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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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New Tech Could Save Big Oil $7 Billion Per Year

Seven billion dollars—this is the sum that oil producers could save annually if they take advantage of all digital capabilities made available to them by a technology industry that’s been evolving at a breakneck speed. And this is just in the upstream segment, and just over the next five years, according to a report from Wood Mackenzie.

On the face of it, the fact that there are major savings to be had with digitalization is nothing new. More than enough has been written on the topic and there is undoubtedly more to come. What’s new, according to the report’s author, Greig Aitken, is the amount of new tech flooding the market and offering opportunities previously either unavailable or unaffordable for anyone but the supermajors.

Here’s how Aitken puts it: “The industry produces Big Data, but advances in analytics, including machine learning and artificial intelligence (AI), provide new ways of interpreting this data, producing previously unknowable insights. While large volumes of data in the past could be a problem, Big Data is now an asset. Moreover, advances in cloud computing and edge analytics mean firms do not need a supercomputer or a Supermajor's IT budget to capitalise on this opportunity.”

The problem, however, is the conservatism of the oil and gas industry. Most players in this field are wary of new technology because they are used to doing things in a certain way and rarely feel an urge to change to a whole new way of doing things. Yet, Aitken notes, just look at what Big Oil is saying about digitalization: it’s nothing but praise for the cost savings, the health and safety improvements, and not least, recovery rates and overall operational efficiency. Related: Non-OPEC Oil Output Soars Despite Price Slide

In the face of so much evidence supporting the potential of digital tech to make oil and gas companies’ lives easier and more profitable, no wonder there is a change in attitude already visible in the industry. KPMG’s latest CEO Outlook: Oil & Gas has suggested that the oil industry has fallen hard for digital tech, with artificial intelligence and robotics a particular focus of attraction. As much as 85 percent of respondents—52 global chief executives from the oil and gas industry—told KPMG that they have either already adopted AI in their operations or are in the process of testing it for adoption. What’s more, a high percentage of the respondents believe that this increased adoption of digital technology solutions will actually create more jobs.

The AI market in oil and gas has been estimated to reach US$2.85 billion by 2022, growing by a compound annual growth rate of 12.66 percent. It’s worth noting this AI market actually involves predictive algorithms, automation systems, and analytics, which are not exactly artificial intelligence per se, but the trend is clear: oil and gas is adopting more and more software solutions to improve their results and bottom lines.

Those that are still holding back should just ask shale producers in the United States how digitalization has transformed their business. Thanks to Big Data and advanced analytics, Aitken says in the report, shale producers have been able to materially lower their costs and boost their competitiveness in a very competitive environment. It’s about time conventional oil companies followed suit in greater numbers.

By Irina Slav for Oilprice.com

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