On its own, it won’t transform the sub-par economics of pre-FID deep water projects left high and dry by US$50/bbl oil. And it won’t be instant – the full benefits of the transformation may take years.
However, there is a huge, potentially lucrative opportunity in digitalisation to reinvent the upstream of the future, say start-up E&Ps – an even bigger one, re-invigorating the old legacy business. There will also be commensurate challenges.
First, the big data opportunity in upstream is incalculable.
The data pool is so vast no-one knows how much there is. Data has been collected since the 1960s, primitively at first then intelligently over time. Some may be more use now than the purpose for which it was meant. All of this data, from sub-surface to production facility and beyond, needs to be drawn together, cleaned up, then stored in the cloud. Only then can the data scientists usefully do their stuff and start making that data sing.
Second, the industry has to change the way it runs the E&P business.
Right now its dysfunctional, deep silos are littering the value chain. Exploration, appraisal, engineering, construction and operations do their own thing, as do individual operators; and relationships with service companies are typically arms-length.
No-one speaks to each other, let alone shares data or information. Unification of multiple company-wide IT systems into a single, central platform is the Holy Grail, opening up access to users (whether real people or machines) and relevant partners. All the users can then work in concert to make things happen.
Third, people will prove the biggest challenge.
There’s a major battle ahead to win hearts and minds. Well-intentioned early digitalisation initiatives in upstream have already died a death in the middle layers of management – the turkeys wouldn’t vote for Christmas. The hard truth is unavoidable: the structural change needed will leave legacy roles stranded. But digitalisation will also bring new ones.
Given all this, executive leadership needs a clear strategy and plan of action. Critically, a cross-functional implementation team needs to be empowered to make decisions and take risks. Failure will be part of the learning experience.
Sceptics may argue that digitalisation is part of a race to the bottom with negative implications for price. Maybe, but there’s no real choice. In a world of plentiful resource, oil or gas, and demand growth under threat longer term, the low-cost producer wins. The management teams that digitalise most effectively have the best chance of being that low-cost winner.
What advice then to undergraduate geologists, geophysicists and petroleum engineers puzzling where they fit into a future, digitalised upstream? Go get a Masters degree in predictive analytics. The industry will need data scientists but, better still, ones that understand how the E&P sector works.