OE 2017: Misconceptions hindering industry’s full embrace of digitalization, report finds

More needs to be done to increase the use of digitalization within the offshore oil and gas industry as a way of achieving sustained lower opex, according to new report from AVEVA and Westwood Global Energy Group.

Offshore staff

ABERDEEN, UK– More needs to be done to increase the use of digitalization within the offshore oil and gas industry as a way of achieving sustained lower opex, according to new report from AVEVA and Westwood Global Energy Group.

A joint study by the two companies interviewed a variety of decision makers both within the E&P and oilfield services companies to better understand their views ondigitalization. It was found that while the benefits of digitalization, using tools such as intelligent data management and laser scanning to create a Digital Twin, are generally recognized, the industry’s risk averse culture coupled with reduced budgets amidst the oil price downturn and common misconceptions is preventing its full potential from being realized.

Michail Tzouvelekis, marketing solutions director at AVEVA, said: “Our report provides valuable insight into the perceptions of digitalization in offshore operations – particularly maintenance and modification. New data provided by Westwood also improves our understanding of the short to mid-term outlook for the industry.

“It’s clear from the study that both the oil and gas industry and providers of the digitalization tools need to step up their efforts, if the industry is to realize the full long-term benefits of these technologies.”

An executive summary of the report, “Digitalisation Offshore - Is It The Answer To Sustained Lower Operating Costs?” has been published to coincide with Offshore Europe 2017 in Aberdeen this week.

The majority of interviewees said they believed digitalization would deliver benefits including reduced opex, better quality and sharing of data, and more efficient projects. Those interviewed also said they felt the industry had been slow to embrace the technology because of the current downturn as well as misconceptions such as high-up front costs and long lead times to realizing a return on investment.

“While the downturn has helped to make the case for digitalization, parts of the industry have been more open to change than others,” said Tzouvelekis.

“We are finding that some companies, particular supermajors are typically further ahead with digitalization projects than others such as independent operators, where there is less focus. FPSO operators, in line with the wider marine industry, are already beginning to implement digitalization initiatives,” he added.

The report has called for a concerted effort to promote the benefits of increased digitalization.

It states: “An important next step is to promote digitalization considerably, including an industry wide concerted effort towards engineering data standardization, overcoming cultural inertia, and addressing misconceptions. Looking ahead, participants expected the emphasis to be on innovative and intelligent solutions. 3D models that integrate the complete data framework of enabling real-time access to data. The Digital Twin was highlighted as allowing E&P operators to plan for the future and reduce unexpected downtime.”

In addition to views on the use of digitalization, it also contains new data from Westwood on the outlook for the offshore oil and gas industry.

The report confirms that since the highs of 2014, the price of Brent Crude has tumbled by 76%, from $114/bbl to $28/bbl in January 2016. As a consequence, global oil and gas capex and opex investments also dropped sharply by 42% and 22% respectively. Looking to the future, Westwood’s Base Case scenario assumes average Brent spot prices will rise to $70/bbl by 2021 with overall E&P spend also recovering modestly.

As the offshore oil and gas industry adjusts to a lower-for-longer oil price mindset, production optimization (to maintain cash
flows) and sustainable cost rationalization via supply chain pricing compression, enhanced operational efficiencies, and standardization
have become increasingly important.

Westwood’s research estimates that since 2014, average upstream capital costs have fallen by 42%, with much of the initial savings
due to immediate price reductions for
offshore marine infrastructure (rigs, vessels, etc.) and improved drilling efficiencies.
Increased standardization and simplified engineering have contributed to deepwater and shallow water costs per barrel to drop by 62% and 37% respectively since 2012.

Arindam Das, Director and Head of Westwood EMEA Consulting, said: “As the industry adjusts to a lower for longer and volatile oil price outlook, digitalization is especially pertinent in the context of offshore operations which continue to be challenged.”

09/07/2017

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