Digitalization: Producing Results In The Oil And Gas Industry

Judy Cubiss and Ginger Shimp

The world’s population will expand to 10 billion people by the year 2050.

Think about that.

Ten billion people.

And all those people will need a clean, reliable, affordable source of energy. Breakthroughs in artificial intelligence, augmented reality, automation, machine learning, and blockchain technology will give oil and gas companies the tools they need to meet that demand.

Recently, Brian Fanzo and Daniel Newman, co-hosts of the popular S.M.A.C. Talk (social, mobile, analytics, cloud) technology podcast, caught up with Joerg Ehlert, vice president and global head of oil and gas business unit, SAP, on an episode of an extraordinary series entitled Digital Industries, which examines how digital transformation is affecting 16 different industries.

Listen to the following sound byte from the podcast:

SMAC podcast

“Here comes digital, and all of a sudden we’re at the threshold of rethinking what is really the core competency of an oil and gas company,” Ehlert stated.

Digital disruption in the oil and gas industry

In response to growing population estimates, the oil and gas industry is employing disruptive technologies to drive down production costs. Among these techniques include hydraulic fractoring and directional drilling. As Ehlert noted in the podcast:

the industry has learned how to produce oil and gap from the shale plays, which has really changed on a macro level the balance of power

Swing producers can ramp up and down production much more quickly—which has driven oil prices down.

This means that industry giants are having to compete in other ways; they are rethinking their relationships with suppliers and vendors. Interestingly, as an industry, many digital elements—such as information from sensors in real time—have been in use for a long time. However, what is new, according to Ehlert, is that “the industry is starting to not use these elements for a singular perspective and use case, but starting to weave data from different sources together.” So now data from a piece of equipment can be used to predict when it will fail, but it is also combined with business data to predict the right time for maintenance while ensuring you have the right parts and the right people on hand to minimize the impact to the business.

Using the analytical tools and data from all these sources at each step in the chain of hydrocarbon production and logistics can be optimized. Transportation models can now be fully on demand, fully scalable, and globally sourced.

The creation of new services

Controlling huge amounts of oil is no longer enough to hold the market. Even the biggest legacy companies in the industry will be forced to innovate in order to remain relevant. Below are just a few of the incredible uses that are beginning to materialize because of the new technologies:

Augmented reality can help oil and gas companies avoid maintenance errors and potential accidents. Imagine if a person physically looks at the equipment, and then the virtual or visual browser recognizes the equipment and guides the person through the steps that need to be performed.

Predictive financial systems based on expansive data access will analyze KPIs across multiple dimensions of the ecosystem to provide companies a better picture of how to remain profitable. No longer will companies have to decide between better serving customers or turning an extra few pennies of profit.

if you take all of that together this digital construct is applicable to any stageThe workforce of each company will be more effectively utilized. Social collaboration between teams will be much easier. Digital platforms will support collaborative efforts across geographic lengths. Companies will be able to collaborate with universities and other partners on research. Ehlert opines: “The notion to use technology to potentially come to a better way of using hydro carbon that is more efficient, that is safer, I think that’s a real opportunity and a challenge.”

Technology creating a common standard

“Think about almost connecting all trading partners that work on an oil and gas project, and these could be hundreds, if not thousands, of people that could share a common database and see the pieces of information as designs get developed, parameters get changed, and so forth,” Ehlert envisioned.

Experts are looking forward to a more connected network of people. Collaborative digital constructs can connect all those trading partners. Engineers, installation experts, construction professionals, and the many other people who are usually engaged with a single project may now work from a single source of truth, creating improvements in real time.

Ehlert pointed out that it takes about $500 billion to $700 billion dollars per year in capital investments just to stem the natural decline of our oil fields. If you were to take just 5% or 10% of the time out of the process and get to full production faster, imagine the tremendous value that could be created. This is the possibility that technology brings to bear.

And yet for all its advantages, digital transformation has yet to fully hit the mainstream in the oil and gas industry. Only 20% of companies in the industry can say they are truly digital. Most of them are on the front edge, with many opportunities ahead of them once they see the advantages. However, half of the CEOs in the industry do not yet think that digital transformation is a board-level concern.

We are in the era of new fuels being developed and alternative fuels getting more popular. However, with the population growing predominantly in Asia, we will need hydrocarbon-based fuels for a long, long time. This reality forces energy companies to think about what business they want to be in: Do they want to play in hybrids? Do they want to provide gasoline companies customers a better retail experience, and so forth?

Although carbon-based fuels will be needed for some time, given the population growth, new fuels such as hybrid technologies and alternative energy are gaining a foothold. Traditional oil and gas companies will need to think very clearly about what business they want to be in going forward and how they want to provide their products to the consumer.

To listen to this episode of Digital Industries for the oil and gas industry, co-produced by SAP and S.M.A.C. Talk Technology podcast, click here.

Transforming into a truly digital business is much more than just implementing new technology to meet the demands of a digital age. It’s more than keeping up with the deluge of transformation happening all around us. Digital transformation is about understanding how to harness these changes and incorporate them into your business strategy. It’s about driving agility, connectivity, analytics, and collaboration to run a Live Business. A digital core empowers you with real-time visibility into all mission critical business processes inside your four walls, and in your interactions with customers, suppliers, workforce, Big Data, and the Internet of Things.

For more on how SAP can help you drive your own digital transformation in the oil and gas industry, visit us online.


Judy Cubiss

About Judy Cubiss

Judy is director of content marketing for Finance at SAP. She has worked in the software industry for over 20 years in a variety of roles, including consulting, product management, solution management, and content marketing in both Europe and the United States.

About Ginger Shimp

With more than 20 years’ experience in marketing, Ginger Shimp has been with SAP since 2004. She has won numerous awards and honors at SAP, including being designated “Top Talent” for two consecutive years. Not only is she a Professional Certified Marketer with the American Marketing Association, but she's also earned her Connoisseur's Certificate in California Reds from the Chicago Wine School. She holds a bachelor's degree in journalism from the University of San Francisco, and an MBA in marketing and managerial economics from the Kellogg Graduate School of Management at Northwestern University. Personally, Ginger is the proud mother of a precocious son and happy wife of one of YouTube's 10 EDU Gurus, Ed Shimp.