OTC 2018: New report examines cost-saving potential of digitalization

Offshore staff

HOUSTON – A new report by Wood Mackenzie examines how companies, across the entire value chain, are employing digital technologies in their operations and the extent to which they are delivering value.

The report found that up to $150 billion per annum could be saved in operating costs across thee energy and natural resource sectors – 10% of which could be achievable in the medium term by implementing and scaling digital technologies that are already being tested and deployed.

At the Offshore Technology Conference in Houston, Preston Cody, Head of Analytics Lab at Wood Mackenzie, addressed these topics as part of a panel on big data applications.

Cody discussed how companies across the energy sector are accelerating the implementation of big data applications and digital technologies, to help transform their businesses and improve margins in new ways.

Some of the key findings included:

* Data must move from being a liability to being as asset. Currently there are pockets of well-structured data, but as a whole across the sector it has largely been fragmented across business units, functions, and companies. Long term, for companies to really benefit from data as an asset, new skillsets will be required to achieve its full potential. Enterprise data management will become the norm, with the goal of shared, integrated data from mine to manufacturer, producer to refiner that maximizes returns.

* Big companies will catch up fast. Many of the largest players in upstream oil and gas are already moving toward enterprise data management — Statoil is already targeting 30% reductions in capex and 50% in opex. Widespread adoption of digital technologies could be a precursor to greater industry consolidation: an asset is worth more in one company’s hands than another’s. A digitalisation ‘winner’ will have a value advantage in M&A.

* Disruption is inevitable. Business models must and will change with the evolving digital landscape. This will eventually mean more automation of lower-value operations and a shifting workforce focused on higher-value jobs. The business models of the future will also include much greater data sharing; either because the industry accepts that more data means bigger benefits, or because host governments and regulators mandate data-sharing as a condition of operating with the aim of maximizing resource recovery and economic benefit in each country.

* Consumers and economies will benefit. This is textbook economics — the broad adoption of digital technologies will ultimately put downward pressure on commodity prices, with only limited additional demand. For companies, capturing margin before the industry disruption will be crucial to profits, and those who act quickly will benefit the most.

05/02/2018