Where to, the digital energy company? And what does that mean for the energy company knowledge worker?
Those two topics were explored earlier this month in a thoughtful, thought-provoking and totally interesting evening of discussions on digital transformation titled, “The Impact of Digitalization on Employment in the Oil and Gas Industry.” The event was held at Canary Wharf in London, with about 100 energy professionals in the audience.
This was an evening to talk digital transformation, a forum organized by Access for Women in Energy, which is led by Dr. Carole Nakhle, the CEO and founder of energy strategy firm Crystol Energy. The firm is co-chaired by Lord David Howell (member of the House of Lords and former U.K. Secretary of State for Energy). I was privileged to have been invited as a panelist, which is what brought me to London on a crisp fall day.
Lord Howell put it bluntly in his closing remarks. “The energy industry has an image problem,” he said. “Digital transformation is a brilliant story. Can analytics and AI help the industry to change its image? I think so. The industry needs to take a huge leap. They can embrace this, or they can go hide their heads in the sand.”
Different Perspectives on Digital
Lydia Rainforth, oil and gas equity research analyst at Barclays Investment Bank, brought a similar, very clear perspective, but from a different angle. Looking at the performance of the energy (oil and gas) industry with respect to other industries, she said they need to do something big in the next three years. Lydia follows the major energy players in Europe, including Shell, BP, Total, eni and Statoil, as well as the smaller players. She sees the productivity measures of oil and gas lagging other industries by 40 percent (revenue per employee), and the numbers are getting worse rather than improving.
It’s an interesting perspective, since within the industry, we hear great success stories such as integrated remote operations centers to remove people from extreme areas. But in reality, much of the oil and gas industry improvement in the past three to four years has come (so far) from contractual cost-cutting, rather than basic improvements in industry structure or organizational effectiveness. Of course, there are some good successes, such as a fundamental reduction in costs of drilling production wells in areas such as the Permian basin, and eni’s excellent story (reported at CERAWeek 2018) of applying big data concepts to their hydrocarbon finding and monetization.
Lydia stated that the biggest industry improvement from digitalization in the next five years will come from predictive (and prescriptive) maintenance using analytics and AI.
I talked about the mega-trends converging towards digital transformation, namely the explosion of connected data (the “IIoT” and its implication for energy), the ability to makes sense of that data (through analytics) and the breakthroughs in turning that information into knowledge (artificial intelligence, knowledge automation and machine learning). I also explored why those will change the very structure and nature of organizations (democratizing them), and noted that the agility of organizations in adopting digital solutions will determine the winners and losers (for some of the reasons Lord Howell and Lydia Rainforth put forward) — and why the nature of work will change.
On the nature of work, Shell’s Linda van Leeuwen gave a different, inside perspective. She’s involved in a digital transformation project within Shell, and she talked about how this is transforming jobs, roles and teams — and how large companies try to manage them. It provided a good perspective on how the energy industry can provide terrific opportunity today to creative, flexible, and ambitious young employees.
So What Does the Future Hold?
Energy industry leaders are convinced that digital transformation is an imperative for their companies.
IHS Markit’s Paul Markwell delved into that argument in depth, arguing that these executives and leaders haven’t figured it out really yet, and that progress is moving more slowly than initially expected. Yes, his remarks put a bit of a damper on the points other speakers were raising, but also added some good perspective!
He pointed out the imperative for the industry to ensure that the investments in digital transformation go into areas where short-term (or at least medium-term) benefits can be realized — such as asset reliability and maintenance, as Rainforth had noted.
Dr. Clare Bond, geosciences lecturer at the University of Aberdeen (Scotland), added a different, and definitely thought-provoking perspective. Speaking from a teaching and learning point of view, she gave examples of how advanced visualization and data analysis techniques can speed up and bring whole new perspectives and insights to the world of geosciences, which is, of course, central to the whole arena of oil exploration and production, and the economics and efficiencies of drilling.
But beyond just the technical, what will change in terms of the nature of how experience and expertise is taught and, in general, how technical information can be taught and learned? This is a crucial area as the energy industry goes through a massive demographic and experience-level change in staffing over the next few years, which may impact the productivity of companies.
Of equal interest was the engagement and informed questioning by the audience members, who had listened with rapt attention. Questions revolved around how these approaches are applied to older facilities (which yield a surprising amount of pertinent data, but the challenge is the mobilization of that data), how to use these approaches to reach higher levels of sustainability and how to integrate new energy sources.
Also, in his closing, Lord Howell raised the spectre that cybersecurity would become a crucial factor in the immediate future. Large energy organizations are global in nature, operating strategic and massively expensive assets whose reliability is key to economies — and they face a risk that digital transformation needs to account for and focus on.
What I particularly liked about the Access for WIE forum was the diversity of panelists and the diversity of attendees. Too often in this field, all of the speakers have a uniformity of background and viewpoint. This was different!
It certainly gave me some new ideas and insights to add to my thinking on the subject. It also confirmed strongly that AspenTech is on the right track in the way we are working with some of the world’s largest energy companies in this area and in the innovations we are bringing to the market.
For more information on applying digital solutions, you can read our recent upstream white paper or downstream white paper, or view our downstream infographic.