26 Apr Recasting Energy System Resilience for the Digital Age Part 1
We need resilient energy systems. Our energy systems need to be tough and elastic to recover quickly from events and mishaps. But we now need them to be a bit more adaptive and agile.
(This is a partial text of a 45 minute address that I offer to energy companies driving change in their workforce. Contact me if you would like to learn more).
Weird Pandemic Shortages
I live on the Sunshine Coast of BC, because I make poor real estate decisions.
Actually, I’m here because I wanted to work on one of BC’s many (13) announced LNG projects and I wanted to be able to walk to work.
I was wrong. Being a local doesn’t matter if your project is a myth.
In Asia, natural gas is seen as the solution, but unfortunately for me, and for my fellow energy sector workers, in many OECD economies, gas is seen as the problem.
Not only that, it’s been a lousy pandemic on the Coast. Work has dried up, I’ve gained a few pounds, and my social life has been reduced to watching my wife watch the Calgary Flames lose hockey games on her iPad.
On the plus side, my travel costs are down to zero, I wear shorts to work, and I haven’t worn shoes in 13 months. In fact, I’m barefoot now.
I have to say, if you have to cower in fear somewhere, the Coast is a pretty good spot. It’s naturally self-isolating because the Coast is practically an island. It’s a $100 ferry ride across the mouth of Howe Sound. The average age is 12 years greater than the BC average. Victoria may be God’s waiting room, but the Sunshine Coast is undoubtably the lobby.
Being on the Coast has its drawbacks. We’ve had all kinds of weird shortages.
Edam cheese. Sardines. Toilet paper. Patience and kindness. These are actually all related. Shortages of Edam and sardines teach you patience, and the absence of toilet paper teaches you kindness.
Or is it the other way round?
But the one thing that has never run out is energy.
Our Resilient Energy System
Our energy systems are built to last. During the pandemic here in Canada, there’s been no interruption in gasoline or diesel supplies, no power outages, no natural gas cuts. None.
Canadians build resilient energy systems because we need resilient energy systems. Our country is big, cold and dark. And that’s just Edmonton.
But what does resilience actually mean?
Here’s a dictionary definition of resilience:
- the capacity to recover quickly from difficulties; toughness.
- the ability of a substance or object to spring back into shape; elasticity.
Energy system resilience is really important after equipment failure, a storm, or an incident or an event. Toughness is a great attribute. We recover quickly and we return the plant to its original shape. We remember and celebrate the journey because the destination is always the same. The status quo. The way things were.
Our management of change processes, our fail-safe procedures, our work permitting processes are how we provide that toughness, that elasticity. We strive for stability, reliability, security and tight control.
We’re particularly skilled at detecting early onset risks that imperil the energy system, and we’re very good at managing those risks.
And we’re going to face more storms, more incidents, more extreme weather and possibly more pandemics in the future. We need our energy systems to be resilient and we’re proud of the work we do.
But that often means pushing back on, or resisting, changes that could improve our very resilience, and that includes even changing the tools we use or the processes we follow.
The Adaptive Agile Energy System
And what about the people working in energy? Do we need tough and elastic people? An army of Mr Incredibles? What do we need in the future?
Personally, I’d like to be called tough and elastic rather than what I’m usually called on Australia Twitter which is #Gashole and #Motherfracker.
As an author and researcher about digital innovation in oil and gas I keep a very close eye on digital changes taking place across the landscape of energy. I’m going absolutely flat out right now.
I believe that the successful energy business of the future will need to behave a bit more like a digital company and a bit less like today’s energy company. Successful people in energy will need to behave a bit more like employees in a start up. This will be the new definition of resiliency. Less “tough and elastic”, and more “adaptive and agile”.
I know what you’re thinking. Our energy system has been run safely, reliably, under all conditions, for 5 decades. Show me the math.
It reminds of when I worked for Mike Crosby, who was the Chief Operating Officer of Irving Oil. Mike is only individual I know who worked as a jail keeper in the US, which convinced him to get an MBA. He told me you learn a lot about human nature when you supervise incarcerated murderers, thieves and lawyers.
