Offshore could set the standard in digitalizing the O&G value chain

April 12, 2017
The time is right for oil and gas companies to invest in the promise and potential of digital technology throughout the value chain.

The time is right for oil and gas companies to invest in the promise and potential of digital technology throughout the value chain. The end game? A more operationally efficient, cost-effective and adaptive industry designed to deliver value regardless of market conditions. Companies must carry forward lessons and embrace solutions that will improve margins in a lower oil price environment. This is especially important offshore, where logistics are exponentially more complicated and unplanned downtime can have devastating impact on the bottom line.

Getting started on a digital transformation first requires an acknowledgment of the issues at hand in the sector and where potential barriers may exist. The supply chains of today’s oil and gas companies are still rife with pockets of internally focused and functional silos.

Manual order entry and inventory tracking processes are still commonplace and operational data is not being exploited at an enterprise scale. A lack of integration also exists in areas of transportation, logistics, and warehousing. And, many operators continue to rely on a large number of different service providers spread across areas of specialization and time zones. These structural issues heighten the probability of costly delays and errors in the supply chain. That’s a big problem, especially for offshore projects, where success depends on timely and flawless delivery of materials and services. A failure or delay anywhere along the chain can immediately cause significant schedule and budget overruns.

While some digital solutions have been implemented offshore for years, including remote operations, these technologies have not fully delivered on their promise. Consider how drillers are required to monitor the safety of critical equipment in real-time and archive the data at an onshore facility. Today, conventional remote monitoring technology ends up stranding large volumes of data offshore. As a result, many remote drilling operations suffer from unnecessary downtime, equipment failures, safety risk, and general efficiency losses.

Offshore has historically served as a hub of innovation for the entire oil and gas industry and, in the current landscape, has a unique opportunity to set the standard for digitization of the value chain.

Initially, digital integration should focus on connecting field assets and equipment to the Industrial Internet of Things (IIoT) through the use of sensors that provide automated monitoring and diagnostics. Through the creation of a cloud and an IT environment that can store and analyze incoming data from critical assets, companies can begin to build real-time and predictive insights on the operation of individual assets and whole processes comprising multiple pieces of equipment. Such insights can help optimize utilization and maintenance planning for individual assets. Maintenance crews can be sent directly to those assets requiring repairs, upgrades, or replacements prior to failure, thereby minimizing downtime and keeping operational costs low.

Predicative field maintenance allows companies to schedule actions at the right time to prevent issues before they occur and optimize performance. This technology works across all equipment regardless of the original equipment manufacturer.

Another application of new technology is intelligent asset management. This involves leveraging augmented reality, drones, radio frequency ID/IoT sensors and cloud for remote monitoring, inspection, maintenance and training; tracking and tracing asset parts and technicians; and controlling asset integrity.

Companies can also drive value through digital by using asset performance management to improve utilization rates of assets. Predictive and prescriptive analytics can determine when assets will fail. Knowing this in advance allows companies to managing more proactively to minimize the impact of unplanned downtime.

Thanks to the ready access of proven remote sensing technology and IT architectures, the industry has already made good progress connecting assets. Significant work remains, however, on fully connecting all of these assets to operations and using their data to boost utilization rates and lower operating costs. This requires a fundamental change to how fast people within the organization embrace the new technology. Companies need to ensure high adoption rates for the technology, and that the technology is used to automate and monitor entire processes - not just individual assets. This journey can take two to three years, in many cases.

The use of sensor data could be used to maximize asset production, including through artificial lift and smart completions. Ultimately, bringing the data to the onshore teams can increase the collective expertise available to support safer and more efficient operations. This is where the IIoT comes into play.

The increased adoption of IIoT processes will ultimately create a step change in operational efficiency in the sector by integrating internal and external supply chain partners, leveraging collaboration and/or mobility tools to compress process time and exploiting data and analytics to improve decision-making.

This level of connection between the asset and the whole supply chain ensures inventory levels in the warehouse are automatically informed by how the asset is running. And, if a major field upgrade or workover is planned, the system should automatically ensure that the sufficient number and type of tools, parts and maintenance crews are ready when they are needed. The enhanced forecasting and planning capabilities afforded by a fully connected value chain gives the company clearer visibility into the costs associated with inventory, contractions and logistics - and subsequently, higher levels of return.

Improving connectivity on- and offshore through the use of new technologies is crucial to improving operational excellence in the sector. These advances have the potential to revolutionize the industry.

Fay Shong

Partner and Global Oil & Gas Digital Leader

Ernst & Young LLP