A digital renaissance is coming for the oil and gas sector
Photo by Zbynek Burival on Unsplash
These are turbulent times for oil and gas companies.
Finding new sources of oil is becoming increasingly difficult, forcing companies to spend more money on exploration and development in remote and environmentally sensitive areas. New entrants and new regulations are changing the economics of the business. And then there’s the looming staffing issue. Thousands of Baby Boomer workers will retire in the next decade, but the industry lacks workers between their late 30s to 50s to replace them in senior management roles—a phenomenon known in the industry as the Great Crew Change.
The only way forward, said IBM business services leader for the industrial sector John Sullivan, is for oil and gas companies to rethink their businesses holistically. Across the sector, he said, leading companies are beginning to do just that by investing in large scale digital technology projects. “Digital transformation is very much the theme of the industry right now,” Sullivan said.
In years past, Sullivan said, favorable business conditions meant oil and gas companies didn’t need to invest heavily in emerging digital technologies to remain successful. The investments they did make focused largely on cost reduction and improving efficiency—that is, nothing fundamental to the way they worked.
“They’ve done all the easier stuff in terms of taking out costs out of back office functions, but they’ve not really embraced the new digital technologies to the extent they can to transform. I think that’s what’s changing now,” Sullivan said.
One sign of the coming renaissance is the sweeping partnership recently announced between IBM and the energy service giant Wood, a global leader in the delivery of project, engineering and technical services to energy and industrial markets in more than 60 countries. In the coming years, Wood, with IBM’s help, will use artificial intelligence, predictive analytics and blockchain to transform several industries. First up: oil and gas.
AI, Sullivan said, can be used to address the challenges presented by the Great Crew Change. Wood could, for instance, use the technology to build digital advisors, which could use the structured and unstructured data compiled by industry veterans to train new generations of workers.
Employees at Woodside Energy, Australia’s largest independent oil and gas company, are already using a similar system to access information quickly and easily on 38,000 company documents.
With predictive analytics, Sullivan said, Wood can help oil and gas companies see equipment failure coming and take steps to prevent it, thereby maximizing the amount of time they spend working productively. Blockchain, meanwhile, could prove immensely beneficial to facilitate the transactions Wood makes with oil and gas companies across the supply chain. By using a secure and immutable ledger, oil and gas companies can increase transparency and reduce disputes, ultimately leading to substantial savings.
Taken together, Sullivan said, these technologies would represent a fundamental transformation for Wood. And as more companies follow suit, that will amount to a core transformation of the industry at large, making it incumbent on companies to start acting now to better adapt.
“I think as you see this technology being adapted, those that don’t transform will be acquired and left behind,” Sullivan said.