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

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Oilfield Services Company Turn To Tech To Boost Profitability

Artificial intelligence, the cloud, robots - these are concepts and products we associate with the IT industry. But there is one notoriously traditional, slow to innovate industry that is now determined to make it part of their sector too. Oilfield service providers are looking to digital technology to help them weather the effects of the pandemic-induced sector crisis. In the process, tech may even make them more profitable.

It’s all about profitability, really. The pandemic will end sooner or later, and the world will return to something that at least resembles normal. Since oil will continue to be a fixture of this normal, oilfield service providers are going nowhere. And they are embracing digital technology like their fellow industry players from exploration and production.

A recent Forbes article notes that Halliburton’s deal with Microsoft and Accenture will enable the migration of Halliburton’s data centers to the cloud, boosting the oilfield services major’s digital product offering. And the deal is already bearing fruit despite the pandemic. Two companies last year contracted Halliburton to provide digital technology-enabled services to Thailand’s PTTEP Exploration and Production and Kuwait Oil Company.

In all fairness, oilfield service providers have been expanding their ties with Big Tech for quite some time. Last year, Google virtue-signaled by declaring that it would no longer make products for the oil and gas industry, prompting some concern that, like some banks, technology companies might start turning their backs on the unloved oil and gas industry. Yet, it seems that some tech majors are more pragmatic than idealistic. Soon after Google’s declaration, IBM sealed a cloud computing deal with Schlumberger.

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Baker Hughes, for its part, has been working consistently - and successfully - to become a technology company with oil and gas services as just one of its divisions. This is the clearest sign yet that the industry that decades ago existed to drill wells and maintain them, along with all related tasks, is morphing into another segment of the digital technology industry.

The trend was highlighted in an EY survey last year, which found that most oil and gas companies feel that investment in digital technology has become urgent amid the pandemic.

“The COVID-19 pandemic has accelerated the timeline for some digital technology adoption from five years to three months,” said EY Global Oil & Gas Leader, Andy Brogan at the time. “The cost savings digital can deliver is critical for survival in today’s low-price environment, as oil and gas companies look to gain greater operational efficiencies and drive productivity across the value chain.”

The same is true, if not truer, for the companies that service E&Ps. They usually tend to suffer more damage from price crashes, and the pandemic-induced crash has not been an exception. This means that oilfield service providers will likely double down on their move towards technology in order to improve their share performance.

It is a no-brainer. The adoption of digital technology such as cloud computing helps keep costs under control, streamlines operations, and enhances efficiency. This, in turn, strengthens the financial performance of a company, boosting its bottom line and making shareholders happy and willing to buy more shares in that company.

Despite the bad rap that the oil and gas industry gets, it pays to be practical if you are an investor, even if you are an ESG investor. One side effect of all the benefits of digital technology is that it allows oilfield services to better control their emissions footprint and gives them capabilities to reduce this footprint. A good 3example of this is the methane leak detection systems that were made possible by digital technology.

By Irina Slav for Oilprice.com

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