OPTIMIZE 2019 has kicked off in Houston, bringing delegates from around the world and multiple industries together to learn about how digital transformation will affect them. From optimizing plants and processes to enabling entirely new business models, the digital revolution provides the edge energy companies need to stay competitive in a changing world.
On the surface, the energy industry is sound — energy usage is set to rise, driven by increased demand from emerging markets and rising populations, while fossil fuel reserves will last long enough to sustain a transition to greater use of renewable energy.
However, despite these strong supply and demand fundamentals, the energy industry is in flux. Oil prices have remained stubbornly low since 2014, job losses since then have created a skills gap, and a focus on the environment and fighting climate change have put the industry under pressure.
Fortunately, the digital revolution offers a number of opportunities to help the energy companies streamline themselves and remain competitive.
To combat low oil prices, energy companies have started to integrate — after all, while low oil prices are bad for upstream companies, they’re good for downstream companies. It makes sense for oil producers to invest in refineries, petrochemical plants and LNG terminals and gas-to-power plants to take advantage of the increased margins on oil products when prices are low.
Energy companies are also diversifying into renewable energy sources, most obviously when Equinor changed its name from Statoil to reflect renewables becoming a core part of its business. Renewable energy represents a more sustainable business model, as not only will wind and solar power last longer than oil, but they are more palatable for environmentally conscious customers.
With increased integration and diversification comes complexity — an energy company needs to be able to coordinate its supply chain to take full advantage of all its operations. For example, this means ensuring that refineries are being supplied with the right grade of crude or that new oil wells have destinations for their oil supplies.
Digital management solutions provide the backbone of these complex organizations. They make information transparent and allow management across different departments to share the same intelligence with each other, simplifying and speeding up decision-making.
Data doesn’t just need to move between departments within a company — in many cases, it must move between companies too. Cooperation is key in the new digital world. For example, machine learning needs data for the AI to develop its algorithms. If you need to teach an AI how to predict a rare event (such as a reactor breakdown that only happens once every 10 years), the system runs the risk of learning too slowly to be of use. If multiple companies that use similar equipment pool information, the AI can learn faster and all parties can share the resulting intelligence.
Companies can also integrate the different parts of various processes — the insights gleaned from operations can instruct new equipment and system designs. Better operations are then informed by data gathered from maintenance, which also guides the design process. The traditional hierarchy between design, operations and maintenance is broken down and rebuilt as a cycle.
The oil price crash saw many skilled workers leave the energy industry. It takes around six to seven years for a worker to become capable in their field, creating a skills gap as the new hires coming in lack the capabilities needed to fill the roles left by the old workers. However, digital transformation means that the skills the energy industry needs are radically different than those needed a decade ago.
Many new hires coming into the energy industry have been raised in digital cultures. They are quick to acclimatize to using digital solutions. While many of us still remember using graph paper to make predictions when designing new assets, many younger workers find digital twin technology far easier to work with, as they have been raised with ready access to virtual environments.
The age of specialization is coming to an end. Most workers need to be able to fill many different roles in a company, sometimes in the course of a day. Up-to-date and accurate instructions and guides are needed here. Just-in-time training, available online, can turn someone into a 15-minute expert, providing them with the right skills for a job.
New hires are only half the story, though — management also needs to understand and support policies that enable digital transformation. Instead of leaning on employees to work harder, managers can automate many dull or repetitive tasks, freeing up employees for more important work. This includes a lot of the list-making work new hires were traditionally used for. It’s a lot easier to entice new workers into the energy industry if they aren’t just going to be making hourly inspection reports.
As energy companies further embrace digitalization, they will move from making small-scale, isolated changes to creating AI-driven smart enterprises. This is how they will gain the capabilities they need to develop new business models for an evolving market.
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