Empowering the oil and gas sector with digital transformation: A new era of efficiency and innovation 

By Parimit Lohani, Business Consultant, YASH Technologies

The oil and gas industry is undergoing a series of changes and disruptions. Business leaders must be able to ask themselves: What does the future look like for my Industry? How can I remain relevant? What technological components does my company need to invest in to stay competitive in the future? These questions will require leaders to assess their strengths, weaknesses, and opportunities within the business context of their sector and internally.

The impact of the pandemic on the oil and gas industry has been profound. During its most acute phases, this global health crisis drove down demand in the Industry. The potential economic slowdown has created additional headwinds against which companies must be resilient. This is getting exacerbated by the Russia-Ukraine crisis. 

Resurgent demand for cleaner fuels like gas and crude oil and increased penetration of alternative sources, like solar and wind, have been transforming the internal dynamics of the sector. This shift to a greener economy has led governments worldwide to develop policies supporting the adoption of renewable energy.

Anticipating uncertain times, the Industry strives to improve reliability and reduce costs and carbon emissions through more significant innovation in all areas. 

Given the ubiquity and scale of oil and gas operations, digital transformation is essential for unlocking value from these complex supply chains. Thus, they are taking a more urgent approach to embracing digital technologies at scale. The Industry must boost efficiency through automation & process optimization.

Frost & Sullivan expects oil and gas companies’ automation market to reach $24.6 billion by 2025. Some of the most common objectives for the Industry’s transformation are:

While the pressure to digitalize mounts, reports suggest that only a tiny fraction of the oil and gas industry has fully deployed digital technologies at scale to make real progress in improving performance indicators.

The sector must accelerate its pace of digital adoption for many reasons, including a need for market intelligence about the value created by digital change management. Oil and gas companies need to be clearer on what impact they want to see from their digital transformations. 

What should these companies focus on while using technology as an enabler?

Fundamental Areas Leveraging Technology Enablers

Efficient Operations: A move away from the traditional

The Industry has relied on tried methods and manual processes to drive business operations. The focus on operational efficiencies means that companies could maintain their competitive edge while also remaining profitable by leveraging emerging technologies like IIoT, AI/ML, intelligent automation, etc. These include satellite imagery, seismic data capturing, remote process automation, digital asset maintenance, precision drilling, refinery corrosion reduction, and demand-supply optimization.

Efficient Business Model: Reinvent the business model to adapt to change

As the demand for oil and gas varies based on multiple factors, there is a need to reinvent the business model to adapt to change. Oil and gas companies must look beyond their core product lines and focus on new opportunities that offer sustainable business models. As per a McKinsey report, more than one-fifth of surveyed business leaders name building new businesses as their companies’ top strategic priority, and 55 percent consider it a top three priority.  

With massive investments required over the next decade as part of a broader shift from fossil fuels to cleaner energy sources, it is time for the oil and gas majors to leverage their areas of strength to identify and pursue new avenues. This can be further strengthened by a new emphasis on business model innovation, which reinvents how products and services are brought to market. 

Efficient Investments: Aligning with net-zero

In a recent SAP and Oxford Economics survey, 79% of the oil and gas company executives responded that sustainability issues are a significant concern or top-of-mind at all stages of the manufacturing process.

The oil and gas industry must be equipped with the necessary digital tools and adopt technologies that keep their CO2 footprint in check. In a world where digital transformation is integral to meeting sustainability goals, oil, and gas companies can harness technology to gain visibility into their infrastructure and optimize their investments. For instance, organizations can leverage insights from the field to manage infrastructure, increase server utilization and improve productivity optimally. Furthermore, the latest technologies can help manage surplus equipment’s financial and sustainability impacts. 

Efficient Connect: How consumer interests are Transforming the energy landscape

As oil and gas companies strive to attract and retain this new generation of customers, they must redirect their attention from traditional strategies to more customer-centric experiences.

Oil and gas companies are changing how they do business, from replacing natural gas with cleaner fuels to focusing on the electric vehicle market. They have realized the future lies in creating and delivering experiences within their organizations where customers can engage in powerful new narratives that shift perceptions about their Industry.

Efficient Workforce: Evolve to meet future needs

The oil and gas industry is one of the most dynamic service sectors in the global economy. With every change comes a new challenge for businesses to innovate, implement, and compete. These challenges come from changing customer needs, business models and processes, technology, energy regulations, etc. The three mainstays for improved efficiencies will be digitalization, automation, and a future-ready workforce.

However, the Industry has been facing a talent crunch. From procurement to finance and engineering to sales and marketing, it requires diverse skills across functions. The aging workforce is another challenge that affects the oil and gas industry. It’s essential to find ways for oil firms to retain and upskill their workforce to remain competitive. Employers need to focus on building a workforce that will stay relevant in evolving market scenarios.

Conclusion

The oil and gas industry presents significant opportunities to improve operational efficiencies and increase productivity and profitability while maintaining the ability to compete. Digital transformation catalyzes these efforts by rapidly creating capabilities that have been proven successful in other industries. The added value of implementing digital technologies can be better decision support, greater collaboration and socialization among workers and customers, increased customer satisfaction, product or service innovation, or performance improvement relating to resource management (risk mitigation).

It is simply a continuous process of change or improvement. It requires companies to create a culture of innovation to improve their current business models. While investing in digital transformation might seem risky, it’s also an inevitable long-term trend that will continue to drive the Industry in the coming years and decades. In other words, not only is it time to leap now, but oil and gas companies should be making strategic investments to prepare for the future.