Over the past several years, the oil and gas industry have had to traverse a range issue, after a long run of high and growing rig counts, mega-capital expenditure projects and plentiful capital to support investment. Problems arose when oil prices dropped suddenly in 2014 and 2015. After this event, oil companies who had been investing heavily based on their forecast began to slow down or even halt their operations completely.
Optimism did increase slightly with a price rebound in early 2016 but since then efforts are constantly underway to try and contain costs. They began to do so by reducing their headcount, slowing down future projects and cutting spending across all facets of their operations.
Oil executives should consider a range of digital technologies which have the potential to transform their operations. The effective use of digital technologies in the oil and gas sector could reduce capital expenditures by up to 20 per cent it could cut operating costs in upstream by 3 to 5 per cent and by about half that in downstream.
It is poised that we are in the presence of a new digital age within the oil and gas industry. This digital age should bring reduce costs, increased productivity and boost performance significantly. Making better use of existing technology can deliver serious returns: up to $1 billion in cost savings or production increases.
The oil and gas industry is tailor-made for transformation through the use of a range of digital technologies. The high level of visibility and clarity that can be delivered through digital technologies and advanced analytics can give executives unprecedented views of their organizations. Along with this, it allows for better strategic decision making.
The oil and gas industry is beginning a transformation of its own, increasingly looking toward data-driven solutions to boost performance, enhance efficiency and ultimately, to reduce costs.
Digitalization can bring various benefits to day to day operations and cost reduction as mentioned. For example, real-time data from oil wells will allow timely decisions on underperforming wells and other potential high-cost issues. Detecting anomalies during drilling and operations will enable more effective decision making that can deliver cost savings. There are also potential benefits for health, safety, security and environment performance. Providing a more accurate view of condition status, allowing better prediction and mitigation of equipment failures. Data analytics improves understanding of environmental risks, and authorities can create more effective regulations and monitoring.
Sources: McKinsey, DNVGL, Siemens