Low Oil Prices and COVID-19 Accelerate Digital Transformation in Upstream Oil and Gas05/12/2020
As OPEC was increasing supply and driving down oil prices, the coronavirus was simultaneously setting in and reducing demand. The two have had earth-shattering impacts on upstream oil and gas, including the challenges of working from home and social distancing in the field, and more starkly, cutting drilling and other projects, furloughing employees, trying to maintain cash on hand, and frankly, surviving.
It doesn’t take a rocket scientist to recognize that companies that have adopted technologies like cloud are able to adapt to remote work, or alternative work environments, easier than those that have not embraced the “digital transformation” – a broad term encompassing everything from cloud, Software as a Service (SaaS), Internet of things (IoT), artificial intelligence (AI), mobility, and data analytics.
Accelerating the Digital Transformation
Numerous articles are anticipating that the pandemic will accelerate the digital transformation. Just Google ‘COVID-19 and digital transformation.’ Companies worldwide are learning to pivot quickly to manage their business differently and engage with their customers and business partners in different ways. There’s really no option to simply cut costs and go back to “normal.” There is no going back. This is driving a fundamental change in how upstream oil and gas companies operate in the future. The “new normal” will be a different way of doing business – from reduced manual activities in the field to automated well operations and reduced manual processes in the back office to automated accounting and regulatory filing. It is important that you research, focus, and even spend on technologies that will support the new normal.
What Can Your Upstream Operation do to Embrace the Changing Landscape?
- Automate, Automate, Automate. Remove all manual effort from drilling to field operations to back-office processes and accounting. This has been a trend in upstream as oil and gas fields have been more automated, but now it is a mandate that must be relentlessly pursued.
- Leverage Data and Analytics. Organizations have more data today than ever before, and according to some sources, 80% of data coming in is never used. It is important to leverage data using analytics, coupled with AI when applicable, to make better decisions on which wells to shut in, which wells to drill, how to reduce LOE, etc.
- Leverage New Technologies. Software, hardware, robotics, drones, downhole sensors, and more are all changing so rapidly it is hard to keep up. Companies must understand and embrace technology and new methodologies to see just how they can help optimize their operations.
- Determine Your Key Strengths. And once defined, ruthlessly focus on them, and consider outsourcing all other functions. This could be entire areas like revenue and JVA accounting or land administration. It could also mean moving to SaaS/cloud-based models rather than supporting IT infrastructure internally.
As the digital transformation infiltrates the upstream oil and gas industry, it is time to dig in and discover the tools and technologies that will enable your success now and into the future. There’s no going back; forge a new path forward, and let P2 guide you in understanding how to leverage the right tools for your unique business.