huge growth in imports of LNG from the US, Qatar and other sellers this decade that will be the inevitable result of the switch away from Russian gas. This is expected to boost digitalisation efforts in the midstream sector as employing these technologies will ensure LNG terminals have an increased uptime.

Artificial intelligence (AI) will be key to a successful rollout of the new LNG terminals that will be required. This, argues an Achilles Insights study, is because it will dispense with the need for a human workforce to perform repetitive tasks and ease the supply of gas through the supply chain.

‘The main benefit [of AI] comes from the automation of repetitive and time-consuming processes such as vendor screening and pre-qualification. Advanced data analytics can help buyers collect, verify and utilise huge amounts of data. Cloud computing and IoT [the Internet of things] are coming together to create networks of connected devices and workers at every stage of the oil and gas supply chain,’ it explains.

Digital twins will also become increasingly useful in the supply chain by enabling the analysis and testing of sites from the various onshore locations. They can subsequently help to improve the predictability of projects by cutting down transport-related emissions and costs in the supply chain.

‘Oil and gas companies are realising the benefits of integrating [digital] technologies into workflows. However... the digitalisation wave creates new access points in industrial networks for hackers to exploit.’ – Francesca Gregory, GlobalData analyst

New digital tech agreements announced 
A number of oil and gas companies have recently announced digital technology deals.

In May, India’s Essar Oil and Gas Exploration and Production (EOGEP) announced a tie up with Sensia for the digitalisation of oil and gas field operations. EOGEP produces gas from coal seams (coal-bed methane) and will deploy Sensia’s Avalon digital platform for real-time data acquisition of mechanical, electrical, gas and water flow, pressure and power backup data.

By leveraging remote access and control capabilities, EOGEP will gain the ability to monitor and adjust vital well and facility parameters. According to Pankaj Kalra, CEO of EOGEP: ‘This partnership represents a significant milestone in our digitalisation journey. We are confident that we will achieve increased production, reduced operating costs and enhanced efficiency.’

EOGEP is employing the latest technology in its existing wells to ramp up production from 0.9mn m³/d to 1.3 m³/d.

Shell Global and Kongsberg    
Last December, Shell Global Solutions announced it had entered into a five-year agreement with Kongsberg Digital to digitalise its global assets using digital twin technology. Commenting on the agreement, Owen O’Connell, Senior Vice President and CIO, Upstream and Projects & Technology at Shell, said: ‘Wider digital twin adoption across our assets enables Shell to continue to accelerate our digital innovation journey driving efficiency improvements.’

In January this year, a contract was signed between Kongsberg Digital and Chevron. For a multiple-asset deployment plan in which Kongsberg Digital will aid Chevron in work planning and project execution.

BP data deal 
BP has signed a multi-year global data agreement with geoscience technology services company CGG. The accord will support BP’s subsurface digital strategy by leveraging the value of unstructured data directly to subsurface operations. Sophie Zurquiyah, CEO of CGG, said: ‘By unlocking the true value of huge volumes of disparate unstructured data, asset teams can focus on generating new insights to better understand uncertainty and risk, improve decision-making and deliver business value.’

The two companies have worked together previously in a joint venture with Pharaonic Petroleum for the 3D seismic imaging of an OBN (ocean bottom node) seismic survey conducted in the Nile Delta, covering the Atoll and Atoll North fields.

Saudi Aramco digital contract
In February, Accenture won a large digital consulting contract with Saudi Aramco as part of a raft of deals by the oil and gas giant worth over $7bn. Saudi Aramco Chief Executive Amin Nasser said the company is planning to invest $1.9bn in digital transformation over the next three years.

One of the main pillars of Saudi Aramco’s technology roadmap is the newly launched Aramco Digital Company. Ahmad Al-Sa’adi, Executive Vice President of Technical Services at Saudi Aramco, commented: ‘The launch of Aramco Digital Company will provide state-of-the-art AI and emerging technology expertise in a vital sector of the economy.’ In March, it signed a memorandum of understanding (MoU) with Samsung Electronics for a strategic collaboration to develop an industrial 5G technology ecosystem.

Petrovac and Aveva sign digital accord
More recently, in April, Petrovac and Aveva Group, the multinational information technology consulting company, signed an agreement under which both companies will cooperate towards digital transformation of the end-to-end supply chain system process. This will include engineering, cataloguing, procurement, site material control and construction planning.

Aveva said its solutions ‘will provide Petrovac with value chain visibility and secure audit trails for tracking material procurement, minimising waste and ensuring regulatory compliance’.

Cybersecurity concerns
Despite the benefits, digitalisation does have some drawbacks. For a start, its rapid adoption has exposed the oil and gas supply chain to potential cyber attacks, creating a security challenge. GlobalData forecasts that this increased vulnerability will require spending on cybersecurity by the industry to rise to $10bn by 2025.

Francesca Gregory, a GlobalData analyst, explains: ‘Oil and gas companies are realising the benefits of integrating technologies into workflows. However, the wider industry is largely underprepared to handle its risks. The digitalisation wave creates new access points in industrial networks for hackers to exploit.’

Despite the increase in cybersecurity spending, Gregory says the industry ‘is still not taking cybersecurity seriously enough’. She describes the industry’s current situation as ‘precarious’ and warned about the prospect for disruption and extortion by hackers.

It is clear then that utilising emerging digital solutions has the potential to enable oil and gas companies to transform their business and operational models. But, as Achilles Insight cautions: ‘It is not as simple as putting digital solutions in place and letting them work their magic.’ The analyst argues instead that: ‘The oil and gas sector has a number of barriers to change and lags behind others in digitalising their supply chains.’

A major sticking point is that the industry’s regulatory frameworks ‘were not created with the data sharing we see today in mind’. There has also been a lack of data standardisation and data sharing throughout the industry’s ecosystems.

One solution to reducing costs and risks, says Achilles Insight, is to leverage digital solutions from outside the industry rather than rely on in-house approaches. It argues that industries like manufacturing and retail have already been relatively successful in doing this and their insights could be applied to upstream oil and gas supply chains.

But, ultimately, whatever digitalisation model is adopted, the oil and gas industry will need to be decisive and grasp the nettle quickly to take advantage of the huge opportunities afforded by harnessing digitalisation.