The oil and gas industry has played an important role in worldwide development for hundreds of years. However, changing energy demands and global events have affected both demand and supply, forcing the industry to take a closer look at what can be done to optimise production efficiency and future-proof itself in the age of renewable energy. Given the proliferation of Industry 4.0 in recent years, could it be the catalyst to the oil and gas sector’s transformation?
The importance of the oil and gas industry on the world cannot be denied. Although steps have been taken in recent years to curb global reliance on fossil fuels, the world has not yet reached a point where oil can be forgone as a resource.
Global oil consumption worldwide has risen dramatically since the 1970s, growing from 2.2 billion metric tonnes in 1970 to 4.25 billion metric tonnes in 2021.
Then, more recently, the industry encountered roadblocks in the form of the global shift towards sustainable energy sources and the COVID-19 pandemic.
The sector has since recovered somewhat, with a rebound from its 2021 slump. However, a return to the highs of previous years may prove to be difficult.
Early predictions and forecasts of the oil and gas industry for next year from the International Energy Agency have not been promising, with oil supply not expected to be able to keep up with rising demand in 2023.
Although projections by OPEC are less pessimistic in terms of demand growth, the general sentiment of a difficult supply situation is shared between the two organisations.
The oil and gas industry is now under significant pressure to find ways to ramp up productivity, improve efficiency and develop strategies to future-proof the industry.
This is where Industry 4.0 comes in. Manufacturing processes across industries have improved remarkably thanks to innovations like automation, artificial intelligence (AI), machine learning (ML) and more.
With these smart technologies and neutral benchmarking tools like SIRI to help optimise manufacturing, could Industry 4.0 give the oil and gas industry the boost it needs?
Industry 4.0 transformation trends and challenges in oil and gas
Industry 4.0 has played a pivotal role in improving several industries’ manufacturing processes, including the oil and gas sector.
Advanced technologies – introduced through digitalisation – have helped address some of the industry’s major concerns such as supply chain resilience, exploration, analysis, safety and sustainability. In fact, positive change has already occurred across the oil and gas supply chain.
For instance, advanced 4D modelling in seismic imaging is being used upstream to enable more efficient and effective exploration and production; smart sensors and thermal detectors have been installed on transportation railcars and tracks midstream to improve safety and reduce derailment risk; and predictive data analytics are helping to improve forecasting and automation downstream for improved productivity and efficiency, and less waste.
But the digitalisation journey in the oil and gas industry is far from complete. In fact, there are likely numerous hurdles ahead – not only does the industry need to deal with complex cross-border regulations, but it also needs to contend with a constantly changing market environment, pressure from environmental and sustainability groups, and generational opposition towards new technologies.
In addition, companies looking to develop sustainable digitalisation must view it through two perspectives: a cultural change lens and a cultural continuity lens.
Essentially, businesses need to balance both change and continuity in the course of their digital transformation, or risk failure. Failing to digitalise successfully will inevitably lead to the oil and gas industry being left behind.
“On a rocky sea of fluctuating oil prices, expanding sources of supply, and increasing regulatory requirements, digitising operations and infrastructure can act as a life raft to energy companies in this age of uncertainty,” says Charlotte Newton, Thematic Analyst at GlobalData.
The use of advanced technologies and increased interconnectivity thanks to the Internet of Things have also been a double-edged sword.
While smart machinery and tools can help to enhance operational processes, provide a greater level of agility and scalability, and improve resource management, they also give rise to cybersecurity risks, interoperability challenges and transparency issues.
Nevertheless, there is clear potential to improve operations across the entire oil and gas supply chain. Many companies have digitalisation within their sights, with reports that the oil and gas industry is projected to spend US$15.6 billion on digital technologies in 2030 to stay competitive and tackle current operational and commercial challenges.
Accelerating Industry 4.0 adoption in oil and gas manufacturing
While individual strategies may differ, more broadly, oil and gas businesses need to have a structured framework and a set of guiding principles and benchmarks to help steer the Industry 4.0 agenda.
First, proper data governance must be implemented to ensure that data is gathered, managed, analysed and used effectively. This will allow companies to leverage data assets to improve their predictive models and pre-empt trends so they can make informed decisions.
Second, the digitalisation journey must be approached from a cross-organisational perspective, and businesses should form strategic partnerships when necessary.
By devising a strategy that works holistically and collaborating with relevant partners who augment the digitalisation plan, better and more sustainable outcomes can be achieved.
Third, a culture that embraces change and while still respecting the core elements of the company must be developed.
This will help nurture the people and mindset of the organisation to not just encourage agility and flexibility, but also drive continuous improvement and openness to change, without discarding the organisation’s unique traits.
In addition, reliable and effective tools can allow companies in the oil and gas industry to speed up their digitalisation.
A neutral framework like SIRI enables companies to identify technological and operational gaps, while enhancing existing processes to improve performance.
Moreover, platforms like ManuVate can lead to greater partnering opportunities, boosting and fostering innovation to achieve the desired business results.
By focusing on certain key areas and leveraging fit-for-purpose Industry 4.0 frameworks and tools, digital transformation in the oil and gas industry can be accelerated, leading to greater productivity, efficiency and longevity.
Design an effective transformation journey for success
As a champion of manufacturing transformation, the International Centre for Industrial Transformation (INCIT) has both the tools and the reach to provide support to major industries and manufacturers globally, such as the oil and gas industry, as they look to optimise their processes and improve efficiency.
To learn more about how you can design your transformation journey with success, contact us.