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Navigating the flow of data in the oil field

INSIGHT ARTICLE  | 

From Coca-Cola to Netflix, businesses in every industry leverage data to solve their challenges and drive growth. Over the past two decades, the use of data in the oil field has grown exponentially. In the early 2000s, when seismic drilling came to the forefront, it spurred data practices including measurement while drilling, or MWD, and logging while drilling, or LWD, in 2006. Technological advancements leveraging big data began in 2014, with the use of supercomputing techniques for reservoir modeling and automation. 

Data challenges and opportunities

Data is helping to transform the industry, but it poses risks. With the amount of data generated by machines and sensors, energy companies are awash in information from multiple sources. As sensors become more affordable, they will appear on more sources throughout the drilling process and generate even more data more frequently. Energy companies are challenged by interpreting diverse data points to more efficiently control operations, as drillers collect, manage, report and analyze information in real time. Meanwhile, cyber risks have escalated, making data security a growing concern. Compounding these challenges is the lack of skills to interpret and deploy newfound data. How can the industry bridge the cultural gap between data scientists and technical petroleum professionals? With this “great crew change” of skill sets occurring in the oil field, companies must adopt new strategies to attract and retain data scientists and software engineers. At the same time, enormous opportunities for substantial cost reductions, better safety and sustained productivity improvement exist for energy companies. Businesses willing to evolve have the potential for significant growth and profitability in the age of big data.

The path to transformation

The oil and gas sector has already experienced significant change by adopting technology; it is now entering another phase of transformation. Research shows that while big data and analytics represent the industry’s second-largest investment today, they will become its largest investment over the next five to six years. Additionally, more and more oil and gas companies are moving toward cloud technologies, a prerequisite to embracing digital technology. Cloud-enabled capabilities such as advanced analytics, artificial intelligence (AI), machine learning, the internet of things (IoT), and automation are driving new levels of productivity. Machine learning allows computer systems to learn from and interpret data without human input, and can be used to run simulations, using predictive data models to discover patterns based on a variety of inputs. Two popular AI applications currently in use by the supermajors include robots designed with AI capabilities for hydrocarbon exploration and production, and an AI-enabled drilling solution that steers itself with no human intervention.

That’s just the tip of the iceberg. According to Markets and Markets research, AI in the oil and gas industry is expected to grow to a market size of $2.85 billion by 2022. 

Faster transmission of data

To address the growth in data and the massive amounts the industry will be confronted with, many oil and gas companies will adopt private LTE (Long-Term Evolution) networks within the next five years. The transition to LTE in not unlike the shift from AM radio to FM—or amplitude modulation to frequency modulation. Both transmit information in electromagnetic waves but AM radio ranges up to 1200 bits per second, while FM operates in a higher spectrum, up to 2400 bits per second. FM has better sound quality due to higher bandwidth and is less susceptible to noise because information in an FM signal is transmitted by varying the frequency, and not the amplitude. With LTE, companies will benefit from dedicated, fixed-cost networks for their business and internet of things devices. The advantages of private LTE can range from savings in data usage and enhanced traffic flow to better information security. Private LTE, which can use a range of spectrums—including CBRS (Citizens Broadband Radio Service) — can reduce congestion, enhance traffic flow, improve information security and dramatically drive down costs. 

The good news is that oil and gas companies don’t have to transform everything at once to move to the next level. Rather than start from scratch, they can begin incrementally and build upon technologies that have been proven in other fields; to do so requires investing in new talent and capabilities, as well as careful prioritization. 

People, process, technology

Companies must ask the right questions at the very start of the digital transformation journey to create a plan that will meet their needs and business objectives. Which tools, in particular, will drive value creation? How can your company keep pace with the rapid speed of innovation? What approach to technology adoption will allow your company to move ahead of the competition?

From a high-level view, oil and gas companies must examine three areas:

  • People—how can we attract the right talent for the data transformation? What drivers will bring in the next generation and how can knowledge be transferred during the great crew change? Companies must consider what they want to do, how they want to be organized, what capabilities are needed and whether they should be built internally or externally.
  • Process—are we doing things right? Where are the opportunities to automate and digitize processes? And how can we more seamlessly integrate processes with suppliers and customers?   
  • Technology—what skills do I want to develop in-house versus outsource to more qualified companies? How mature are my digital capabilities in relation to personalization, prediction, engagement and agility? And how can we assure flexibility for any future changes?

The role of an internal audit

Companies on the path to digital transformation should consider engaging internal audit as advisors to gain insight into the above questions and truly benefit from investment in new technology. The consultative approach should include identifying both internal information technology risks as well as those related to third-party vendors and service partners; consultants will also build a long-term plan to monitor and mitigate information technology risks. 

Companies must consider what they want to do, how they want to be organized, what capabilities are needed and whether they should be built internally or externally. The process must be carefully managed with milestones and parameters that are calibrated at the appropriate level of precision to determine how well the program is meeting its objectives. And it should be flexible enough to make incremental changes and accommodate timely adjustments.

At the end of the day, companies need an objective third-party team that understands how their people, process and technology can present risks and leverage that knowledge to create a complete picture of the risk universe within the organization.

The bottom line

Information is a critical corporate asset for oil and gas companies. Timely access to accurate data from the rig to the office is a competitive edge that can help companies work more efficiently, mitigate risk and be profitable. To help achieve these goals, energy companies have invested heavily in digital technologies over the last few years. According to the International Energy Agency’s report, “Digitization and Energy 2017,” global investment in digital electricity infrastructure and software grew by over 20% annually since 2014, and in 2016, reached $47 billion. To put it into context, the industry’s investment in 2016 was almost 40% higher than investment in gas-fired power generation worldwide ($34 billion). The digital revolution is rapidly driving transformational disruption across every sector. The World Economic Forum recently stated that by 2022, over 60% of global gross domestic product will be digitized, and an estimated 70% of new value created in the economy over the next decade will be based on digitally enabled platforms.

Embracing technology and digitalization is instrumental in driving business growth and creating more efficient processes that contribute to increased productivity. Doing so can very well mean the difference between leading the pack or risk falling behind the competition.

CONTACT OUR TEAM

Ron Beck
Principal

Nazif Sharique
Partner


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