At the end of each year, IDC Energy Insights develops a list of Top 10 predictions for the upcoming year for various industry segments and geographic markets. Predictions typically look beyond just the upcoming year and include a two-three year forecast horizon.
Since IDC is a technology market research and advisory firm, its Top 10 predictions are focused on the role of technology in the energy industry but are presented in the context of the business and regulatory environment impacting technology investment. The oil and gas industry has faced a number of challenges over the past couple of years including the economic recession, the Macondo well blowout in the Gulf of Mexico, and supply disruptions because of the "Arab Spring" uprisings in the Middle East and North Africa.
The industry has coped with these challenges and nearly all of the economic indicators are pointing toward positive growth. Worldwide oil consumption and rig counts are both above prerecession levels. As of the writing of this article in mid-February, the WTI crude price is just under $100 per barrel and the Brent crude price is above $110 per barrel.
Given the forecast of increasing global demand and sustained high prices, we expect the focus on unconventional resources to accelerate in 2012, driving IT investments to support exploration and production.
At the same time, oil and gas companies must address public concerns and ever-increasing government regulations, especially in the area of environmental health and safety. As such, it will be critical for oil and gas companies and technology vendors to understand how IT can be used to support both exploration and production growth as well as manage risk and compliance.
It is with reference to this economic environment that IDC Energy Insights developed its worldwide oil and gas industry 2012 Top 10 predictions, a summary of which are presented below.
1) Innovation in the oil and gas industry will be dominated by exploration and production for unconventional resources.
Early stage E&P technology innovations (e.g., horizontal drilling, hydraulic fracturing) make it possible to recover the available resources and will be followed by IT-enabled process innovation.
Later-stage, IT-enabled process innovation will be focused on efficiency (driving out costs) and risk management (public/government environmental concerns).
2) Independent midsize exploration and production companies will continue to be the innovators in shale gas.
Independent midsize E&P companies will pioneer a "manufacturing" approach to shale gas production.
This approach will require increased IT investments in capital project planning, rig scheduling, supply-chain management, enterprise-asset management (EAM), environment, health and safety (EH&S), hydrocarbon accounting, collaboration and business analytics (especially geospatial).
Supermajors, majors and national oil companies (NOCs) will continue to gain this expertise through acquisitions (e.g., BHP Billiton/Petrohawk, Shell/East Resources, ExxonMobil/XTO).
3) There will be more work required for safety and environmental management.
Companies with best practices will set the bar for achievement, focusing on clear accountability, designation of authority, and well-defined safety and risk metrics as well as training, safe work practices, advanced maintenance practices, pre-start-up reviews, emergency response and control, and standard operating procedures.
Oil and gas companies will invest in achieving a holistic view of assets, people, and operations driving technology investments in safety monitoring, EH&S, EAM, incident management, enterprise content management, analytics (including geospatial visualization), and workflow to solidify safe processes.
4) Smart drilling and production will be a cornerstone of digital oilfield initiatives.
Instrumentation for remote control and monitoring will be used to reduce the number of trips to wells in remote locations, enabling fully automated wells.
Oil and gas companies will ask vendors to make hydrocarbon accounting applications capable of using less frequent well tests and data-driven models for production values.
Companies will apply smart instrumentation, real-time communications and advanced analytics to enhance production and to increase "speed to answer."
5) Capital project management will increasingly focus on planning and portfolios.
Companies will prioritize up-front planning while establishing processes to monitor performance and manage risk.
The focus on return on investment (ROI) will broaden from individual projects to global portfolios.
Integration of multiple applications (engineering, project portfolio management, content management, collaboration, and analytics) will be required.
6) Companies will move toward integrated asset management.
Companies will apply analytics to data from sensors, mobile devices, SCADA and EAM systems to optimize asset management processes.
Decision-making will move toward real time, enabling operators to identify problems before breakdowns and disasters occur.
7) Regulations will tighten and will focus on transparency for energy commodity trading.
Real-time reporting, possibly time stamped, and compulsory clearing will be required for registered swap dealers.
Companies taking the end-user exception will need to submit data on the deal to comply -- SDR requirements will drive more data to the exchanges.
Non-registered companies will need to monitor position limits intraday and confirm transactions.
Energy companies will look to energy trading and risk management (ETRM) vendors to provide easy report configuration and ability to access multiple sources of data for compliance -- service firms will be needed to meet tight deadlines.
Trade surveillance will increase in importance to determine whether at risk in the market and/or at risk of noncompliance.
8) Cloud services will expand into core exploration and production processes.
Private cloud-based solutions will be increasingly adopted to enable better collaboration among joint venture partners and establish standard procedures (e.g., license agreement management).
Private cloud for delivering high-performance computing (HPC) services to geoscientists will be piloted in an effort to satisfy spikes in demand and extend capabilities to smaller companies.
Cloud services will need to overcome concerns about geographic restrictions on data, privacy, and security.
Cloud adoption in oil and gas will continue to lag behind other industries.
9) Companies will slowly move to fill security gaps with the help of vendors.
Security investments will increase worldwide — especially in the areas of antivirus, antispam, and identity and access management.
Companies will invest in securing the B2B environments, which include partners, contractors, service providers, and suppliers.
There will be an uptick in breach notification and vulnerability management services.
10) IT spending growth will be driven by emerging economies.
Middle East and Africa, and Central and Eastern Europe will grow at double the average rate through 2015 (Figure 1).
Asia/Pacific will challenge North America in total IT spending.
E&P software spending will continue to dominate the market as ERP investment levels out (Figure 2).
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| Figure 1: Worldwide Total IT Spending by Region, 2012 |
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| Figure 2: Worldwide Software Spending by Application, 2012 |
About Rick Nicholson: With more than 25 years of experience in IT and other emerging technologies in the energy industry, Rick Nicholson leads IDC Energy Insights. In this role, he has global responsibility for IDC Energy Insights’ research-based advisory and consulting offerings, which provide full coverage of information, communications and emerging energy technologies across both the utilities and oil & gas segments. He is a recognized and highly respected expert in the alignment of business and technology strategies and the successful deployment of technology to enable smart grids and other game-changing initiatives.
Nicholson blogs regularly in the IDC Energy Insights Community and tweets (@rlnicholson2) about business and IT issues relevant to the new energy economy.
