Conquering Volatility through Oil and Gas Industry Technological Change

Digital technologies can assist oil and gas CEOs and executives in reducing costs, increasing output, and lower carbon emissions.

FREMONT, CA: The oil price roller coaster shows no indication of waning. There was a drop in oil prices on significant exchanges during the first wave of the COVID-19 pandemic in April 2020. It had risen above $100 in two years due to increasing demand, geopolitical instability, and supply chain disruptions. And the industry anticipates additional obstacles. In the medium term, organizations must maintain output despite rising factor costs and talent shortages. In the coming decades, the global energy revolution will likely result in the closure of many oil and gas value chain assets while all facilities are under pressure to enhance efficiency and reduce direct carbon emissions.

Oil and gas businesses are working to transform their operations by, among other things, enhancing asset availability and reliability and decreasing expenses and carbon emissions. Leaders acknowledge the necessity of achieving significant breakthroughs in these areas, surpassing the gradual adjustments that have characterized best practices in the past.

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Numerous CEOs see digitization as the key to unlocking the profits they want. In the past decade, companies in various industries have optimized complex processes, identified elusive sources of losses and inefficiencies, and responded more effectively to volatility, shocks, and disruptions using data analytics, artificial intelligence, and the Industrial Internet of Things.

The rapid pace of innovation in these technologies of the Fourth Industrial Revolution will continue, building on past triumphs supported by substantial investment. The oil and gas industry sees potential in a wide range of fast-growing technologies, including enterprise cloud computing, augmented reality, drones, and blockchain data exchange.

A holdup in the development of technologies

Unhappily for CEOs, however, few oil and gas businesses have applied digital technologies at the scale necessary to achieve significant gains in their most important performance indicators. Research conducted by McKinsey reveals that, although virtually every organization has implemented digitization initiatives in various operational areas, 70 percent of these initiatives have not advanced beyond the pilot phase.

And technology is typically not the issue. Many of these pilot projects have achieved or surpassed their technical objectives. Instead, digital changes stagnate because of one or more of three significant cultural and organizational obstacles.

The value generated by technologies and use cases is not always obvious. This may be because they are not addressing the critical obstacles to improved bottom-line performance. Or, project teams may be unable to demonstrate the financial benefit of their work. Management will unlikely devote the necessary resources for widespread deployment if they do not observe improvements in the essential issues.

Even if managers are passionate about digitalization, this does not necessarily translate to employee enthusiasm. New technologies necessitate the development of new skills, the adoption of new procedures, and the modification of established work practices. This does not occur unless individuals receive the appropriate incentives and assistance.

Many businesses regard digitization as a collection of isolated projects. Pilot phases are acceptable since integration with other systems is less crucial, and new and current ways can run simultaneously. Every new digital strategy must be wholly integrated with the organization's IT and operational technology (OT) infrastructure for success at scale.