Digitization Strategy for the Oil and Gas Industry Post-COVID-19
Deliver safe, reliable, and sustainable energy products and services
The oil and gas (O&G) sector is used to the highs and lows of economic and price cycles. The current downturn due to COVID seems unlike any other. With the survival of many companies at risk, massive job loses, and decline in petroleum demand (short to mid-term), the next decade could look very different for the entire O&G value chain.
While the depth and duration of this crisis are uncertain, under most scenarios, oil and gas will remain a multi-trillion-dollar market for decades. Given its role in supplying affordable energy, it is very unlikely to fail.5
- The International Energy Agency (IEA) and several leading energy firms have forecast a strong outlook for energy demand based on factors such as worldwide population growth, strong economic progress, and higher living standards in nations such as India and China.
- Between 2040 and 2050, the global energy mix is predicted to still focus on natural gas, crude oil, and coal, while solar, wind, nuclear, and bio-based power will gain a portion of the market share.1
- Investment required to meet the energy development is of nearly US$11 trillion.2
The companies that embrace emerging technologies to increase their agility will be best positioned to respond to market changes, whatever the future may hold.4
The question is – how to create value in the new normal?
Let’s look at the three most fundamental challenges the global oil and gas companies are facing on today’s crisis:
- Oversupply of oil and gas, shortage of storage capacity
- Refinery and fields are operating at lower capacity
- Lack of skilled resources at the local site
Role of Technology
Technology will play a very critical role for the companies to survive in the near term. To remain competitive during this time of significant change, energy providers need to optimize and automate the processes across the value chain through adoption of digital technologies (e.g., AI/ML, big data, Analytics, IoT, RPA, CAI). Industry 4.0 methodology with new digital technologies will make it possible for companies to gather and analyze data across assets and business systems to enable faster, more flexible, and more efficient processes.
Strategy post Pandemic
The most fundamental strategy for the industry should be: “Process optimization and process automation across the entire hydrocarbon value chain (e.g., subsurface exploration to downstream to retail) through digitization”.
It will not only help companies to survive the current crisis, but will also build a strong foundation to unlock new opportunities for sustainable growth and increased shareholder value. Digitization also accelerates companies in advancing the clean energy transition.
- Balance demand and supply across the hydrocarbon value chain: The emergence of global supply chains requires the oil and gas companies to balance demand and supply situation with real-time visibility into demand, supply, and financial information. This will enable the companies to lower the operating cost across the value chain.
- Adoption of Industry 4.0 principles for business continuity at low operating cost: With the oil and gas industry being the most asset intensive, companies need to adopt the best practices of Industry 4.0 on asset management to optimize the maintenance for business continuity while lowering the operating cost.
- Remote monitoring and remote diagnosis of assets (production, refining, pipeline, storage tanks/terminals) through digitization is becoming the most adopted strategy during these pandemic times. With the remote monitoring capabilities, this strategy also addresses the skilled worker shortage issue at the local site.
- Beyond Barrels: Accelerate diversification into adjacent industries and adoption of new business model (e.g., pay-for-outcome, individualized offering) for net new revenue streams.
- Connect and collaborate with ecosystem in real-time
An integrated digital platform enhances collaboration among ecosystem participants (project, production, maintenance, logistics), helping to fast-track innovation, reduce cost, and provide operational transparency.
- Saudi Aramco on Industry 4.0 3: Industry 4.0 best practices is helping Saudi Aramco’s Khurais facility to reduce power consumption by 18%, slash maintenance cost by 30%, cut inspection time by 40%, enhance reliability by 50%, and increase operational response times by 100%. An important point to note here is, “Technology has helped to ensure uninterrupted production throughout the COVID-19 pandemic”.
- Vivo Energy on Supply Chain Optimization: Combining the power of a full suite of SAP S/4HANA applications alongside SAP SuccessFactors, SAP Cloud for Customer and SAP Integrated Business Planning in one integrated, end-to-end platform enables Vivo Energy to predict demand for particular products and automate replenishment at the service stations, reducing its fuel distribution costs.
How SAP can help oil and gas companies make their Intelligent Enterprise journey
SAP and its partners are enabling oil and gas companies to become intelligent enterprises through a portfolio of industrialized, innovative, and intelligent cloud services that set the new market standard for the energy industry.4
For further information, see our oil and gas industry landing page.
- “Sky Scenario,” Shell Global, 2018.
- Digital Annual Report 2017 “ExxonMobil 2017”
- How the 4IR is driving a new wave of energy innovation
- SAP: Intelligent Enterprise for the Oil and Gas Industry
- McKinsey: Oil and gas after COVID-19: The day of reckoning or a new age of opportunity?