For the last couple of years, we have been undergoing an energy crisis caused by several reasons. The pandemic affected the oil and gas industry tremendously, but it’s not the only factor. Alexey Chalimov, CEO at Eastern Peak, takes a closer look at the drastic shifts in the global economy provoked by geopolitical conflicts and climate change.
In February of 2022, Russia launched a full-scale war against Ukraine that shocked the world. In response, many countries around the world have chosen to modify their oil and gas supply chains in order not to finance the aggressor and the invasion. As many economies are highly dependent on energy from Russia, these changes will most likely reshape the future of the oil and gas industry.
Luckily, the digital transformation of oil and gas has already helped enterprises cut the costs of oil and gas distribution and employment, increasing their outcomes. Here, we’ll uncover the premises and advantages of digital transformation in oil and gas and new technology that will help weather the global fuel crisis.
Major Challenges For The Oil & Gas Industry
The following are the primary challenges and driving forces of change in the sector.
Geopolitical situation and market volatilityÂ
Politics and economy, especially when it comes to energy, have always been interrelated. The possession of natural assets privileges some countries geopolitically while placing importing states in a situation of inferiority.
In many cases, uneven resource reserves aren’t a cause for concern. Instead, it builds the foundation for international trade and cooperation. However, conflicts with massive oil and gas importers may trigger consequences for world economies and drive fuel crises. We experienced it after the Gulf War and the 2003 invasion of Iraq, and we’re witnessing this tendency today amidst the Russo-Ukrainian war.
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Cost management
The oil and gas industry is pretty unstable, and such factors as environmental changes or geopolitical conditions may affect the expenses for energy extraction and the fluctuating market.
This sector needs a systematic and comprehensive analysis of price curves and thoughtful methods of management based on an extensive data analysis. New technology in the oil and gas industry aims at process automation and optimization, cutting down waste, and establishing healthy producer/consumer relations.
High costs of safety
The oil and gas industry is often synonymous with occupational injuries and industrial disasters. These risks turn safety management into a big challenge that results in great expenses. Today, oil and gas enterprises want to find effective production methods to strike a balance between staff safety and related spending.
Demand for renewable energy
Traditional fuel contributes largely to global pollution, and modern economies and cultures are aiming to prioritize minimizing climate change and its consequences. In response, markets for greener solutions are expanding.
Oil and gas currently have competitive renewable alternatives (e.g., biofuels and solar or wind power). Companies seek ways to include them in their energy portfolio and thus generate the demand for green energy sources. Moreover, the attractive prices for these alternatives offer a winning position amid the skyrocketing oil and gas prices. Â
Strict environmental regulations
Oil and gas extraction generates disastrous environmental consequences, yet it’s arguably the primary energy source both for industrial and individual needs. Today, we face atmospheric pollution with harmful chemicals, unpredictable and unnatural weather patterns, pollution-related health issues, and species extinction – and these are the consequences of uncontrolled oil and gas extraction.
It’s no wonder countries impose severe environmental regulations on the oil and gas industry. Now, enterprises have to consider both economic profitability and environmental sustainability.
Benefits of Digital Transformation
Digital technological developments aim at making the oil and gas supply chain and production cheaper, more fruitful, and less harmful. Let’s look at the ways in which modern gas and oil technology can be beneficial for the market.
- Unlocking new business opportunities: Digital technologies provide energy companies with new tools that allow them to build a more flexible and diverse business model. For instance, they can now combine traditional and green energy sources.Â
- Increasing capital profitability: New technology in the oil and gas industry has shown that previous value chains were realized unproductively. Current computing capacities and overall technological advancements allow oil and gas companies to construct highly advanced machinery, enabling them to reach the deepest wells and reservoirs.
- Improving operational efficiency: Digital transformation assists both at the planning stage and in more practical procedures. Predictive analysis is helpful for preventive equipment maintenance, smart monitoring for effective real-time management, or data collection for comprehensive analysis.
- Enabling agility to respond to market volatility: The energy sector is extremely vulnerable, and its current demand depends highly on geopolitics, environmental conditions, society, etc. Technologies make it easier to adjust and respond to these changes.
All these advantages are readily available for energy companies that complement their strategies with digital technologies such as IoT, big data, AI, drones, and mobile applications – everything that also works to benefit other market sectors.
Digital Technologies across the Oil and Gas Value Chain
Let’s take a closer look at the oil and gas value chain and the transformation that digital tech is causing in it.
IoT
The Internet of Things in oil and gas can give live insight into crucial metrics thanks to smart sensors, analytics, and specific software. Moreover, IoT oil and gas can also serve preemptive maintenance of pipes, vehicles, and filters to avert damage.
IoT in oil and gasOpens a new window can be applied for easier supervision of the functioning of offshore plants and oil refineries. Besides that, IoT offers round-the-clock live tracking capabilities for more efficient logistics.
Big data & analytics
You can gather data every hour, collecting an unimaginable amount of valuable information with the help of sensors and other modern engineering solutions. In this respect, data analytics in oil and gas is decisive for efficient energy production. Big data in oil and gas can study gigabytes of information and extract helpful findings about drilling, reservoir engineering, transportation, and safety matters.
Moreover, predictive analysis in oil and gas is crucial both for functional outcome and overall ability to survive and prosper in this ever-changing industry. Big data analytics in oil and gas can work out patterns, predict trends, and thus give a competitive edge in the field.
AI
Artificial intelligence in the oil and gas sector is all about analysis and predictions. AI can manage enormous amounts of valuable data, and it can assist companies at any stage of energy production and supply. For instance, seismic data processing helps to evaluate the economic feasibility and possible risks, predict fluctuations in the market, and calculate profit and losses.
AI in oil and gasOpens a new window also works well as an addition to other solutions for preemptive service. However, besides invaluable insights and money-saving solutions, oil and gas artificial intelligence can support employees on the operational level with smart assistants and robots.Â
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Robots and drones
Robotics is always associated with automation, and this aspect of energy production has become increasingly valuable. Not only can robots automate routine and complex procedures, but they are also capable of tolerating hazardous working conditions.
Taking this into account, oil and gas drone inspections will soon become a non-negotiable procedure in energy production. Drone inspection of oil and gas vehicles, storage tanks, pipelines, and other assets relies on ultrasonic sensors and present-day visual technologies. Drones in the oil and gas industry open a gateway to data that is, in other cases, difficult and dangerous to access.
Mobile technology
Oil transformation technology includes employing smartphones, tablets, and wearables to make a workplace safe and productive. Mobile technology in the oil and gas industry helps employees manage the workflow in real-time without taking any health and safety risks.
In addition, mobile apps establish effective and prompt communication between workers, give access to their location, and make decision-making and the overall working process smooth and transparent.
Conclusion
The future of the oil and gas industry, with its complexity, will surely be digitalOpens a new window . Not only because it’s a natural evolution in any market, but because the environment, society, and politics require this transformation as soon as possible. Technological capacities, such as tracking technologies, robotics, and advanced analytics, help energy enterprises not only keep up with the dynamic market but also transform the whole industry.
What digital transformation trends do you predict in the energy sector? Share with us on FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window . We’d love to get your take on this!