Digitalization and Innovation in the Energy Industry
The Energy Industry is in a dual transition era from the last two decades — transitioning into the digital world as we know it today and dealing with the energy transition challenge shifting from a fossil-based system of energy production and consumption to renewable energy sources. (You can read about an introduction to the energy industry here — insert link -). The traditional Energy Industry has been at the forefront of innovation since man first discovered fire to the discovery of electricity and the first steam engine to the drilling of the first oil well and today we are in an era of digital innovation and disruption. The Energy Industry is taking another leap globally, this time in the digital front. Digitalization is traditionally defined as the conversion of data (objects) such as texts, pictures, or sound into digital format by a computer. However, here digitalization is defined as the deployment of these digitized data and tools to enhance organizational and business processes. It is also the application of digital technologies and digitized data to influence business and organizational processes to transform the way employees, partners and customers interact within the Energy Industry. According to a report by the IEA, the energy industry crossed the Zettabyte (1 Zettabyte is equivalent to 1,000 Petabytes or 250 million DVDs) threshold in 2017 which ushered the Energy Industry into the ‘Zettabyte Era’.
Pioneers in the digital front are charting new ways to accelerate digital innovation and adoption in the industry to help improve safety, minimize downtime, improve productivity, increase efficiencies, and help fight climate change. Innovation is simply an act, the act of turning an idea into practical reality. Innovative start-ups float technological solutions regarding digitalization and automation to create value while increasing efficiency and productivity across the value chain. It has become paramount to adopt new technologies to streamline inefficiencies in the face of uncertain oil prices by disrupting existing business models and workflows by improving old systems or introducing new technologies in the Energy Industry value chain. Which is where digitalization and innovation comes in. Some of these exciting emerging technologies and systems to do with both digitalization and innovation in the Energy Industry have been deployed and tested in the last decade while some are still at the concept stage. The push for the adoption of digitalization and innovation in the Energy Industry has never been more apparent with the recent calls for a carbon neutral future which aims to reduce all carbon dioxide emissions to net zero by 2050 by multi-government think tanks such as the International Energy Agency (IEA) and the European Climate Foundation (ECF). The adoption of digitalization and such emerging technologies in the industry will ensure safe, efficient, faster, and less expensive systems to minimize downtime and increase productivity while improving overall safety, and operational efficiencies within the environmental, social and governance (ESG) framework to achieve the climate targets.
Innovation is the ability to see change as an opportunity — not a threat according to Steve Jobs and this is the call of this article, for the Energy Industry to see innovation as an opportunity especially in the digital front. However, the Energy Industry is no stranger to innovation as the history of innovation in the Energy Industry goes all the way back to 1847 with the drilling of the first oil well in Baku Azerbaijan, to the introduction of wireline logging in 1927 and seismic survey technology in 1928. By 1949, the Energy Industry moved into uncharted territories in search of hydrocarbons with the drilling of Deepwater wells in the Gulf of Mexico in 1949. Recently, the shale gas revolution of 2010 and the renewables innovation of the last decade is changing the landscape of the Energy Industry forever. It is not to say there has not been any innovation in the Energy Industry to do with digitalization as the Energy Industry is an early adopter of digital technologies since the 1970s. This is highlighting the fact that innovation is no doubt ingrained in the DNA of the Energy Industry. Digital technologies and innovation, and more specifically, digitalization and automation technologies are increasingly being deployed in the Energy Industry all over the world, helping the industry to successfully address inherent challenges and the current challenge of increasing energy demand and lowering carbon dioxide emissions due to climate change.
However, there is a need for the full integration of digitalization and innovation for the Energy Industry to catch up with the pace of the current shift in the energy transition era as the world move away from fossil-based sources of energy to renewable energy sources. This can be achieved by embracing innovation and digitalization by key energy industry players across the whole value chain. Transformations in the energy industry through embracing innovation and digitalization can only be achieved through collaboration and knowledge sharing. This will ensure the energy industry harnesses technological breakthroughs to accelerate transition to a digitalized future globally. There is currently technological breakthroughs and innovations the energy industry can leverage in emerging new technological advances like Industrial IoT, big data & analytics, blockchain, artificial intelligence (AI) & machine learning (ML), deep learning, machine vision, augmented reality/virtual reality (AR/VR), scalable computing systems, cloud environment, unmanned systems, blockchain, industrial cyber security, and more. Integrating these new and emerging technologies into the processes and operations of the Energy Industry value chain will ensure more safer operations, financial predictability, risk mitigation, real-time insights and integrated insights for quick decision making, the creation of new frontiers and the addition of value.
