BAKU, Azerbaijan, June 29
By Leman Zeynalova – Trend:
The potential benefits of going digital are increased productivity, shorter response and intervention times, cost savings, safer operations, and asset integrity as well as sustainable resource treatment. As the world’s oil and gas industry strives to expand margins by reducing production costs wherever possible, advanced capabilities enabled by the integration and digitalization of upstream operations can help in substantial ways.
Cost reduction
Rystad Energy says digitalization, which involves converting text, pictures or sound into a digital form that can be processed by a computer, can deliver as much as $100 billion in oil and gas industry savings.
Deloitte believes that majority of digital solutions currently in the market are aimed at reducing the industry’s operating costs, which were about $2.3 trillion in 2016. Undeniably digital has, and will continue to, lower the industry’s operating costs, but there is a much bigger category of $3.4 trillion in net property, plant, and equipment—or the productive capital—which is nearly untouched by existing digital solutions. Even a 1 percent gain in capital productivity from this figure—by reducing future opportunity costs through intelligent robots that also ensure safety of assets and people, lowering the replacement cost for worn-out producing assets through on-demand rapid printing, or extending the economic life of offshore assets by regularly tracking their structural integrity—could mean savings of about $40 billion. (To put this saving into perspective, listed pure-play upstream, integrated, and oilfield services companies worldwide reported a cumulative net loss of about $35 billion in 2016.) And when digital efforts start optimizing both operating and capital costs, O&G companies could reverse the falling trend of their return on capital employed (ROCE) even in a lower-for-longer oil price environment.
Challenges
The interviewees of DNV GL identified the following key challenges that need to be addressed if the industry is to capitalize on the opportunity of Big Data:
Complexity - Most of today’s data is stored in fragmented systems, in various formats and not easily accessible to make timely decisions. To unleash the full potential of the data-rich reality, companies will have to aggregate data sets from various databases, standardize formats for easy analysis and make it available to the right people for decision making. Currently, there is a lack of infrastructure in place to store and analyze both structured and unstructured data to fully take advantage of Big Data technology. To harness the full potential of data for more effective operations and decision making, it is vital that companies implement a robust strategy to capture, manage and utilize critical data.
Trust - One of the biggest challenges facing the industry today is trust in the data on which it is dependent. The interviewees revealed a varying level of trust in the data that they currently use. When data is fragmented and arriving from multiple locations, it needs to be properly sourced and aligned to a central data quality standard. Systematic monitoring of data will be essential to ensure that the quality of data is comparable to the impact of decisions informed by it.
Security - Security is paramount for rapid adoption of new technology in the oil and gas industry. Field, reservoir and production data is incredibly business sensitive and operators demand uncompromising protection through rigorous security systems. Stringent security standards will be required to minimize security breaches and to enhance the flow of information within projects and with trusted partners.
A need for innovative solutions - The oil and gas industry recognizes the opportunity for imminent breakthroughs if it can better address the large amount of data that are collected today. Although resistance regarding new approaches remains, the industry is waking up to Big Data challenges and opportunities, and is taking steps to understand the implications to their daily business. The companies interviewed were at varying stages of digital adoption: a few early adopters are emerging, but many are still at very early stages of maturity.
Artificial intelligence in oil and gas production
Investments in artificial intelligence can help increase productivity in the petroleum and natural gas industries, according to McKinsey & Company.
“While digital transformation continues, some of the companies with heavy assets may not be giving required priority to better use of artificial intelligence. Our research shows that artificial intelligence can help organize these companies’ complicated operations and high-performance software tools can allow these companies to develop their algorithms. In other words, companies with heavy assets can increase their business volumes and profits per hour by using artificial intelligence. They can reduce their energy consumption. Our research shows that artificial intelligence, especially by using existing information and software, can deliver improvements without intensive equipment upgrades. Besides, AI generates machine learning that is easily transferred to similar assets and sites, which adds to its appeal as an investment,” said the company.
For companies with volatile margins and capital-market pressures, artificial intelligence brings significant opportunities to better manage risks and volatility, according to McKinsey & Company.
“We can say that the future will look brighter for manufacturers with heavy assets that are able to read, interpret, and use their machine-generated data to address the changing needs of customers and suppliers. It is time, for these companies which are routinely capturing and storing vast amounts of machine data to start creating algorithms. With guidance from external experts and interim resources as a bridge, they have a chance to quickly start enjoying the power of artificial intelligence.”
Azerbaijan’s case
Several years ago, Azerbaijan’s state oil company SOCAR established Caspian Innovation Center (CIC) to manage digital transformation processes. CIC analyzed all software used in SOCAR in detail, found out gaps and determined the spheres, which need optimization. CIC began implementing digital projects in upstream sector in 2018. The drilling sector completely relies on SAP ERP platform, as there are many risks and uncertainties in this sphere. All processes, including well planning, well drilling and commissioning are automated here. SAP UFAM (Upstream Field Activity Management) platform was applies for the first time in the world to systemize and automate all the processes in the oil and gas production. Many cutting-edge technologies, including machine learning are used by SOCAR’s Azneft production union. SOCAR’s systems predict the expected production from the well, possible risks and processes.
Calculation of project cost automatically with resource method, automation of works related to security and healthy environment will be widely applied on SAP platform in 2021 as well. As such, risky work control systems, certification of employees and minimization of accident risks are among the main targets. Predictive and cognitive ways of solution will cover all areas.
A skilled local team has already been created to implement all the processes in the oil and gas production, that’s to say, the SAP UFAM in a single system and to ensure its uninterrupted operation.
Automation work is underway in downstream sector as well, including in Azerkimya. After creating a single database, the company will have systems meeting Industry 4 standards. SOCAR has already worked out a plan envisaging application of data analysis, Internet of Things, video analysis and many other new generation technologies in the company.
The corporate database of SOCAR has digitized the information on almost 50 percent of 44,000 wells. SOCAR has been successfully creating a corporate digital management platform, combined with the automation of business processes for more than 10 years. This process currently covers all main areas of activity.
By monitoring the drilling process in real-time, it is possible to obtain the desired well depth, pressure, volume of pumped raw materials, and other drilling parameters. Digital systems are also used in other areas such as oil and gas production, gas processing and transportation, operations management by using digital models, the ability to control various devices in real-time. Video surveillance equipment installed on ships and other production facilities allows regular visual monitoring of the situation, ensuring more effective management of possible emergency situations.
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