Digitalization and its transformational benefits to the energy industry
The topic of this article was actually a question I was asked for an interview. Well, I didn’t get the job, but I learned a lot in the process of researching the topic and I’m happy to share my learnings with you. So, here we go!
Exploration and production operations in the oil and gas industry are faced with a growing number of constraints, including increasingly complex fields, increasing energy demand, volatile crude oil prices, and increased pressure from countries to transition to net-zero CO2 emissions. These challenges however also present a tremendous opportunity, encouraging us to constantly explore new frontiers and continually improve our production techniques while bringing costs down and reducing environmental impact.
The adoption of digital technologies, digitalization, will transform the energy industry within the next 10 years. This transformation will be defined by reduced CAPEX and OPEX, improved safety to lives and assets, and an acceleration towards net-zero CO2 emissions. Big data analytics, artificial intelligence, industrial internet of things (IIoT), automation, and cloud computing are components of digitalization that will play a huge role in this transformation.
Traditionally, the energy industry is conservative; oil and gas companies are often reluctant to embrace new technologies because of the substantial cost implications of failure. Also, the process of qualifying new technologies can be a lengthy and expensive process, so it’s cheaper for companies to just stick to what they know works. However, times are changing fast, and in order to keep up with the times, more companies are adapting and incorporating digital technologies in their operations.
Digitalization will have an impact across the entire oil and gas value chain from exploration to production and further downstream. One outcome will be the merging of project management and operations into a digital value chain run by machines and algorithms. This value chain will enable a virtual walkthrough of an asset’s life cycle before field development even starts thereby saving costs and reducing significant operational risks.
Cloud computing, advanced simulations, virtual reality, and virtual testing will improve the efficiency and success of exploring for oil and gas, appraising discoveries, and developing infrastructure to produce and transport hydrocarbons.
The installation of Industrial internet of things (IIoT) devices in the industry has increased exponentially in the past decade and this trend is expected to continue in the coming decade. IIoT combined with big data analytics will give companies the ability to make sense of data to optimize operations. The improvement in efficiency will lead to sizeable CAPEX and OPEX savings. There’s an interesting ad by GE, the boy who beeps, that gives an insightful understanding of the internet of things, in case you want to learn more.
Digital twins, which is basically a virtual simulator connected to real-time data feeds from assets, will enable operators to monitor the real-time condition of assets like platforms, subsea equipment, and wind farms thus closing the gap between testing and operating conditions. The insight gotten from the data will help stakeholders make smarter decisions and make them faster.
The benefit of real-time monitoring using digital twins will play a key role in preventive maintenance, production forecasting, failure prediction, and an overall improvement in asset reliability. Unmanned onshore or offshore platforms will also become possible thus saving operational costs and improving safety for workers by reducing exposure to harmful and hazardous conditions.
Virtual reality (VR) is a transformational technology for the energy industry as well. With it, stakeholders can go on a guided virtual tour around a facility, technicians can troubleshoot a piece of hazardous equipment without exposing themselves to danger. Students and trainees can experience what it feels like to be in a remote offshore facility, without actually going there. Companies will be able to train their employees on complex pieces of equipment or facility without spending a lot of money.
In terms of safety to the environment and the transition to a net-zero carbon emission world, the rich data flow that can be generated with digital twins will allow for much better monitoring and control of CO2 emissions from various assets thus contributing to producing fewer greenhouse emissions.
The Future is Here
Operators around the world have started reaping the transformational benefits of digital technologies.
In Mender field, Abu Dhabi, UAE, data collection activities that required operator field visits have been replaced by digital systems that are safe, reliable, and efficient. Downhole sensors are now used to collect data replacing conventional gauges which required expensive intervention activities and production downtime. The data gathered by the sensors have helped to reduce operating costs while improving the lives of the pumps used to jet out crude oil from the ground. The Mender field is a smart field that proves the value-adding capability of digital technologies.
Johan Sverdrup an oil field in Norway, operated by Equinor is already reaping some of the benefits of a digital oil field. By incorporating digital technologies such as digital twin solution, the field, which is the 3rd largest field in Norway is essentially giving us a peek into the future of the oil and gas/energy industry. After coming on stream in 2019, the field has proved to be highly profitable, producing over $8.3 billion worth of oil. The field emits less than 4% of CO2 per barrel which is 100x less than the global average of 18kg per barrel of oil equivalent (boe). The field’s recovery factor is about 60–70%. Their digital twin technology, Echo, makes it possible for workers to virtually inspect platforms and with an app, workers can activate permits, check equipment, and read system manuals without going to their desk.
Top oil and gas companies like Total, Aker, BP, and Shell have also developed digital twin technology. BP uses its APEX simulation and surveillance system to create virtual copies of all its production systems. This helped add 30,000 barrels of production in 2019. BP was also able to reveal an additional 400million barrels of oil in its Atlantis field in the Gulf of Mexico thanks to breakthroughs in seismic imaging and reservoir characterization.
Augmented reality (AR) using Microsoft’s 3D HoloLens helps Chevron field and office workers “look at” what they are working on together in real-time to monitor and quickly redress or improve equipment. Isn’t that amazing!
Machine learning and deep learning are moving seismic interpretation toward reducing risks and helping to identify new prospects. Using its proprietary subsurface modeling software, GeoSigns, Shell discovered additional 10 million barrels of oil beneath subsurface structures in the Demios field, Gulf of Mexico. Major industry players are using machine learning algorithms and pattern recognition to increase their chances of identifying profitable reserves.
Companies are also using predictive analytics with either artificial intelligence (AI)-based algorithms or first-principle engineering models to monitor their wells in remote locations and to know earlier and respond faster if they start to lose production.
Some Challenges to be Overcome
There is no doubt that digitalization is transforming our industry in many ways. However, there are some challenges that need to be overcome for digital technologies to gain a wider acceptance in the oil and gas/energy industry.
One is cybersecurity. Transmitting and storing data over the internet can expose a company to cyber attacks. Solving this security issue is key to creating a fully digital value chain run by machines and algorithms.
Also, due to possible downtime of cloud platforms, the dependability on the cloud for real-time data analytics can be a major hindrance in executing daily operations. However, companies are adopting edge computing to address this issue.
Unlike the tech industry where failure can be tolerated, investments in oil and gas projects easily run into several billions of dollars. So the cost of failure is prohibitively expensive both in monetary terms and in terms of lost production. This restricts the number of experiments companies are willing to take. However as the learning curve grows and reliability improves, more and more companies will adopt digital solutions to achieve their business goals.
Fears of unemployment: Many workers fear that their source of livelihood will be lost to machines. As a result, they are opposed to digital innovations like artificial intelligence and robots. This is a touchy situation because, in fact, companies are looking to save costs by using machines to carry out mundane tasks which would mean that workers in those tasks may have to leave. I think that machines will free up time for workers to work on more innovative ideas but, the fear is somewhat valid and companies will need to do more to quell the fears of their workers.
Finally, we are currently in industry 4.0, the fourth industrial revolution a.k.a digital revolution. In this age, you either innovate or die, so for companies to thrive and for the energy industry as a whole to move towards improved efficiency, cost savings, safety, and providing sustainable and reliable energy for a constantly growing population, incorporating digital technologies is a no brainer. By 2030 digitalization of oil fields and wind farms will completely transform the energy industry.
Thanks for reading!