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Oil, gas industry looking to digitalization to cut costs, advance ESG goals

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Oil, gas industry looking to digitalization to cut costs, advance ESG goals

The adoption of digital technologies could not only save the oil and gas industry tens of billions of dollars, but could also help better position upstream oil and gas operators to compete amid the energy transition, according to industry analysts.

The utilization of digital technologies such as advanced analytics, predictive maintenance techniques, wearables, 3D printing, and blockchain technology has already saved the oil and gas industry $10 billion, according to industry consultancy Rystad Energy.

Audun Martinsen, Rystad Energy's head of oilfield services research, said digitalization, which involves converting text, pictures or sound into a digital form that can be processed by a computer, can deliver as much as $100 billion in oil and gas industry savings.

These digital technologies allow companies to "derive a better understanding of reservoirs and the integrity of facilities," Martinsen said in a Nov. 18 email. They can provide "considerable savings in the supply chain and reduce the need for manhours," resulting in substantial cost savings that have become essential as crude oil prices remain rangebound in the low $40s per barrel, the analyst said.

While typically slow to change, "the current commodity price environment is forcing operators to adapt just to survive," analysts with Bank of America said in a Nov. 16 note.

Martinsen indicated that within the industry, "machine learning on field drainage optimization, seismic visualization, and reservoir software have come the furthest." At the same time, the use of digital twins — the virtual replicas of physical devices used to run simulations —"is catching up," the analyst said.

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Schlumberger's MagniSphere high-definition nuclear magnetic resonance logging-while-drilling service can improve production and recovery in complex reservoirs.
Source: Schlumberger Ltd.

COVID-19 accelerated the adoption of remote drilling and completions activity by oilfield services majors, including Schlumberger Ltd. Halliburton Co. and Baker Hughes Co., Martinsen said. The analyst said that engineering, procurement and construction firms capitalize on digital twins and preventive maintenance investments.

"We have not wasted the crisis, as we could say, taking the opportunity to restructure our organization to reset to the new, what we expect in normal," Schlumberger CEO Olivier Le Peuch said during the company's third-quarter earnings call Oct. 16.

The company is focused on its fit-for-basin structure and advanced digital offerings designed to support improved production recovery, which is an increasingly critical area of focus as clients look to improve returns from mature assets, Le Peuch said.

Digitalization supports the energy transition

COVID-19 has accelerated the increasingly rapid adoption of digital technologies as a way to cut costs, however the move towards digitalization also supports exploration and production companies' efforts to expand their role in the energy transition, Martinsen said.

"With low oil prices and a focus on emissions reductions, digitalizing the oilfield is important to realize cost savings and to keep emissions down so [exploration and production companies] adhere to their [greenhouse gas] targets," the analyst said.

BP PLC, Royal Dutch Shell PLC, Equinor ASA and Repsol SA are among the European oil majors committed to reaching carbon neutrality by 2050. The U.S. majors trail their European counterparts in commitments to achieve these goals.

"The COVID-19 pandemic has revealed the speed at which the environment can respond to lower carbon levels. This has accelerated the debate on how to fuel economic growth while transitioning to a lower-carbon future," Baker Hughes' Chairman and CEO Lorenzo Simonelli said during the company's Oct. 21 earnings call.

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Many oilfield services companies are investing in carbon-capture technology to support their customers' cleaner energy initiatives.
Source: CO2CRC

Baker Hughes and Schlumberger are developing avenues to contribute to oil and gas operations' decarbonization and see opportunities for their technology in carbon capture and energy storage.

Baker Hughes also plans to expand the use of digital technology and remote operations in both its oilfield services and turbomachinery and process solutions segment, Simonelli said.

Baker Hughes, on Nov. 3, agreed to acquire Compact Carbon Capture, or 3C, a technology development company specializing in carbon capture solutions.

Further adoption impeded by lack of data sharing

While the industry is making strides in adopting digital technologies, the lack of oil and gas data sharing is a significant impediment to further adoption, Martinsen said.

"To really maximize on the learning of digital solutions and big data, it is important that both [exploration and production] companies and [oilfield services] companies share data and best practices, with each other and peers," Martinsen said.

As "entrenched industry veterans" leave the workforce and are replaced by "new age engineers" looking for new approaches, the workforce's fundamental shift should help facilitate change, Bank of America analysts said.

"Improved data collection is helping, with machine learning replacing humans and improving the accuracy of the data. And advancements in data analytics are helping users pinpoint which data points will help them make better decisions," the analysts said.

"Data collection will play a critical role in solving the emissions problems as operators can't make advancements in [environmental, social and governance] if they don't track emissions," the Bank of America analyst said.