Digital Tech Drives Innovation For Oil & Gas Companies

Ken Evans

The new digital economy is upon us, and the growing use of digital technology is freeing oil and gas companies from traditional constraints.

Companies are finding value in new operational areas through innovative application of digital transformers. In doing so, these companies are leveraging technology to move beyond meeting traditional demand at lowest cost. They are also reimagining their business models and processes to diversify their supply and create new outcome based value propositions.

Driving this digital revolution are hyperconnectivity, supercomputing, cloud computing, smart technology and cybersecurity. With fuel prices in decline, innovation will drive differentiation.

For oil and gas companies, this change will disrupt traditional vertically integrated business models. Those models have long depended on controlling vast reserves and assets.

However, in the digital economy, it is access to digital information, rather than access to resources, that is spurring differentiation in oil and gas. Successful companies will find value through controlling costs, energy diversification and outcome-based services.

Why are companies so slow to adapt? Some speculate it is due to economic pressure to continue getting the job done. Sometimes reluctance comes from hesitation to risk new, unproven technology.

However, innovative companies, often driven by managers raised on technology, are pushing change. This is happening often at newer companies that are gaining a foothold in the industry.

With the recent oil price pressures, profit margins will continue to face challenges.

Martha Aviles, in a recent article for Forbes, put it well: “Getting by with dated and fragmented technology will no longer work for an industry that is experiencing massive shifts due to heightened market pressures, efficiency demands, and the ever-increasing need for new technology.”

Let’s take a closer look at three strategies and how they are transforming the industry.

Improved productivity reduces costs

Digital improvements allow companies to eliminate redundancies and execution lag times. In turn, companies see improved productivity and reduced capital and inventory pressures. Often these efficiencies are gained through better collaboration and sharing within the network of suppliers and customers.

Take the example of Pacific Drilling, S.A. Based in Houston, Texas, the company was founded in 2006.

Pacific Drilling has focused on using real-time data to transform its management from a reactive to a proactive model.

Pacific Drilling also uses a shared platform for both transactions and analytics. Having these together saves Pacific Drilling insight-action time and cost in using a system that is scalable as the company expands.

With payroll, procurement, and supply chain in one place, database size is reduced. Operational complexity is simplified.

These improvements in turn have led to additional savings. For example, time on both payroll and material requirements planning have dropped by 50 percent.

Future plans call for Pacific Drilling to import data from sensors embedded on rig equipment. This “data from the drill” will allow the company to do analysis, make and execute decisions in real time.

Diversifying the resource base

Technology today lets companies apply proven techniques to a more diverse portfolio of energy sources.

WellDog, a company founded in 1999, is applying laser technology in new ways. Originally focused on mining coal seams for natural gas, the company is turning attention to shale formations in North America.

The company works in partnership with Royal Dutch Shell PLC on the new project. WellDog uses lasers to find oil and gas in shale formations. Looking at the photons that bounce back from these rock formations helps drillers decide where to put wells.

Another good example is GroundMetrics. The company is using electromagnetism to find underground pockets and what is in them. This data allows companies to make far more informed decisions about whether to drill with far more confidence.

It’s about outcomes

Companies in many industries today are delivering outcomes, not just products. These business models focus on new relationships and partnerships. To accomplish this, oil and gas companies will need to enter into or at minimum collaborate with retail, banking, and consumer goods industries to provide valued outcomes such as transportation and heat, not just the fuel product itself.

Conclusion

In a connected world, oil and gas companies can leverage groundbreaking technology in new ways. These innovations can spur new partnerships, reduced costs and smarter decisions. Operations become more efficient, better informed, safer and more profitable.

Companies that continue to rely on older, outdated technology and tools risk being left behind.

Start your journey now! Find more information on the value of digital transformation for oil and gas here.


Ken Evans

About Ken Evans

Ken Evans is the global vice president for the Oil & Gas Industry at SAP with responsibility for assuring that SAP’s portfolio of solutions and services deliver the highest value for the industry. Since joining SAP in 2006, Ken has led SAP’s solution strategy and global marketing for the Oil & Gas industry. Prior to SAP, Ken held executive positions at FuelQuest and i2 Technologies. He also brings over 16 years of experience spanning a variety of roles at BP across the design, operation, maintenance, automation, and management of operating assets. Ken holds a BS in Chemical Engineering from the University of Colorado.