Since 2014, the oil and gas industry has rightly had a focus on resetting expectations for a lower priced environment.
Now that we are in a more stable position, we should allow ourselves to think forward and consider what might be different about how we will work tomorrow versus today – what impact will new technologies have on business operations, and what will the thriving industry of the future look like.
In response to the downturn, the North Sea experienced a period of aggressive but necessary cost cutting with a focus on headcount reduction, supply chain renegotiation and deferral of work. This was followed by a second wave of value creation, with a core focus around reliability, production efficiency, shutdown frequency, and time on tools, as well as more dynamic relationships with the supply chain. This has resulted in a more sustainable position for the industry, with improved production and a lower OPEX on a per barrel basis.
The industry is now entering a third wave, moving to the next level of productivity and efficiency. A central theme to this is digitally enabled transformation, which is creating a new role for technology within our industry. It is driving not only efficiency, but increasing the potential for new business solutions. However, after three years of modest investment, the North Sea has fallen behind somewhat.
Today oil and gas is a marginal industry, and other basins are succeeding by constantly looking to drive further value and adopting new ways of working. Those operating in the North Sea are recognising that we need to be more competitive – not amongst ourselves, but globally against other basins, where both operating and development costs are currently lower and may be perceived as more attractive for investment. Getting on board with technology is now critical – not only to support our need to be more competitive, but also to support the UK’s ambition to develop a leading supply chain export industry.
Digitally enabled transformation will be crucial for the longevity of our industry, but to successfully integrate this into business operations and create future value requires a shift in both mindset and culture.
According to the KPMG 2017 Global CEO Outlook survey, Oil & Gas CEOs are ramping up investment targeted at emerging technologies and innovative solutions, reinforcing the view that the industry is becoming more open to explore new ways of working with technology.
Of fifty-one global oil and gas CEOs being surveyed, eighty-two percent stated that they were confident they will see company growth over the next twelve months, and much of this growth is being achieved through investment in data analytics tools, Internet of Things (IoT), and intelligent automation.
The CEOs’ priority objectives for this investment is to achieve bottom-line growth, transform their businesses, and create organisational resiliency. However, despite commitment to emerging technologies, CEOs remain concerned that implementation will be challenging.
Whilst the oil and gas industry has always been data rich, the level to which this data is leveraged to bring insight and automation across the business will substantially increase over the next decade. Artificial intelligence (AI) and a plethora of digital capabilities are already here, but for the most part, in early proof of concepts or discreet instances. The oil and gas industry has a fantastic opportunity to leverage some of these technologies. However, organisations must also carefully consider which projects will deliver the best performance outcome, with a fair balance of speed, risk and cost, as well as impact on the business.
Most importantly, to gain value from adopting new digital technologies, organisations must consider the impact that this technology will have on people across the business. Overcoming resistance to change remains a huge challenge for many organisations, with forty-three percent of organisations citing this as the biggest impediment to digital success (KPMG Harvey Nash 2017 CIO Survey).
It is therefore vital that organisations focus on people and carefully consider how to engage and bring their most important asset on this digital journey. Overlooking this, or getting this wrong, can have a profound and negative impact on achieving business objectives.
As the industry considers the implications and possibilities of adopting new technologies, the question is – does the North Sea have the building blocks of vision, skills and behaviours in place today to succeed on this journey and lead this digital revolution? To get the North Sea industry into the 21st century, we have to be open to new opportunities and we have to think beyond today.
Lawrence Hunt is a director for KPMG and Head of Oil and Gas Consulting in Aberdeen.
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