Digitalisation in the Oil & Gas industry
The Oil and Gas industry is on the verge of a digital revolution. Pricing and demand fluctuations, global economic uncertainties and increasing focus on environmental sustainability are just a few of the challenges pressing Oil and Gas organisations to look for ways to improve their existing operational model and generate greater efficiencies. One such way is technology. So, how far has the Oil and Gas industry come on its digital transformation journey? And what will the Oil and Gas organisation of the future look like? Find the answers in our blog below.
With price and demand volatility on the rise, the Oil and Gas industry is facing significant pressure to revamp the ‘old’ operational models and strive for greater efficiencies and resilience. Reducing costs and carbon emissions whilst improving the reliability and availability of their assets has become imperative for those who seek to remain competitive and grow. Organisations are recognising digitalisation as a key enabler for realising those goals. Advancements in core technologies like data analytics, artificial intelligence (AI), cloud computing and blockchain, are unlocking a vast array of possibilities for process optimisation, automation and simplification, asset tracking, and data management in the Oil and Gas industry.
Despite the rapid emergence of technologies and organisations’ growing efforts to transform, the speed of digitisation in the sector appears much slower than anticipated. According to GlobalData’s latest thematic report, the shortage of skilled technicians, concerns over data security, and cost-benefit uncertainty for adapting ageing assets are among the key factors deterring the adoption of new technologies in the Oil and Gas industry. However, this is starting to change, with Gartner predicting that by 2025, 70% of internal IT roles in Oil and Gas companies will be providing or supporting new digital business services.
“Gartner predicts that by 2025, 70% of internal IT roles in Oil and Gas companies will provide or support new digital business services.”
The current state of digitalisation in the Oil and Gas industry
KPMG’s latest CIO Survey confirms that the traditional Oil and Gas operational model is already at a tipping point. Many Boards are now turning to IT to tackle the pressing challenges of fluctuating prices, increasing decarbonisation, evolving supply chains and growing security and performance risks. The top 3 priorities for management boards in the area of IT are to:
Improve operational efficiency
Gain actionable insights from data
Enable the workforce
The major focus of investments is on improving their organisations’ cloud and security infrastructures. SaaS, AI & ML, IIoT, intelligent automation, and blockchain and DLT are among the other most commonly implemented technologies in the sector.
Over 70% of CIOs also quoted ‘skills shortage’ as the main obstacle preventing organisations from speeding up the pace of transformation.
In the new digital reality, more and more firms are starting to invest in maturing modern data architectures to gain essential business insights and shorten decision cycles. 71% of CIOs recognise scaling data analytics skills as a key priority, with expanding and integrating modern data repositories the next most important task on their agenda.
“Real-time, accurate and actionable operational data must flow through the business like the resources it produces. To do this, the sector will need to lean in on more advanced IIOT capabilities, advanced networks, and stronger analytics capabilities, and attract new technical talent.”
Who’s leading the digitalisation race in the Oil and Gas industry?
In its thematic research, “Digitalization in Oil and Gas”, GlobalData has identified some of the most prominent and digitally advanced Oil and Gas organisations in the sector. Among the leaders are ADNOC, BP, Chevron, Eni, ExxonMobil, Equinor, Repsol, Shell, Sinopec, Saudi Aramco, and TotalEnergies.
The researcher highlights ADNOC as a great example of industry excellence for its significant investments in digital technologies over the past 5 years. So far, the company has adopted technologies such as AI, big data, blockchain, and predictive analytics to create more agile operations.
“Ever since oil prices began declining, digital innovation has been rising as a strategic business priority. It is a critical pathway for delivering efficiency and has now become a distinguishing hallmark of industry leaders.”
The Oil and Gas organisation of the future
The leading global consulting provider, McKinsey & Company, has identified 5 big trends that will shape the Oil and Gas organisation of the future. We’ll briefly look at each one of them in the section below.
Organisational agility
The future Oil and Gas organisation should be able to quickly adapt to the changing economic environment and market conditions, or to be agile. According to McKinsey & Company, having a stable backbone and dynamic capabilities is the key to building a truly agile organisation.
Digital organisation
As we saw in the previous section, digitalisation is well underway in the Oil and Gas industry. McKinsey & Company predicts some major technological developments in:
Automating 60-90% of routine manual processes that will improve safety and productivity
Redefining existing job roles and capabilities which will open up new opportunities for more PhD-level IT professionals like data scientists than geologists, for example
Implementing new digital systems and processes for managing personnel and optimising the overall performance of the organisation
“Our industry’s reliance on paper-based processes for the back-office is well past their expiration date. The most significant opportunity for the industry is to collaborate and digitize the entire ecosystem.”
Millennials’ working culture
Millennials have been gradually climbing the corporate ladder and we’re already seeing many of them jumping into the executive ranks. This will lead to organisations adapting their culture and working environment to match the expectations and ideas of their millennial leaders, such as introducing a more flexible employment structure and working towards a positive external footprint.
Decentralisation
In an attempt to manage risk, leverage scale, and share scarce technical talent, many Oil and Gas enterprises have built complex and highly centralised corporate centres over the past 15 years. But the recent changes in crude prices and the rise of lower-risk asset types have started to shake up the existing structure, with large overhead costs becoming unaffordable, and decision-making slowing down.
As a result, McKinsey & Company expects some Oil and Gas companies to reverse the 15-year trend by decentralising business and technical work, creating a corporate core that is radically smaller than today’s.
Redefining the core
Driven by cost and market pressure and the deployment of new advanced technologies, Oil and Gas organisations will have to redefine their core operational model and move away from tactical contractual arrangements and toward long-term strategic partnerships with a network of tier-one and tier-two suppliers.
How can Cygnetise help Oil and Gas organisations in their digitalisation journey?
Cygnetise provides a digital solution as an alternative to the paper-based management and distribution of Authorised Signatory Lists (ASLs). It allows firms to manage their governance framework of authorised signatories and delegated authorities data in a secure, cost-efficient and sustainable way, from anywhere in the world.
Without a clear view of who authorised signatories, authorised traders (also known as trader mandates) and delegated authorities are, it’s impossible to control properly which employees can formally act on behalf of the organisation. Furthermore, it’s equally important to know who has access to signatory data, whether the signatory lists are out-of-date, and to ensure they do not fall into the wrong hands. Without these controls, organisations are exposed to a higher risk of security breaches and fraud.
With Cygnetise, flying paper pages of sensitive signatory data and time-consuming manual processes will become a thing of the past. Operational resilience, enhanced efficiency and ESG could become the new norm.
Key areas where Cygnetise can help Oil and Gas firms improve their operations:
Treasury
Trading (Authorised traders for OTC and physical trading)
Company Secretary
Supply Chain Management
Procurement