Blog post

Upstream Digital Transformations in Oil and Gas: A Remedy for Market?

What are the trending elements of upstream digital transformations in oil and gas consulting? Let's take a look at a few important ones

Updated on December 17, 2021

6 mins read

The mighty oil and gas industry, once perceived as an unsinkable flagship of the economy, has been navigating through some rough waters in the past several decades. Political standoffs and economic crises, coupled with fluctuating demand, have sent the entire industry spiraling down and back up with surprising periodicity.

Oil and gas consulting companies have always accompanied their clients on this endless roller-coaster ride, and have finally acknowledged digital transformation as one of the key drivers behind cost optimization and boosting of the overall efficiency of their clients’ operations.

Upstream digital transformations hurdles

Given the technology-intensive nature of the industry, the right ingredients and the infrastructure have always been there. The biggest challenge for the adoption of digital transformation in upstream oil and gas, however, has been the deployment of smart digital solutions at scale in a way that would seamlessly introduce them into the business and yield tangible results.

Estimated cumulative savings due to the upstream digital transformations globally
Upstream Digital Transformations in Oil and Gas: A Remedy for Market?
Source: PwC

The oil and gas industry has traditionally faced a number of challenges along their digital transformation journey, including:

  • IT scalability and the high cost of company-wide deployment

Major upstream players have ridiculously complex and intertwined IT infrastructures spanning across different continents and multiple offices. Implementation of new initiatives and systems has been a major challenge for IT leaders in the industry, as it requires substantial funding, involvement of a great number of stakeholders, and, occasionally, serious organizational changes.

  • Abundance of siloed, disparate, legacy systems in the upstream, midstream, and downstream segments

Large organizations can have thousands of standalone or loosely connected applications that generate data in different formats and store it locally. Bringing this number down and putting key components onto a single, scalable, customizable cloud platform for global access is a high priority for enabling upstream digital transformation in oil and gas.

  • Inability to comprehensively use real-time operational data for simulations and predictive analysis

Drilling platforms and other types of exploration equipment can pack thousands of sensors that are supposed to feed data to corresponding systems that will subsequently be used for analysis. However, few companies put all this data to good use, thus wasting improvement opportunities and allowing their data models to be not as precise as they could be.

  • The complexities of wide-scale business process automation

Substantial performance gains can be achieved through the implementation of automation tools at various stages of technical and business processes. Unfortunately, many upstream companies still have a remarkably high share of manual labor, which puts a drag on their overall performance and creates local bottlenecks.

Opportunities for digital change for oil and gas

In times of uncertainty, the first action that oil and gas companies usually undertook was cost optimization. Curtailing day-to-day costs and boosting the operational efficiency to minimize the impact of market volatility were the steps needed for finding a new stable baseline that they could work against.

Other changes were also made across the board: starting from numerous advancements in drilling techniques and technologies offering higher well utilization and throughput to innovative methods of deep-sea exploration and mapping. However, these changes in the mechanical aspects of the upstream process could only account for a fraction of the much-needed headway. But do they accelerate digital transformation in upstream oil and gas?

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In order to implement digital change for oil and gas companies, the entire paradigm of data collection, storage, use, and management had to be rethought. The industry has always relied on multiple streams of data coming from various sources, but the bulk of this data remained unused or wasted, resulting in suboptimal data models and overlooked insights.

Digital strategy in oil and gas (oil field transformation)

Upstream Digital Transformations in Oil and Gas: A Remedy for Market?
Source: PwC

Today, the oil and gas digital transformation is well underway, with all major players investing major dollars into building long-term digital strategies for sustainable growth and development based on data and automation. Read on to find out how.

Predictive maintenance and drone technology

Predictive maintenance is essential for mitigating the risk of major malfunctions, especially in such an environmentally hazardous industry. Oil and gas companies have been using a number of approaches to keeping their physical infrastructure in good shape, mostly with the help of vast sensor arrays and, more recently, by using drones for aerial inspections.

Drones can be used in fully automatic mode or in conjunction with a pair of AR glasses for ease of piloting. After a series of flybys and visual inspections, the drone footage is additionally analyzed for signs of wear and tear, corrosion, or other forms of damage.

Onshore asset digitization as part of oil and gas digital transformation

Large oil and gas giants work with millions and millions of documents, both physical and digital, including blueprints, maps, financial and legal documents, archived materials, photos, videos, and a lot more. Scattered across different geographies, these siloed, heterogeneous sources of information are being steadily replaced with data warehouses and data lakes available globally in 24/7 mode.

On top of this, the digitization of all existing materials, usually powered by blockchain solutions, dramatically facilitates the work of thousands of employees at every level who can now access the entire pool of corporate documents from their devices.

Data mining, data processing, data management

Today, any digital strategy in oil and gas relies primarily on collecting, processing, storing, and using big data for the benefit of the company at every level: from drilling teams to VP offices. Sensor arrays and connected devices installed on a single oil rig can feed enormous amounts of data to the backend, so it’s important to be able to utilize big data to the maximum extent possible, making each byte count and delivering value.

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Upstream oil and gas consulting companies are growing increasingly attentive to the quality of forecasting, accuracy of data models, and cost-effectiveness of business decisions based on analytics. All of these objectives require solid engineering expertise put into practice by a strong data-analysis and data-science department.

Use of AI applications in exploration and production

As the complexity of exploration and production operations grows and the task of monitoring the entire infrastructure of an extraction site becomes extremely challenging, artificial intelligence (AI) solutions come to rescue. Trained neural networks are excellent at detecting the most minute deviations from the norm and potentially dangerous emerging trends in data streams, video footage, or sonar data.

In addition to ensuring safety, AI tools can be used to boost the effectiveness of oil and gas consulting, exploratory efforts, predictive maintenance, and business process optimization.

Are the future of digital transformation and oil and gas industry growth aligned?

The upstream oil and gas industry has come a long way since digital transformation became a strong industry-wide trend triggered by the need to adapt to a new market reality. Back in the day, way too much information was processed manually, way too much data was unutilized and wasted, and way too many systems were disconnected and technically outdated.

The rigidity of the old ways of doing business and associated systems resulted in massive inefficiencies, excessive and often unjustified investments, peaking risks, and the industry’s inability to respond to market challenges in a timely manner. All of that, combined, made operation Digital Transformation look almost utopian.

Today, however, digital transformation in oil and gas is a reality, fueled by some great advanced technologies like the Internet of Things (IoT) or artificial intelligence. It’s a never-ending process of continuous improvement and harnessing the power of data for better business results and the security of the industry’s employees. The future of digital transformation and oil and gas companies now lies in the same plane.

Enabling large-scale positive changes in established industries requires a broad technology and domain expertise, as well as the ability to dive deep into the client’s business challenges and find optimal solutions. Please, don’t hesitate to contact us to schedule a call with our experts.

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