Investment in digitalization set to rise as senior professionals see path to profitability

By DNV GL

New research by DNV GL, the technical advisor to the oil and gas industry, shows the digitalization of the sector has been increasing steadily in 2016, with significant progress in digital technologies, including artificial intelligence, automation, predictive analytics and machine-to-machine communication.

Among the 15 emerging technologies investigated for Short-term agility, long-term resilience, DNV GL’s seventh annual benchmark report on the outlook for the oil and gas industry, digitalization is the area in which companies are most likely to invest in 2017 across R&D, trials and full-scale implementations. This indicates that the industry has recognized it as a path to improved profitability and reduced risk.

Among a global survey of 723 senior industry professionals for the research, 39% expect their organization’s spending on digitalization to increase in 2017. The same proportion report that the low oil and gas prices have increased their focus on digitalization, while 45% say that their focus has remained the same. Only six per cent have decreased their focus on digitalization following the downturn.

Lack of digital culture

Naturally, funding is a major barrier to digitalization for many companies amid a period of cost cutting across the industry: 30% of respondents cite it as the joint top barrier. It shares the top spot with the presence of an old-fashioned organizational culture. These two obstacles are closely followed by a lack of awareness among senior management about digitalization and the potential benefits (26%), a lack of the required skills (23%) and bureaucratic/procedural obstacles (20%).

It is striking how, funding aside, these top barriers to digitalization all relate to people and culture. Technical obstacles – such as immature technologies (14%), reliability of data (14%) and access to required data (12%) – fall far down the list.

Primary barriers to greater digitalization

Source: Industry outlook report 2017; ©DNV GL

Also striking is how those in senior positions perceive the problem compared with those further down. Funding is, by some margin, the leading barrier among board members, directors, and c-suite executives. For the heads of business units, however, the top barrier is the lack of awareness among senior management. For managers, further down, an old-fashioned culture is by far the greatest barrier.

The data scientists who will be required to bring the oil and gas industry through a digital transformation have different cultural expectations from work, according to Maria Moræus Hanssen, chief executive officer for the exploration and production business of global energy supplier ENGIE in an in-depth interview for DNV GL’s report. “Data nerds don’t show up at work in a suit and tie. They don’t sit around tables discussing in long meetings like we do. We saw the need to set up a different type of work environment to reflect this, inviting people with crucial competences to come and interact with us more informally. We needed to change our culture,” she said.

ENGIE has recently established separate digital unit of its business to foster creativity and new ways of thinking that is needed to take on the digital journey successfully.

Data-driven production

Larger companies are leading the charge towards digitalization: 60% of respondents from large companies say their organization needs to embrace digitalization to increase profitability, compared with 56% of those from mid-sized companies and 45% of those from small companies. Correspondingly, 57%

of large companies are expecting to increase spending on digitalization in 2017, compared with 42% of mid-sized and 30% of small companies.

“There’s general acceptance of the idea that big data, in particular, is important to the future of oil and gas,” said Paul Doucette, global leader for public policy and external funding at GE Oil & Gas in an interview for the study. “Many operators are working on how to go about harnessing it. The struggle is to make data meaningful and actionable fast enough to make a difference.”

DNV GL estimates that the industry could become at least 20% more efficient by making full use of digitalization, and examples of such transformation can be found throughout the value chain.

BP, for example, is working on digitalizing production platforms. A pilot project announced in November 2016 will use specialized software to gather and process data in real time to help reduce unexpected shutdowns. The operator believes that this initiative alone could improve operating efficiency by up to four per cent.

DNV GL is also contributing to new ways of working with data. The company has recently brought quantitative risk assessment (QRA) studies into the digital age through an interactive dashboard that allows project and asset risk results to be viewed in ways not possible in a static QRA report. The dashboard makes it easier to understand hazards and make day-to-day decisions. Koheila Molazemi, global service area leader, risk management advisory at DNV GL – Oil & Gas says: “The reporting tool allows our customers to view and interact with information more tangibly, using filtering, drill-down functionalities and 3D visualizations and can be used to support decisions and communicate risk across the lifecycle of a project. It can also be accessed by all project stakeholders, helping to avoid disconnect between the parties involved”.

Portuguese integrated energy company Galp Energia is also aiming to get more value from the massive amounts of geological and geophysical data it collects. Over the past two years, the company has been investing in an R&D project to try to use cognitive computing to make sense of this data more rapidly. “We are putting a lot of emphasis on this project,” says Thore E Kristiansen, the company’s chief operating officer (exploration and production) and executive director interviewed for the DNV GL report. “We think, if successful, it will enable greater efficiency and more powerful data analysis.”

Gasunie, the Dutch natural gas infrastructure and transportation company, has worked with DNV GL to use data analytics to try to match the occurrence and severity of external corrosion of onshore gas pipelines with data from pipelines and their surroundings. The patterns in the data allow Gasunie to estimate the probability of external corrosion occurring. Similarly, SGN, the UK’s second largest gas distribution network operator, is working with DNV GL on building real-time gas networks that will use flow and gas quality sensors to manage gas distribution more efficiently while helping to predict customer demand.


The Industry Contribution is a new section in which the oil and gas industry companies share their project endeavors or analyses. Please contact us at sm@navingo.com for inquiries.

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Posted on March 13, 2017 with tags .

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