When trying to describe the continuously evolving world, the acronym “VUCA” is particularly apt. In defining a set of challenges with which oil and gas professionals have become all too familiar, it stands for volatile, uncertain, complex and ambiguous.

The industry has been operating in “crisis mode” with the collapse of the oil price and the prolonged industry downturn, forcing the entire sector to shift its focus and acclimatize to the “new normal.”

In the recent past the focus was on increasing production and expanding into new geographies and basins. Companies now operate under the imperative of maximizing productivity and efficiency, lowering opex and enhancing flexibility to allow field viability at lower oil prices.

What, then, is the best way to navigate the industry’s constrained environment? Companies need to look at the tools and resources they have at their disposal to respond to today’s challenging demands and build a sustainable and prosperous long-term future for oil and gas.

With middle classes in the emerging world expanding and driving the global demand for energy, the industry has an important role to play. Today’s volatile market, however, calls for a new set of priorities.

Across the entire oil and gas value chain the reshaping of the future will be built on these fundamental pillars:

  • Redefining the relationship between industry players with an emphasis on reviewing the supplier/end-user relationship and on introducing new commercial approaches and business models;
  • Identifying smart and disruptive technology for the future, anticipating trends and ensuring the industry remains at the forefront of product and solutions development while harnessing opportunities for technology simplification; and
  • Actively driving the “digital revolution” with a focus on the possibilities offered by digital solutions as enablers of cost-optimization and efficiency.

These elements are very much interrelated and are part of an integrated approach that requires commitment and far-sighted vision from everyone in the industry.

Redefining relationships

There have been countless calls in recent years for closer collaboration among industry players and the need to shape a more unified industry voice and approach. GE Oil & Gas believes this is intrinsically related to designing a new way for original equipment manufacturers (OEMs) to support industry projects.

Over the years the industry has become exceptionally complex and prone to widespread inefficiencies as a consequence. Fixing that requires going back to the drawing board to simplify processes, technologies and relationships.

Eliminating inefficiencies means introducing new commercial approaches, fundamentally redefining how we work together and shaping compelling subsea solutions that are convenient and productive in the current environment.

For example, GE Oil & Gas is collaborating with Alpha Petroleum on the subsea infrastructure for the Cheviot Field in the U.K.’s North Sea. To provide the best possible configuration and planning options and meet performance objectives, GE has collaborated closely with Alpha for more than a year co-creating the scope of delivery and equipment specifications required from the project’s inception.

It is important that the industry is open to supplier- led solutions, where the OEM role can evolve from a transactional equipment supplier to a full life-of-field partner, bringing core competencies to the discussion to shape cost-effective system solutions from the beginning. The benefits of this are clear: minimized costs, optimized time frames and an overall reduction of costly customized specifications.

Identifying smart and disruptive technology

Low oil prices are here to stay, thus defining a new order in which improving cost and improving cycles are needed for a sustainable future.

This requires technology that enables cost savings and leaner, more agile operations. Disruptive technology can open the door to new ways to save costs while simplifying and improving operations for the long run.

The subsea environment has inspiring examples to offer. Hydraulic control systems have been a core feature of the subsea industry since its infancy. The performance of these systems is challenged when operations move to longer step-outs and deepwater installations to sensitive geographies.

By moving to all-electric systems, umbilicals can be simplified or eliminated, replacing them with more efficient technology configurations where less equipment is needed both topside and subsea, with obvious gains in terms of cost effectiveness and simplification. Electrical systems also allow the collection of operational data, helping identify the cause in the event of equipment malfunction.

Electrifying subsea systems is something the industry has been looking into for quite some time.

So far, implementation has been limited. This is partly due to the immaturity of the technology and to the traditionally conservative approach of the oil and gas industry. The two elements are inherently connected. There are encouraging signs of a change in attitude (as the industry is more enthusiastic about innovation) and in the improvements made to the maturity and availability of all-electric control systems.

Technology efficiency is not about making focused improvements one piece at a time but about taking a “systemwide view” of the tools and technology at the industry’s disposal to improve the entire process.

Driving the digital revolution

The digitization of the industry will require the same mindset for introducing new and disruptive technology. The challenges facing the industry provide an opportunity for oil and gas companies to reshape the way they work and to fully digitize their operations. Big Data and analytics are playing a defining role by reducing costs and increasing productivity.

A recent study by market research and analytics firm Kimberlite found that, on average, offshore oil and gas operators endure unplanned downtime that costs on average $49 million annually. For the worst performers, the negative financial impact can be upward of $88 million.

Yet the effective use of digital technologies in the sector could reduce capex by up to 20% and cut upstream operating costs by 3% to 5%. That’s according to another recent report by consultancy group McKinsey. Even marginal gains in volume have a transformative effect on operational financials, and GE estimates that the industrial Internet will bring productivity gains of $8.6 trillion for industrial companies in the next 10 years—more than two times the future value of the consumer internet alone.

Industry examples

So let’s consider some examples of bringing digitization to operations. Retrofitting equipment with sensors can reduce maintenance costs and improve reliability. Today only 3% to 5% of oil and gas equipment is connected. By retrofitting with sensors, companies can reduce manual servicing and support.

Most data currently collected from upstream operations are used for issue detection and control, not for optimizing asset performance. In fact, the average offshore rig has 30,000 sensors generating data, yet less than 1% of these data are actually used to inform decisions. The Asset Performance Management software powered by GE’s Predix was developed to capture, manage and use the data generated by sensors on rigs.

By using sensors and connecting equipment to Predix, companies can use insights to not only automate processes but to improve maintenance, reliability and productivity. Machines and equipment can be monitored digitally, and analytics from the data generated can be used to predict and diagnose issues early. Operators can then implement analytics-based work management programs using predictive maintenance to repair vital equipment before it breaks down, reducing downtime and increasing production.

New and disruptive technologies, structural simplification and the opportunities offered by digital systems have a huge potential to transform upstream operations and create additional profits from existing capacity, making the industry more productive, agile and prepared to navigate future uncertainty to not just survive but to thrive.

Have a story idea for Industry Pulse? This feature looks at big-picture trends that are likely to affect the upstream oil and gas industry. Submit your story ideas to Group Managing Editor Jo Ann Davy at jdavy@hartenergy.com.