How the digital economy will impact oil and gas

Five ways the new rules will go straight to the bottom line.

By Brent Potts, SAP July 13, 2016

Think your company holds a unique, defensible position in the oil and gas industry? Maybe and then again, maybe not. We are witnessing a radical transformation in global manufacturing unmatched by anything in the past. The new digital economy is upon us and companies failing to reimagine their businesses could lose whatever competitive advantage they hold in the market. Five major technology trends have collided to shape what is becoming known as the "Digital Economy."

Hyper-connectivity, supercomputing, cloud computing, cybersecurity, and smart products have created a world where traditional boundaries of products versus service offerings no longer exist. Individuals, businesses, and societies are connecting in real-time, creating a world that is more collaborative, intelligent, and responsive. Fortunately, the oil and gas industry has been highly automated and digitized for decades.

Yet, the technology powering the digital economy is taking connectivity to a new level, transforming nearly every aspect of operations and customer engagement. Early adopters are growing shareholder and stakeholder value faster than their peers; while those failing to adapt are falling behind. Staying ahead of the curve means taking a hard look at existing practices and reimagining everything from business models and processes to work management solutions.

Characteristics of the digital economy

Over the past decade there have been significant changes in how people and businesses connect. Building on the popularity of social networks, enterprises have established their own business networks to connect suppliers, customers, and internal systems. The result is a growing global trade that SAP Business Trends estimates will reach $65 trillion by 2020. Add to this, the rise of the Internet of Things with an estimated 45 billion connections between devices by 2020, and you have a business environment of endless possibilities. To successfully adapt, one must first understand the five main attributes of the digital economy:

  1. Digitized and tracked. In a digital economy, analog objects generate digital signals that can be measured, tracked, and analyzed for better decision-making. While the oil and gas industry has been ahead of the curve on digitization for over 30 years, digitalized assets have been limited to high-value equipment and machinery. Now, however, lower costs for sensor technology are allowing operators to push more processing out into the field. For example, companies could connect multiple oilfields to improve forecast accuracy and increase profitability on a well-level basis.
  2. Connected. Linking assets, suppliers, workers, and stakeholders by wireless communications allows people to make data-driven decisions, thereby improving safety, efficiency, and visibility across the enterprise. By connecting remote pipelines to each other and leveraging predictive maintenance, oil and gas companies are eliminating unexpected failures, improving asset integrity, and increasing asset uptime.
  3. Shared. The digital economy operates on sharing. Soon companies will buy only what is needed and pay as they go. Purchasing what is needed lowers inventory costs, while buying usage as a service allows companies to pay only for the time used and value received. Consider the possibilities of true collaboration among service station operators, third-party carriers, refineries, and terminals to consumers. Oil and gas companies could automate the replenishment of tanks, use best-buy scenarios, and plan optimized truck routes for deliveries to service stations.
  4. Personalized. Another characteristic of the digital economy is customer personalization. Personalization means customers get tailored products and experiences from their favorite brands when and where they want them. Imagine delivering the specific type of fuel a gas station prefers at the exact moment it runs out. Or providing fleet drivers with specific routes optimized to their personal preferences and driving habits.
  5. Direct. The digital economy also allows oil and gas companies to by-pass the middleman, eliminating unnecessary intermediaries or channels and creating a more direct relationship between buyer and seller. A simplified ecosystem has less friction and lowers the barrier to entry for players in another part of the value chain. Remote service monitoring is a good example of more direct operations. Leveraging remote intelligence to track, monitor, manage, report, and resolve asset issues throughout the service lifecycle eliminates the need to have full-time, local personnel.

What it means for oil and gas

The digital economy is transforming people’s lives, giving them greater convenience choices and value than ever before. It’s transforming society with increased efficiency, economic development, and improved problem solving. And, it is transforming businesses by giving decision makers new insights to help optimize processes and make smarter decisions. The resulting value-added benefits can positively impact a company’s bottom line.

For example, oil and gas companies can strengthen customer loyalty by developing hyper-personalized products and services and a more unified end-user experience. They can also drive new innovation through technology platforms that enable the sharing of ideas from anywhere and anyone. Data-driven, actionable insights also help companies get more out of constrained resources with improved processes such as real-time resource allocations, more agile infrastructures, and sophisticated applications that can create greater abundance of scarce resources. Finally, the digital economy can drive efficiencies by preventing disruptions and automating processes such as maintenance and workload schedules.

Oil and gas companies have a unique opportunity to leverage the efficiencies and growth promised by the digital economy. It begins by looking for ways to digitize content and then capturing, analyzing, and delivering the resulting data in easy-to-consume formats so that real action can be taken. Now is the time to activate, optimize, and transform to secure new competitive advantages and establish sustainable leadership in this new world.

Brent Potts is the senior director for global marketing for the oil and gas industry at SAP. He is responsible for equipping the field sales organizations with core and industry-flavored content to facilitate sales in the global oil and gas industry.

Original content can be found at Oil and Gas Engineering.