The Digital Paradox of Change in the Oil and Gas Industry

Most industries measure digital transformation by accelerated, highly visible outcomes—from new business models and efficient processes to experiences that wow customers and employees alike. But not the oil and gas industry. In fact, it may be following a completely different playbook.

To most industry outsiders, the pace of digital transformation for oil and gas companies may seem glacial. But, according to Geoffrey Cann, author and adviser on digital strategy and innovation in oil and gas, digital technologies are actually well-positioned to affect oil and gas operations in profound ways.

“Industry analysts, such as The International Energy Agency, predict that digital tools will expand reserves in the upstream by 5% worldwide. That’s 500 billion bbl of oil,” he said during the Americas’ SAP Users’ Group webcast Bits, Bytes, and Barrels: The Digital Transformation of Oil and Gas. “When you consider the current price point is $50 a barrel, the released value of this digital advantage easily amounts to several trillions of dollars.”

The Asymmetric, Chaotic Nature of Digital Evolution

Oil and gas companies are avid users of innovative technologies—and this openness shows as their operations become more intelligent in areas such as hydraulic fracturing and resource stimulation. But what separates their progress from the rest of the world is their limited use of newer technologies.

“What’s different is how the industry defines digitalization,” Cann said. “Most industries want to deliver a product, service, or business model that brings together data analytics and computational power to create an experience that is compelling or novel. But, for oil and gas businesses, the priority is to strengthen their operational foundation with data, analytics, and connectivity.”

When you consider the level of uncertainty and impending erosion of demand that’s casting a wide shadow over the industry, this approach makes sense. For example, the petroleum market could contract significantly if auto and truck makers and other transportation equipment manufacturers aggressively replace internal combustion engines with electric engines. But no one knows with certainty whether and how the industry will change over the next few years.

So, in the meantime, most oil and gas providers are choosing to focus on digital assets that drive cost improvements and productivity gains. But don’t be fooled—as Cann reminded said during the webcast, never underestimate the power of data, analytics, and connectivity.

“When I first started my career, data was basically numbers presented in rows, columns, and the occasional chart in a spreadsheet. Data was scarce,” he said. “But, now, data is ridiculously abundant and can represent images, sounds, and odors, along with measures like pressures, speeds, temperatures, orientation, and locations. Even the contents of text messages, tweets, and Facebook posts can be used to measure sentiment and emotions.”

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