03 Jan What does 2017 hold for digital oil and gas?
It’s customary at the dawn of a new year to make predictions you have no idea will come true. So what are my predictions at the dawn of 2017 for the world of digital oil and gas? This is tricky because it requires some predictions for oil and gas too. Here goes.
Oil Price – No Material Change
What possible effect does the price of oil have on digital? Actually, the price of oil is a big driver of the deployment of digital technologies into oil and gas. Frankly, high prices are a detriment to the use of digital in oil and gas. Higher commodity prices drive investments to grow production, whereas continued low prices drive investments in improving productivity, where digital shines.
There’s lots of enthusiasm that OPEC will finally prove all the naysayers wrong, coalesce as a coalition of the willing, hack away at production and finally move the price of oil permanently north. This will not happen in 2017, but might in 2018 or 2019. There are several reasons for this.
There’s a huge and undocumented inventory of produced crude tucked away in floating storage (loaded tankers moored at various ports), and inshore storage facilities. The owners of this oil might want to wait out the market, but if prices move up even a little, some will want to capture any profits and sell down. More oil to the market keeps the price down.
How much oil are we talking about? If markets have been oversupplied for 30 months by 1 million barrels a day (OPEC thinks the market went long in June of 2014), and that oil has gone into storage, as much as 900 million barrels are out there looking for a buyer. Lots has disappeared into strategic stockpiles, but still, there’s months and months of supply to absorb.
And what about the inventory of drilled but not completed wells in the US shale sector? These wells won’t move the market dramatically, but the owners of these facilities will be highly motivated to get their wells into production the instant the wells are in the money. Since the Saudis first floated production cuts in September, more than 150 drill rigs went back to work in the US, a sign that the US oil engine is still primed and ready to go. Throw in a new fossil fuel friendly, climate skeptic government and it’s Drill Baby Drill.
And of course, will OPEC really honour its agreed production position? I’m not buying it. The temptation to cheat on production targets is going to be overwhelming after all the pain they have been through.
Low oil prices are good for the adoption of digital technologies. Long live low prices.
Biggest Investment Area
While there are lots of digital trials underway in oil and gas, they are going to be hampered by the generally poor quality of the underlying data. Until the data is cleaner, digital can’t progress very far. It is starting to dawn on the industry that it is going to have to boost the level of investment and interest in assuring the ruthless cleanliness and reliability of its data.
Of course, there’s an argument that says that digital analytics can overcome crappy data by applying heuristics, probability engines and artificial intelligence to make very good educated guesses about what the data should be. I think this only takes us so far. It might be good enough for a desk engineer trying to figure out what’s wrong with a process. It will not be good enough for a site engineer tasked with fixing a reluctant valve and relying on a system that has “guessed” which way to turn it, even if the system is a good guesser.
I’m already detecting a strong level of interest from big oil and gas concerns about leading practices in improving information quality. The areas of greatest interest will be in fixing the reliability and accuracy of existing asset data. Many of the most promising productivity gains that can be captured using digital tools rely on asset data (as builts, specs, drawings), pointing at the construction industry and handover practices as ripe for attention. One of my colleagues thinks best in class data accuracy in a given oil facility is only 98.5% (put another way, a pump with 100 parts has 2 mislabeled, or missing, or extra, but which 2?).
Crappy data is bad for digital. 2017 is the start of the big data clean up.
The biggest payoff for digital in 2017 will be in analytics. Despite my reservations about data quality, the fact is that oil and gas companies are already overwhelmed with data that they don’t fully exploit. And even though that data may not be entirely accurate, it’s still going to be good enough for the clever to to find a payoff by applying analytic engines to the task.
Analytic solutions, for the most part, will continue to be very specific to individual oil and gas concerns, owing to the complexity of their underlying technology choices and bespoke databases. Therefore, oil and gas companies will be most interested in analytics technologies that are sold as a toolset or collection of widgets, and not as developed solutions.
2017 will also see the first examples of cloud-based crowd-fueled analytics using platforms like GE Predix. Huh? Imagine uploading terabytes of down hole pump operating data from a SCADA system and applying an analytic engine to that data. You’d learn something. But what if that analytic engine was also learning insights from all the other companies doing the same thing. You’d learn even more, and faster. None of this is possible without cloud computing and storage combined with analytic engines.
Analytics in oil and gas is like horseshoes and hand grenades. Close enough is good enough.
With all this interest in information management, data, taxonomies and information standards, the hottest careers in 2017 will be for those individuals with training in this new world of data. Get used to hearing about the high demand for data scientists, information engineers, data wranglers, bit doctors, analytics engineers, information analysts, data structure designers, information standard specialists, data conversion experts.
These aren’t roles that are on plain display in the standard oil and gas organisation chart. Indeed, the industry will need to look outside its normal recruiting frame if it is going to find such experts. Good places to look are in manufacturing, aerospace, nuclear, and of course Silicon Valley.
I needn’t observe that the fossil fuel industry isn’t exactly a hot ticket among the youth coming through the education system today. Therefore, the industry should get into growing its own talent or prepare to source it from the market (not a bad strategy considering how much uncertainty there is in digital).
Best job titles for 2017 are Bit Doctor and Data Wrangler. Digital careers boom in oil and gas
One of my biggest frustrations with digital is that the industry seems largely composed of technology nerds with interesting ideas, but low acumen about how the oil and gas industry works.
The Silicon Valley model for digital advancement (run around and break things) doesn’t get you very far in oil and gas. Petroleum is dangerous. It’s often produced in places you don’t normally go on vacation. The climate is invariably harsh, remote, cold and wet, even under water. It takes an extraordinary level of investment to operate safely and reliably under all possible conditions, and the industry will embrace changes to its business model only when the technology is fully proven to run in their world.
Sadly, many clever digital technologies that are killer in other settings will simply not stand up to the rigours of the industry. Can you imagine a tech wearing a virtual reality headset from southern California on a pitching off-shore platform at night in the North Sea? And even when the technology “works”, as with analytics, or with some wearables, or military heads-up displays, these technologies lack a viable business model in oil and gas.
2017 will not see any digital technologies taking off in a viral way in oil and gas as they can in other industries, because the use cases, business models and adoption pathways are under baked. Add the dampening effect of rising prices and you get the picture.
Digital oil and gas means business models, not toys. Go away until you have a business.
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