He said that every presentation needs to answer 4 questions, the same 4 that he used in jail working with inmates, and the same you use with your kids at bath time:
- Why should I change my behavior? There better be damn good reasons.
- Why should I change now? What’s the rush?
- What happens to me if I just delay until conditions improve?
- What bad things will happen to me if I don’t change and what good things are coming my way if I do?
I’m not suggesting you’re inmates, but we’ve all been confined to quarters for the past year. Ryan is working out of his garage. Our houses feel like prisons, and your housemates are starting to feel like murderers, thieves and lawyers.
What I want is to do a jail break of our mindset and recast resiliency for a new age.
Why Change To Be More Adaptive and Agile
So why change? Let me offer you 5 good reasons why.
Young people are turned off by today’s energy industry. In part this goes back to what they have been hearing about energy in school for decades. In part it’s watching their parents repeatedly lose their energy jobs during the commodity cycle. In part it’s the Greta effect. In part it’s the environment they are personally experiencing. Forest fires, bleached reefs, floods and other extreme weather events are shaping our kids.
Young people want to work for dynamic, responsible, forward-thinking companies using advanced technologies. When I was growing up, the energy industry that had the cool technology. Now it’s TikTok? We need young people to see this industry as dynamic, as exciting, as interesting as TikTok. That’s a low bar.
Capital Market Failure
Capital has lost confidence in our industry.
Our share prices have fallen to distressing lows. Meanwhile the digital companies are doing pretty ok.
- Apple? $2.2 trillion.
- Microsoft? $1.9 trillion.
- Amazon? $1.7 trillion.
- Alphabet? $1.5 trillion.
- Facebook? $860 billion.
BlackRock, one of the largest funds investing in energy, will only invest if you have very clear and tangible environmental targets. Norway’s sovereign wealth fund won’t even invest in fossil fuels.
We need to turn this around, or pensions will suffer, home prices will suffer, and we won’t be able to raise capital to fuel growth.
Looked at another way, we have huge upside in share prices.
Digital can reduce costs by at least 20%. That’s the floor. I’ve interviewed over 80 industry experts for my podcast, live streams, and my YouTube series for the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) and the consensus is absolutely clear. 20%.
The International Energy Agency has been studying the application of digital to the energy industry, and as far back as 2017, they concluded that energy costs could come down by 20% through digital.
I think that’s low.
Digital can improve asset productivity by 20%. And not just wells, but turbines, gas plants, pumps, vehicles, services, and people.
Finboot, a blockchain middleware company that I work with, is helping Repsol track product samples from its refineries and labs, boosting the productivity of the labs teams who no longer need to chase down misplaced documents.
Stream Systems, a technology company with whom I collaborate, uses its no-code simulation engine to model complex operations to discover optimization opportunities for existing assets.
Imperial Oil uses AI to optimise maintenance work. There is no possible way a human can optimise 50,000 maintenance tasks per week at the Kearl site but that’s child’s play for a computer. They’ve saved so much money they’re rolling it out everywhere.
There are the five big reasons: Talent. Capital. Cost. Productivity. Environment.
Why Now? What’s The Rush?
Why change now? The pandemic has given a huge boost to digital in energy.
It was the digital tools like Zoom and Teams that let managers move to work from home in the space of just 2 weeks, and your kids to leave cat filters for you to discover in the middle of an important meeting.
Petrobras successfully moved its entire office workforce out of the downtown towers to home in the same 2 weeks.
Following the Fort McMurray fires in 2016, Imperial Oil wisely decided to move one of the Kearl control rooms to Calgary. The project slowly progressed through its paces in the usual stately way that is the industry. Then, as soon as the pandemic hit, the control room moved in 2 weeks.
The pandemic has shown the industry how to move fast when it needs to.
But why is digital having this impact? And is it going to stop anytime soon?
This is a partial text of a 45 minute address that I offer to energy companies driving change in their workforce. Tune in next week for part 2 of this series. Contact me if you would like to learn more.
Check out my book, ‘Bits, Bytes, and Barrels: The Digital Transformation of Oil and Gas’, available on Amazon and other on-line bookshops.
Take Digital Oil and Gas, the one-day on-line digital oil and gas awareness course.
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