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A New Era in Industrial AI

A New Era in Industrial AI

The Energy Industry Outlook for 2020

The energy industry faces considerable economic uncertainty going into 2020, and companies are already showing that there will be divergent approaches to seeking winning strategies moving forward. Pundits are calling the current energy climate the time of “energy transition,” by which they mean an inexorable move towards renewable sources of energy, reduced dependence on hydrocarbon combustion for both vehicle propulsion and electric power generation, and continued innovation.

 

And with respect to chemicals and plastics, there is a movement towards a “circular economy,” which signals a drive to reduce waste and carbon emissions while increasing re-usability. But 2020 will be a year where CEOs and CFOs watch the tea leaves extremely closely, to understand the pace of transition. Amidst widely divergent projections of the transition pace (and while actual data is tracking towards the slowest transition scenario), companies will be prudent to draw up business strategies in expectation of it speeding up.

 

One of the key levers companies have will be applying digitalization. Artificial intelligence (AI) will certainly be a key player in that. AI is already the “star of the show” in the earliest proven value creator in digitalization, prescriptive maintenance, and it has much more to offer.

 

 

Regional Differences

 

Regional differences will increase in 2020, as the will and ability to aggressively pursue sustainability and zero-carbon increasingly diverge. During 2020, Europe will continue presenting different energy sector business drivers than other regions. Refining demand is dropping Europe-wide, with strong momentum behind renewable power generation in the grid, cost disadvantages in the chemical supply chain in Europe and fast adoption of high-efficiency and non-ICE cars.

 

In the US, oil and gas pricing advantages continue to drive export demand. In Southeast Asia, economic growth drives refining and chemicals demand, but the shadow of China and Middle Eastern mega-integrated sites puts pressure on chemicals.

 

Again, whether refining and petrochemicals demand is growing (Asia), shrinking (Europe and Japan) or shifting from transportation fuels to chemical precursors (US and Middle East), digitalization becomes a key business weapon.

 

 

Energy Business Directions and Strategies

 

Although the recipe for financial and growth success in oil and gas has been fairly consistent over the past several years, 2020 will turn out to be the year that energy companies began following divergent strategies in earnest.

 

Some companies are doubling down on investing in their core hydrocarbon assets. Others are following a much more diversified strategy, investing in renewable energy sources, in biofuels, in electric power and natural gas distribution, and in battery storage technologies. Both strategies have medium-term validity.

 

For the national oil companies, where energy often constitutes over 25% of the national budget on the income side, there is less flexibility. While there is an interest in diversification for those companies, there is also an element of being captive to the short-term need to maintain their revenues sources.

 

In all three business scenarios, companies are relying on the acceleration of digital technology to achieve business objectives in 2020.

 

 

The Incredible, Disappearing Expert Worker

 

2020 also will see the exit of some of the energy industry’s most important domain experts. The numbers are urgent and compelling. Several projections point to 40 percent of experts in operating and providing technical support to complex process assets retiring in the next three years — and it is more challenging to recruit the digital-native generation into the energy industry.

 

This is another compelling factor driving companies to accelerate the adoption of analytics and AI. These type of technologies can augment the remaining domain expertise and act as both an educator and virtual assistant to the new workers.

 

 

Building the Strategic Virtual Digital Asset

 

In the past, industry response to downstream under regulatory and margin pressure would be to invest in capital equipment and process units for the plant. However, 2020 will see many energy enterprises trim back their capital spending, while continuing and accelerating investment in digitalization.

 

In the downstream sector, we are seeing AI and machine learning predictive solutions driving proven benefit, and they are therefore the subject of investment at over 25% of the major process asset operators. 2020 will also see a new round of investment in expanding and upgrading the main building block of plant digitalization, advanced process control. Almost all of the strategic business consultants are recommending this as a key first step with proven value.

 

2020 will see production planning modeling across larger portions of the value chain, multiple sites and networks of assets. This business modeling will drive very significant efficiencies for those companies with multiple production sites and distribution networks. Drivers for this in 2020 will be the example set by major networks in the past several years, along with the ability to harness high-performance computing to run these models for minute-by-minute business decision-making. Another significant advance is the growing capability of AI to assist key asset planners in selecting the optimum strategies amongst thousands of simulated alternatives.

 

More hidden gems of digital investments in 2020 will be found in upstream, where data-driven and AI-assisted analysis will continue to improve asset uptime value, and where advanced control is quickly emerging as an area for “quick wins.” In LNG, the same two solution areas will significantly boost operating dollars for operators.

 

 

Crude and Gas to Chemicals

 

The nature of production processes will change in 2020. Many small innovators in the area of process technology, in the area of biomaterials to chemicals and in the development of new recyclable plastics have demonstrated the viability and economics of their processes.

 

2020 will be a proving ground here. How many bets will the capital funders take in these areas? How many commercial-size projects will proceed? 2020 will show us a lot here, and the jury is still out.

 

 

Looking Ahead to the Downstream Asset of 2030

 

2020 will be a pivotal year in laying the foundations for the self-optimizing plant of 2030. We will see exciting and disruptive new technologies come to the market to help achieve that vision.

 

The industry will work to transform organizations to take advantage of tools such as hybrid models (the convergence of first-principle models with machine learning AI), prescriptive AI in areas beyond maintenance, new levels of integration and autonomous optimization up and down the production optimization stack — and more. 

 

2020 will be both challenging and exciting for the energy sector. Those organizations that can rapidly harness and embrace digitalization and AI will have a strong advantage, setting themselves up to be the winners in the coming years.

 

 

Learn more about how technology is shaping the energy industry in our recent conversation with Hydrocarbon Processing Editor-in-Chief/Associate Publisher Lee Nichols and Crystol Energy CEO Carole Nakhle. Click here to view.

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