The Energy Industry can create value through every rank of the value chain from exploration right to the customer by adopting digitalization and innovation. Some of the processes within the value chain where value creation can be achieved include safety management, lowering cost, efficient management of supply chain & logistics, behavioral change, fraud detection, process automation, creating better experiences for all stakeholders and cyber security. As the Energy Industry tends towards digitalization, it is imperative to take cyber security as a priority to ensure no value is lost due to digitalization as it is one of the greatest challenges so far posed to adopting digital innovations in the Energy Industry. The Energy Industry can apply disruptive analytics to old and new data to extract insights to inform decisions and optimize planning from complex data. Radical automation and machine learning can help optimize process controls to enable stakeholders derive molecular value and increase flexibility to the operations while driving safety and efficiency. Specifically, some areas where the deployment of digitalization and the application of emerging new technologies can optimize processes within the Energy Industry include the following:
Drones and Unmanned Aerial Vehicles (UAV): Drones can be employed in monitoring of activities from drilling sites to spills, fires, emergency situations. These can greatly help to improve safety and increase visibility by deploying drones to monitor activities in emergencies rather than sending out personnel to the field. The industry can benefit largely in terms of cost reduction by flying drones for routine site inspections rather than flying out personnel to the site.
Augmented Reality (AR): The industry can benefit from AR technology where onsite technicians can be linked directly with off-site specialist through AR where the experts can guide the technicians through audio and video thereby reducing errors and cost of flying experts to remote locations. This is even more paramount with the Covid-19 pandemic induced lockdowns all over the world, critical facilities can be maintained and repaired in this way. With AR, data can also be used to transmit and overlay relevant field data where a field technician can visualize for instance exactly where a pipeline is in the subsurface to avoid accidents during digging for repairs or other works.
Virtual Reality (VR): VR allows for the user to go into the digital world rather than overlaying images as we have it with AR. The energy industry can greatly benefit from VR in terms of safety where personnel are made familiar with highly complex drilling platforms, machineries, facilities, and systems before they go to site. It can also be used to assess site risk, optimize operational routines, and improve situational awareness for improved safety.
Blockchain: The energy industry can benefit from blockchain technology as it is today especially in the aspects of data exchange and transmission. Blockchain technology will allow for digital information to be distributed in the industry efficiently and transparently but won’t allow the data to be copied. Blockchain technology can also be employed in the O&G industry especially in the terms of commodity tracking and trading with blockchain ledgers that are inexpensive and secure which can be integrated into the energy industry supply chain.
Big Data and Artificial Intelligence (AI): Digitizing oil and gas pipelines, refineries, critical infrastructure, facility, field, and exploration sites, brings all the related data on a single platform. The industry can leverage on this big data and the use of AI to help organizations in decision making with accurate data. Over the years, the energy industry has collected huge amounts of exploration data using hundreds or thousands of sensors on offshore buoys, imaging equipment, and other technologies. The data is collected using a wide range of different sensors and micro sensors embedded into refineries, pipelines, rock formations and other critical infrastructure. These can detect and transmit a variety of field and infrastructure data such as movements, vibrations, leakages, corrosion, and others. In addition, the companies collect a lot of markets data as well as global oil trends to know the direction the industry is taking. Interpreting and understanding the huge amounts of data can help companies to better plan its activities. However, without the right analytical tools, the raw field, and market research data are of little use. Using data analytic tools, the companies can detect patterns and draw useful insights that help them to quickly react to changes or potential defects or failures. In addition, the software tools, including artificial intelligence, can greatly help the oil and gas companies to make better drilling, operational and management decisions. The analytics and AI will provide the oil and gas companies with the opportunity to realize their full potential by transforming field and market data into actionable data. The companies can utilize the in-house and external expertise and platforms to analyze their data.
Despite all the attendant benefits of digitalization and innovation, adopting it fully is not without challenges. The biggest barrier as mentioned earlier is to do with cybersecurity with increasing cyber-attacks — ransomware, malware, phishing, whaling, botnets, it is becoming more difficult to fully implement digital technologies. Other challenges include data possession and protection, who owns the legal rights and control over a single piece or set of data elements? What about data privacy which regulations like the General Data Protection Regulation (GDPR) of the European Union aim to ensure Data Protection and Privacy is put front of any form of digital technology. Adopting digital technologies will also disrupt business models while transforming such business and an attendant effect of such a disruption is the job losses that comes with it — how do you train the workforce of the future to adapt to such changes? Generally, there is a mistrust and lack of acceptance of new technology among the populace — how does the Energy Industry engage the public and impact behavioral change. The foregoing and a lot of other such questions can make implementing a digital strategy seems challenging but once taken into consideration before the role out of such a strategy, the digitalization era will eventually flourish.
Innovation and the adoption of digital technologies will open new access to greater possibilities where otherwise complex targets within the energy industry can be achieve. However, piloting, and early adoption of technologies often takes a long time, partly because of risk aversity and due to limited opportunities to test solutions in the field. Collaboration among key stakeholders with the supply chain on piloting and de-risking of novel digital technologies is therefore paramount and vital to accelerate deployment and adoption of digital technologies in the energy industry. The imperative for the adoption of