Digitalising the Oil & Gas industry
29 September 2017
According to a report by DNV GL – a technical consultant to the Oil & Gas, Energy and Maritime sectors - it is believed by the year 2025 we will see an upstream Oil & Gas industry where technologies such as fully-automated drilling operations, autonomous inspection of pipelines and rig-less plugging and abandonment of wells will be in operation.
While the industry isn’t quite there yet, it isn’t far from it. Connectivity spoke to Mike Houghton, Managing Director – Process Industries and Drives, Siemens UK about the current challenges within the Oil & Gas industry and how embracing digitalisation means companies can make operations more reliable, safe and productive.
Oil & Gas operations are increasingly complex and to ensure plants are performing at their upmost efficiency, relevant data must be collected. Oil & Gas organisations already have a lot of data, most often in silos to be exact. These ‘data jails’ as Mike describes them currently have one problem; connecting them is proving difficult and stopping companies using data in a more meaningful way.
Mike has previously spent time with operators in this industry and he notes that there is a lot of willingness to learn about Industry 4.0 but most of them are struggling to deploy it. To help, Mike details five pillars that companies can work towards:
1. Improving productivity:
Productivity gain is important in any industry and adopting digital technologies and embracing a culture of continuous improvement will be important first steps. Take the automotive sector for example, it sees an approximate 8-10 percent productivity improvement year on year. For Oil & Gas operators, productivity figures such as these are going to become increasingly important moving forward.
The current oil price environment is forcing major change and difficult decisions. According to an article in the New York Times, the oil industry has experienced its deepest downturn over the last two and half years since at least the 1990s . Mike believes this could be here for the medium term, so the industry needs to start thinking of this as the new normal. $60 per barrel seems to be the tipping point at which the fracking market in the US can turn on production because that’s the reliable productivity point for them to go to market. So we’re getting an oscillation at around the $50-60 per barrel.
The real challenge emerges if/when fracking decreases to a new lower price point, giving industry a whole new paradigm to work with. Consequently, the sector needs to have a delivery model that works at these fluctuating price points. Digitalisation can bring about new operating models that are quick to respond to market demands.
2. Integrated supply chains:
For Oil & Gas companies, optimising performance at every process step – over the entire supply chain – is paramount. Digitalisation can help create highly integrated supply chains that allow producers to work with suppliers and come up with new value propositions that drives down costs and increase value.
For example, let’s look at the manufacture of a car, particularly the front headlight cluster. If we went back 20 years there might have been 30 components or assembly actions required to put that light cluster in place. Today, that same light cluster is just one component with four assembly actions, allowing for a faster assembly routine with less room for error. Whilst the price of the unit has gone up, the overall cost of that system has come down.
Oil & Gas companies need to start thinking along these lines, not only to drive productivity but to improve cost management, operational flexibly and accelerate time to market. There are technological solutions available now that can make this possible, it’s whether companies feel confident enough to embrace it.
3. Embracing innovation:
Companies must be prepared to innovate if they wish to survive in this fast paced industry. Innovation comes in many forms; whether its new products, processes or business models, it’s crucial all within this industry are prepared to reinvent themselves to stay ahead of the curve.
4 & 5. Adopting new skills & becoming digital leaders:
Last but not least; skills. We are all aware by now that industry in general is facing a huge skills gap and if we don’t bridge this gap the UK will fall behind its major competitors. People have a crucial role to play in Industry 4.0 as all sectors need workers with the right skills to embrace digital technology.
Mike believes the fundamental skills of petroleum exploration is going to stay the same but where new skills will become important is in data analysis. Data scientists are the key to providing the necessary information, whether that be on performance, maintenance or a whole host of things, which will keep the industry moving forward.
Most importantly, companies will need to adopt a leadership style that will allow them to become digital leaders of tomorrow, having the foresight to understand both the opportunities and barriers these present and knowing how to realise them in an effective manner.
Safety & security
The Oil & Gas industry is a high potential working environment; the BP oil disaster back in April 2010 which killed 11 people in the Gulf of Mexico proves if you get it wrong, it can be catastrophic. Therefore, safety is paramount.
Mike Houghton is the Managing Director of Process Industries and Drives in the UK
Typically oil operators used to carry out periodic surveys of their assets on each platform. This involved sending engineers into high-potential environments to perform equipment inspection that in many instances results in no corrective interventions. Not only is this a huge cost but at unnecessary risk.
Digitalisation techniques changes that. Companies can do a lot more remote monitoring with machinery that has built-in intelligence. Devices can monitor their performance, report on any anomaly’s and effectively judge when a maintenance visit should be scheduled. This removes people from potentially hazardous environments, reduces maintenances costs and the possibly of downtime.
That’s not to say it’s going to be easy. New technology and ways of working are going to introduce new risks and if we’re not careful, this could become a barrier. Most people are of the belief that in not making a decision, they can’t be criticised. But companies are quickly running out of time; if they’re not driving those productivity gains they run the risk of losing their competitiveness and going out of business.
One of those risks involves cyber-security, a topic quite prevalent in the media of late. Companies need to maintain a secure environment whilst keeping connectivity as open as possible to avoid creating more of these ‘data jails’ as mentioned earlier. They also need to ensure they are adhering to the latest security standards and periodically update their security platform. One of the ways to combat a security breach is to have a closed system. This has no physical connections to the outside world but again, if companies aren’t careful, it could become another ‘data jail’.
To start, companies need to develop a robust cyber security plan and work with a partner that can help them develop a plan to meet their needs. It’s no good trying to attempt this piece by piece because you’ll introduce vulnerabilities.
A lack of understanding is certainly preventing this industry from seizing the opportunities Industry 4.0 can bring, feels Mike. People need to make themselves aware of the challenges and confident these issues can be dealt with.
Digitalisation is happening now and it’s going to gain even more momentum as soon as companies start to see the initial benefits. Those that don’t adopt Industry 4.0 will be quickly left behind if they’re not careful and that will leave them vulnerable.
Mike Houghton is the Managing Director of Process Industries and Drives in the UK. He is responsible for building on a solid market position in the growth field of process industries. The Division offers products, systems, applications and solutions for integrated drive technologies and systems.
Mike is a Chartered Engineer, Fellow of the Institute of Measurement & Control and a Member of the Institute of Engineering & Technology, with a Bachelor of Engineering Degree in Electrical, Electronic and Control Engineering.
He is one of nine divisional managing directors within Siemens plc for UK & Ireland and also a member of the Siemens plc Executive Management Board along with being a member of the Country Growth and Strategy Management Boards. He is also chair of Siemens plc UK & IRE Service Forum, a member of Siemens Global PD Innovation Board which sets out future technology needs along with go to market strategies. Mike is passionate about how engineering contributes to sociality.
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