Friday, June 21st, 2019
Happy Friday and welcome to Energized, your weekly look into the geopolitics, news, and happenings of energy markets.
Curated weekly oil and gas newsletter
It’s the third Friday of June and that means we’re releasing our second spotlight issue covering an important recent Houston event, the fifth Upstream Intelligence Data-Driven Drilling and Production Conference (DDDP).
DDDP was so chock full of rich content that we are going to spread our coverage over the next three issues of Energized.
This first issue is merely meant to start the conversation and get you acclimated with the broad topics of digital transformation.
EKTinteractive is proud to be the podcast sponsor for Upstream Intelligence. The supplement to this issue of Energized gives links to seven podcasts with leaders in the field of IoT applications in oil and gas. The supplement is available on our website here.
With all of the buzzwords surrounding the digital transformation space, it’s useful to separate fact from fiction by listening to industry influencers and veterans who are at the heart of driving this change.
At the conference, we couldn’t help but notice that most of the crowd seemed to be IT professionals and data scientists. If you are new to oil and gas and would like to learn “How the industry works.” You can find our popular 10-part mobile ready Oil-101 series at https://www.ektinteractive.com/oil-101/
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Part 1/3: The Dawn of Digitalization
Adapting to Change and Issues with The Current Operational Model
June Spotlight Issue: Data-Driven Drilling and Production Conference (DDDP)
June 11th and 12th, 2019
DDDP is the world’s largest data-driven oil and gas conference.
Over 750 guests, 60 speakers, and 60 exhibitors were in attendance.
As an energy education provider, it’s important that we at EKTi connect and learn from the companies that are successfully implementing digital solutions into their operations.
And boy did we ever learn a lot from DDDP. Here are some of the key takeaways.
First, DDDP is truly the pulse of digital transformation in upstream oil and gas.
Presentations and exhibitions provided clear readings on
- the financial feasibility of new technology
- successful or failed execution of new technology
- challenges in the field
- how digital change is implemented across different organizational structures
Challenges with Company-Wide Digital Transformation
Arguably, the greatest takeaway from the conference was the widespread struggle many companies are facing in successfully integrating a network of digital tools throughout their operations. Commonly referred to as a “system of systems”, this data-driven approach drives efficiency by interconnecting digital solutions across multiple business functions. As the system of systems scales throughout the organization, it effectively creates a multiplier effect by providing deeper insight into actual operations, speeding up time to value, improving products, equipment, and process designs, and reducing planned and unplanned downtime by coordinating logistics.
Well… That’s the theory anyway. It’s easier said than done.
To prove just how challenging pulling off a system of systems is, a Gartner study in 2018, which was referenced at the conference, showed that 86% of oil and gas companies surveyed said they were undergoing digital transformation, but of that 86%, 91% said that they are struggling to implement digital technologies at scale.
In most cases, the oil and gas industry is stuck at level 1, maybe level 2. Situated in steadfast silos, operational efficiency is measured on a micro-scale. In many cases, there is a lack of alignment throughout the company on the best way to approach digital transformation. Should tools be built in house or purchased from 3rd party vendors?
Building tools in house offers security and customization. On the other hand, vendors typically provide cheaper and more scalable solutions but require the customer to share personal data with the vendor.
Typically, there’s a mixture of both in house and vendor-purchased solutions scattered somewhat haphazardly into different business functions.
Many of the presenters showcased shining examples of improving operations with technology but admitted that they had not yet figured out a way for all of this data to be organized. Too often than not, a team somewhere in the organization will do something really well but there’s yet to be a lasting impact on the organization as a whole.
That being said, let’s not sell them short.
This isn’t like having Microsoft Office across most PCs; standardization isn’t easy.
On this topic, the following quote was heard from a panel of industry and company experts at the conference.
“The concept of standardization in oil and gas is foolish, you need enterprise capability to act on intelligence. Deliver intelligence when you can, but if you can’t act on it in a flexible application than it’s worthless, you need to have a shift in the operating model. Be agile as an entrepreneur to act on data-driven insight. You’ve heard of broad project implementation, huge drastic changes, that’s not the way to do this. Small solutions that work and improve the way things are done now: that’s what needs to be done.”
In response to this insight, another panel member raised the following question, “Well then do we want to change? Do we really want to transform? Is there an industry appetite for changing the way we do work?”
The first-panel member responded, “I’d say there’s a lot of tactical decisions being made with no overarching strategy. There’s no end game and that’s the rift that companies don’t understand. At the end of the day if these solutions can help you survive and be profitable then they need to be done.”
That’s another main takeaway from the conference. Digital transformation doesn’t have to be hard. Focus on building tools that improve the way things are done now, think of an end game, and then on top of that, gradually scale the tools across the organization. Between shrugs and sighs, this was the reality that many attendees came to understand. Maybe they had been overthinking it the whole time.
Crossfire & Crossroads
As it stands now, each major silo is comprised of smaller silos and each smaller silo has even smaller silos. And so on and so forth.
In many ways, this structure resembles a military organization. Think of a major offensive, requiring a division to advance in a coordinated effort. What is happening now is only one or two battalions out of the whole division (bolstered by valiant efforts from platoons of IT infantry), will break through enemy lines, only to look around and realize that the other battalions encountered heavy resistance and missed their objectives.
What I mean by missing their objectives is certain business segments failing to provide the proper investment or prowess to pull off actual change in their operations. Meaning that some business units will fall behind others, which makes any data collected less valuable because there are holes or dark spots in different segments.
Winning a few battles means nothing if you’re losing the war.
Nearly all digital tools and innovations are occurring at the company or platoon or even squad level when they really need to happen at the battalion or regiment level. Presenters and companies in attendance were painfully aware of this inefficiency. Some are trying to solve it too fast by thrusting initiatives on the entire corps with no foundation to handle the load. Others continue to rely on the platoons and squads, failing to realize that they need air cover and naval support to really make a difference.
Conclusion: Failure Under the Current Operational Model
The lapse in coordination is occurring due to an outdated operational model. When budgets, objectives, targets, and bonuses are developed for specialized teams there’s limited incentive for cross-functional collaboration. What’s more, the impact of a great tool is muted when that tool’s capability can’t extend beyond its own silo.
Thanks for reading!
The next issue of Energized will feature Part 2: “New Frontiers, Incremental Steps Towards Achieving Widespread Digitalization.”
Be sure to check out the latest episodes from our digital oilfield podcast series which are listed in the Energized IoT in oil and gas podcast supplement. Here’s the link again so you don’t have to scroll up.
Have a great weekend!
EKT Interactive Contributing Editor
Head Writer | Eau Claire Writing
Eau Claire Writing is a Houston-based freelance writing company that specializes in gas compression, turbomachinery, onshore and offshore drilling, and well service content for the oil and gas industry.
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