Is Digitization the Fourth Stage of the Hydrocarbon Revolution?
The use of technology has helped ensure the profitability of the oil and gas industry despite a 50% fall in prices in 5 years. Unmanned rigs are now commonplace, complex operations are monitored from a single control room, and leaks and emissions of greenhouse gases can be identified by drones and satellites, removing much of the need for direct human inspection. Numerous technologies are being applied in ways that can reduce cost and improve productivity. The key question, however, is whether the digital revolution can answer the sector’s biggest challenge: how to secure future production.
Oil demand is not falling. There may be 7 million electric vehicles on the world’s roads, but there are also 1.2 billion vehicles with internal combustion engines. The latest estimate from the US Energy Information Administration (EIA) predicts that, by 2050, the number of internal combustion engines will be 2.4 billion. Freight and aircraft will continue to be powered by jet fuel for the foreseeable future.
Substitutes are possible but not yet commercial. Oil demand may plateau but is unlikely to collapse. By mid-century, says the EIA, global oil demand could still be 100 million B/D, even with efficiency gains and green policies. There is no physical shortage of oil, but access to the resources remains constrained by politics. The areas that hold the most substantial resources, such as Venezuela, Iran, Saudi Arabia, and Libya, remain inaccessible to international investment for different reasons. Areas such as the Arctic are effectively closed to western companies that value their environmental reputation. The medium- and long-term challenge of access is a driving concern for companies that need to replace the 2 million, 3 million, or even 4 million B/D they currently produce. One answer must be for companies to make the most of assets they already hold. Across the world the typical recovery rate from a conventional oil or gasfield is only 35%.
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