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Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

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The “Amazon Effect” Is Coming To Oil Markets

Oil

While OPEC mulls over further steps to once again support falling oil prices, tech startups are quietly ushering in a new era in oil and gas: the era of the digital oil field.

Much talk has revolved around how software can completely transform the energy industry, but until recently, it was just talk. Now, things are beginning to change, and some observers, such as Cottonwood Venture Partners’ Mark P. Mills, believe we are on the verge of an oil industry transformation of proportions identical to the transformation that Amazon prompted in retail.

According to Mills, the three technological factors that actualized what he calls “the Amazon effect”, which changed the face of retail forever, are evidenced in oil and gas right now. These are cheap computing with industrial-application capabilities; ubiquitous communication networks; and, of course, cloud tech.

The Internet of Things is entering oil and gas, and so are analytics and artificial intelligence. These, Mills believes, will be among the main drivers of a second shale revolution, reinforcing the efficiency push prompted by the latest oil price crisis. Related: Russia And Saudi Arabia Are Becoming Unlikely Allies

It seems that shale operators have been paying attention to what growing choirs of voices, including Oilprice, have been saying: they are talking more and more about the benefits that software solutions can bring to their business, potentially leveling the playing field for independents, a field that has been tipped in favor of Big Oil for decades.

Long-standing mistrust of technology is now dwindling as the benefits—including streamlining operations, maximizing the success rate of exploration, and optimizing production—make themselves increasingly evident, not least thanks to a trove of tech startups specifically targeting the oil and gas industry.

In a story for Forbes, Mills notes several examples of such startups that are already disrupting the industry with cognitive software for horizontal drilling, an on-demand contractor network, and an AI-driven software platform for well planning, among many others. The common feature among them all is they are narrowly specializing in various segments of the oil industry to deliver solutions that promise to substantially reduce times, labor, and costs, while improving outcomes. What’s not to like?

Tech investments among oil independents are still much below the level already characteristic of other industries such as healthcare or financial services, to mention just a couple. Yet this will also change. In the not-too-distant future we may see a flurry of M&A in oil and gas software development.

Related: Higher Oil Prices Could Threaten Saudi Vision 2030

The reason for this future consolidation is already evident: there are many oil and gas independents in the shale patch. Technology improvements will soon separate the winners from the losers, so it’s a pretty certain bet that more M&A—a lot more—will likely happen over the next few years.

But independents in the shale patch are already burdened with debts that they took on in order to expand their production, and not all will survive the digital disruption. And they don’t just have Big Oil to contend with; oil and gas independents also have renewable energy solution providers breathing down their necks every time oil prices rise—renewable energy that’s already married to software.

That should be strong enough motivation for shale boomers to make sure they catch up, and catch up fast.

By Irina Slav for Oilprice.com

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  • Fred Vogel on October 10 2017 said:
    Very good article, pointing to the fact that OPEC supply reductions, are doomed. Producers will be able to be profitable at much lower prices, as digital solutions such as Internet of Things, smart valves, and Blockchain ledgers are rolled out.

    Any cartel moves to delay the implementation of new smart solutions, will only hurt those producers who fail to adapt to the new production methods.

    I foresee Brent ICE prices in the 35 - 50 USD range starting very soon.
  • Mizual Toro on October 11 2017 said:
    Interesting Publish. I appreciate and greatly thankful to Irina Slav for such an useful information in Oil sector. There is currently huge changes and inflation to oil market. As per my research on Nasdaq and Oil market, and stock and investment, there is balancing guidelines to choose the best stocks. Higher inflation in price particularly in Saudi Arabia will halt its vision for 2030. This is really awesome information and interesting to know.

    Our especially also into oil sector and also trade stocks i.e. SANP Stock and our tickers like to be as - SANP . The best of information is to be found https://investorshangout.com/Santo-Mining-Corp-SANP-87353/
  • carlos Rodriguez on October 11 2017 said:
    I work on the oilfied and while AI is already embedded in geological survey..yes there is already neural networks in logging software, and Kriggin this will not mean higher oil production..at most enhancements in production in the gas oil ration but there wont be sudden miracles or an R2D2 in the drillers cabin to optimize further..at least not in my experience, sensors are already sophistictated enough to let you know trouble while drilling.

    so in my opinion a safer bet would be some enhancement in well productivity and the life span of the well..but again that falls in the geology and chemistry sciences..not IT

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