Digitally related business opportunities have the potential to unlock approximately US$1.6 trillion of value for the oil and gas industry, its customers and for society, states a new report from Accenture and the World Economic Forum.
Australian oil and gas producers are facing increased cost pressures due to the continuing depressed commodity prices and the development of lower cost sources of oil and gas. The picture here is also complicated by the rise in domestic gas prices that has shone a light on the recent developments that are focused on export markets. The federal government’s response has the potential to further restrict local project development and squeeze the projected return on new and existing projects.
Now more than ever the industry needs to embrace digital transformation to improve profitability and enable growth in existing operations and through expanded developments which would improve supply and hence bring down local prices. Accenture and The World Economic Forum’s (WEF’s) Digital Transformation Initiative for the Oil and Gas Industry has determined that digitally related business opportunities have the potential to unlock approximately US$1.6 trillion of value for the industry, its customers and for society.
The oil and gas industry is no stranger to big data, technology and digital innovation. As early as the 1980s, oil and gas companies began to adopt digital technologies. A wave of digital oil field initiatives swept through most of the industry in the 1990s and the early part of this century.
However, for most of this decade, the industry has not taken advantage of the opportunities that derive from using data and technology in a meaningful way. In fact, according to Accenture and the WEF, about 36 per cent of oil and gas companies are investing in big data and analytics, but only 13 per cent use the insights from this technology to drive their approach towards the market and their competitors. The industry needs to be making a greater effort to embrace emerging technologies to drive value. One such emerging technology with huge potential for the industry is cognitive computing.
Put simply, cognitive computing involves computerised systems that mimic the way the human brain works. They can sense, comprehend and act. These systems are self-learning algorithms that use data mining, pattern recognition and natural language processing to create automated technology that can solve problems without human assistance.
The expected benefits include enabling:
- Better, faster and more informed business decisions by leveraging vast stores of historical and real-time data;
- Workforce focus on higher-value activities that require more judgement; and,
- Improved outcomes in terms of higher profit, quality and safer operations.
Cognitive computing represents the next era in computing. In the past, computers have been unable to accomplish simple everyday tasks like understanding natural language or recognising unique objects in an image. Today, cognitive computing can collate vast amounts of information, analyse that information, make predictions, draw conclusions and provide recommendations or assistance.
Cognitive computing can facilitate human-computer collaboration by enabling individual decision makers to act upon big data more efficiently. Examples include virtual robotics, expert systems, speech, gesture and even facial and material recognition. Cognitive computing is disrupting many industries and it will have a profound impact on oil and gas. This is because the oil and gas industry has large quantities of complex data that can be processed and analysed to solve problems and add business value.
For example, an engineer evaluating what new oil fields to acquire will typically have to manually read through an enormous set of journal papers and baseline reports with seismic imaging data and models of reservoir, well, facilities, production and export. Cognitive technologies can quickly help by analysing hundreds of thousands of papers and reports, prioritising and linking that data to the specific decision at hand, and introducing new real-time factors to be considered such as current news events around economic instability, political unrest and natural disasters.
As a result, the engineer along with key stakeholders can more fluidly build conceptual and geological models, highlight the impact of the potential risks and uncertainties, visualise trade-offs, and explore what-if scenarios to ensure the best decisions are made.
Across industries, however, skepticism about the power of cognitive computing lingers. Accenture’s The Impact of Cognitive Computing in Management study reports that nearly half of senior executives (46 per cent) perceive potential value from cognitive computing. But only 14 per cent of first-line managers and 24 per cent of middle managers agree strongly they would trust the advice of intelligent systems in making future business decisions.
The time is right for oil and gas organisations to start implementing cognitive computing. Some key activities to start exploring now:
- Engage managers at all levels in cognitive computing pilots – Lower-level managers demonstrate considerable skepticism toward intelligent machines, they are perhaps considered a threat to their role. They need to understand how these systems work and how they generate advice before trusting them. Involving such managers in early experiments and later scaling efforts will foster a sense of familiarity and ownership.
- Keep track of artificial intelligence (AI) – The growing powers of machine intelligence and big data can be both used and abused. Leaders need to keep tabs on the application of sensitive data and AI in their enterprises””for legal, ethical and trust reasons.
- Create new training and recruitment strategies – Leaders must seek out talent both willing and able to engage in human-machine collaboration. They must identify candidates who bring creativity, collaboration, empathy and judgment skills to the table and train current workers in these capabilities as these skills become much more important in the new world
- Draw insights from crowds and ecosystems – Leaders will need to look beyond the organisation for guidance, ideas, insight and role models. Enterprises and individuals steeped in judgment-based activities (start-ups, advertising agencies, and humanitarian groups) can provide valuable lessons to organisations that are more engineering focused for example, like oil and gas companies.
As lower oil prices continue to hamper margins, the oil and gas industry is facing intense pressure to improve operational efficiencies. Additionally, capital expenditures for exploration have dropped by about 25 per cent since 2014, adding emphasis to maximising production and throughput by “squeezing” existing assets. Companies that leverage digital technologies such as cognitive computing to simplify, automate and optimise operations will be at the forefront of transforming the industry to ensure they thrive in such volatile market conditions.