E&P Digital Transformation: Fundamental Next Step in Creating Value

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The adoption of emerging technologies is essential for all businesses, and even more important for well-­established industries because of the perpetual threat of disruption from competitors. Industries and companies unable to adopt digital transformation are likely to have a short life span in the current digitally driven global competitive environment. While the E&P industry is more than 100 years old and has seen many ups and downs, the prolonged impact of decreased oil prices since 2014 warrants the need for a transformational modification for it to remain operationally viable.

The upstream sector started the digital journey decades ago, leading to incremental improvements. The first step of this journey is “digitization,” which is the creation of data in digital form. Traditional supervisory control and data acquisition (SCADA) systems, meters, utility line monitors, and other equipment provide digital metrics at different frequencies but there are still many operations that are not fully digital, such as daily drilling reports and log reports.

The second step is “digitalization,” which is leveraging digitized data to generate information with limited value creation such as key performance indicators (KPIs) and dashboards. The industry has created and deployed many of these KPIs and dashboards to assess the health of its business; this “data in motion” is being created with little to no associated provenance, thus creating digitized dark data. In simple terms, dark data are data that exist, but no value is being generated from them. There are many reasons for data to be dark, and for the oil and gas industry the two primary reasons are forgotten data in silos and significant amounts of unused data from past operations.

The final step is the transformational step, “digital transformation,” when the business truly encompasses the transformation of talent, business strategy, and resources by leveraging emerging technologies for real-time resource optimization on an ongoing basis.

Is Your Digitalization Creating Value?

The E&P industry claims to have adopted digitization and digitalization in the form of digital oil fields; however this has failed to generate significant economic value during the past 2 decades. The lack of value creation could be attributed to the following:

  • Incomplete use or nonuse of data-driven innovation
  • Use of inefficient, complex, and fragmented workflows
  • Inability to keep pace with the information technology (IT) revolution

As a KPI, nonproductive time (NPT) is related to value generation. The NPT in the industry ranges from 10% to 30% for capital expenditure, which amounts to tens or even hundreds of millions of dollars per well. While a majority of E&P industry experts speak of doing digitalization, it is the author’s view that this does not provide any competitive edge for the E&P industry in keeping pace with the current Industry 4.0 revolution (the name for the current trend of automation and data exchange in manufacturing technologies). The industry instead needs to focus on a “true” digital transformation by leveraging the four pillars of this transformation and keeping in sync with the pace of IT advancements.

The four pillars of the E&P digital transformation are

  • Automation
  • Real-time resource optimization
  • Integrated technology platform
  • Big data analytics

Big data analytics forms the foundation of this transformational journey because the industry has created petabytes of dark data in its lifetime, which could have significant economic value and impact. In recent years, Halliburton’s Big Data Center of Excellence has proven that the industry’s dark data can be exploited with minimal risk to generate economic value for the organization using measurable metrics such as net present value, efficiency, accuracy, revenue, and cost savings. For example, a big-data-driven model for using the right mud could increase the production of a mature field by 30,000 BOEPD resulting in additional revenue of $1 million/day.

Digital Transformation Framework

Many challenges to accelerating the pace of digital transformation in E&P remain, including:

  1. “Old school” thinking that focuses on digitalization rather than transformation
  2. Data in silos instead of data pipelining through technology platforms
  3. Availability of the right talent

Many organizations are sitting on caches of dark data in their domain. Creating value from these data is a low- or no-risk activity, which requires less than 1% of the investment a drilling well typically needs, but it requires new-age thinking and action.

Recently, a national oil company in Asia worked with Halliburton to exploit the unstructured data for various joint ventures. Using a combination of digital transformation methods like Smart Transform, a 19% NPT was recognized from this data set, and a real-time model to extract such NPT in near real-time is being developed. Several other such opportunities exist in areas of equipment failure, supply chain, design of equipment, operations in the field, exploration, etc.

In previous eras, the linear adoption of technology advancement transformed organizations at a linear pace of growth. The Industry 4.0 revolution focuses on gaining unprecedented levels of efficiencies across operations, enhanced productivity at an accelerated pace, and a paradigm shift in how industries continue to operate in the future. The digital transformation of the E&P industry is of paramount interest; however there remain many challenges due to the legacy nature of the business and lack of proper investment in adopting technology advancements. A proven framework and solutions to accelerate its adoption in upstream oil and gas exist, providing for asset intimacy and real-time resource optimization for maximum economic value generation. This can enable our industry to be equal with the best practices of the current technology revolution and remain competitively viable in the energy landscape of the future.

Satyam Priyadarshy, SPE, is a technology fellow and chief data scientist at Halliburton. He was named as one of the top 50 key innovators on the leading edge of digital transformation by Smart Industry in its first list of Recognized Leaders for Digital Transformation in 2016. Priyadarshy has held several corporate leadership, academic, and research positions in various areas of business, technology, and science. He holds a PhD degree from IIT Bombay and an MBA from Virginia Tech University.

 

E&P Digital Transformation: Fundamental Next Step in Creating Value

Satyam Priyadarshy, Technology Fellow and Chief Data Scientist, Halliburton

01 February 2018

Volume: 70 | Issue: 2

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