Hydrocarbon future depends on “Oil and Gas 4.0”? Digital and AI needed to address challenges?

Even that international media is full of IOT/ICS, Industry 4.0 or Artificial Intelligence, the oil and gas sector is still one of the most conservative and technology reluctant sectors. To challenge this and propone not only technology as such, but also the new workforce behind it, Al Jaber stated that the future of oil and gas is not over, it has just begun. Increased globalization, which has resulted in a growing middle class, supported by new interconnectivity and data, the oil and gas needs to adapt to new breakthrough technologies. To counter growing energy demand worldwide, even when incorporating renewables and nuclear, more oil and gas production is needed. The hydrocarbon sector is still lagging behind, the Fourth Industrial Revolution has not yet opened the doors at most oil companies. To play a continuing pivotal role, oil and gas will need not only to adapt their technology drive and incorporating new technologies, but also work towards a new all-inclusive workforce. The latter will mean first and for-all that NOCs need to adjust their way of working, management styles to include women too. Gender equality in the hydrocarbon sector is still far from being accomplished, many glass ceilings need to be broken still. ADNOC, as also Aramco has shown, however has set its targets very high, leaping from a male dominated technology conservative company into a front-runner in AI and digitalization. In Al Jaber’s words, he wants ADNOC to be part of an “Oil and Gas 4.0”, in which the sector not only integrates new technologies, but embraces disruption and is willing to step out of its comfort zone.

Main focus needs to be on digital innovation, as the latter has been catalyzing economic growth worldwide. Global growth has led to increased demand for oil and gas, as shown in the current 100+ million bpd oil demand.  In the next 20 years, global demand could hit 110 million bpd (ADNOC) or even 120 million bpd (Aramco). The demand for natural gas is even to increase by another 40% in the same period of time.

These enormous challenges will not be able to countered by conventional and proven methods anymore. A new road needs to be travelled, in which “Oil and Gas 4.0” is going to play a pivotal role. Technology transformation is already on its way, but more is needed. Artificial intelligence, Big Data and blockchain, all buzzwords of the last years, will be incorporated into new strategies at NOCs and IOCs worldwide. The need for predictive analytics is clear, especially when looking at maintenance costs or the assessments and mining of terabytes of data and information. Full scale programs are already being put in place worldwide, IOCs such as ENI, Shell and BP, NOCs such as ADNOC and Aramco, are leading the way. After years of implementing departmental programs only, focusing on one or two smaller aspects of the upstream or downstream operational base, full integration is needed clearly.  The need for a combined approach throughout the total value chain is clear, as factors, such as increased profitability, operational efficiency or higher production, go hand-in-hand with new technologies and different ways of working. Al Jaber’s dream, including embedding innovation into every aspect of the business, is not only an Emirati dream. Other producers, such as Aramco, have also indicated that there is a need for a symbiosis between oil producers and technology companies.  For OPEC producers it is clear that digitalization of the workforce and workplace not only will generate higher revenues but also opens up possible opportunities for its native workforce. After decades of being the sole provider of revenues to their respective national economies, NOCs and others now are instrumental to the diversification of their economies, which includes providing the right framework for a technically savvy and highly educated local workforce.

As Daniel Yergin, the world’s leading oil historian, stated “knowledge is everything”.  There is a growing need for a convergence between the energy industry and the world’s leading “Silicon Valleys”. The hydrocarbon sector, used to dealing with commodities on a daily basis, should address Data as the New Commodity too. Oil and Gas 4.0 which describes the nexus of technology and energy is increasingly palpable with the rise in the number of partnerships between the oil industry and technology giants. Microsoft, for example, has a number of strategic alliances with entities like Chevron and Shell. Hydrocarbon giants however should also step out of their old comfort zone, as not only US based high-tech is available, European or emerging markets already are leading the race in some specific subsectors.  Digital transformation is not an US commodity only, as high-tech regions in the Netherlands, Germany or even India have shown already. The latter is also not anymore only related to incorporating digital tools to improve efficiencies to lower costs and expand production capabilities. Oil and Gas 4.0 should, and partly already is, be open for more, as it is linked to all technologies of the Fourth Industrial Revolution; namely artificial intelligence, Big Data, and the internet of things (IoT).

Still, Oil and Gas 4.0 could also be confronted by unwanted issues due to the continuing hype factor of it all.  To digitalize upstream, downstream and midstream operations, such as offshore drilling or unmanned drilling and production platforms, risks involved are still partly overlooked. The integration of legacy systems, third party systems and a conservative silo approach of management, are a recipe for disaster. The coming years, ADNOC and its compatriots will need to set up a strategy in which from the design of new projects, big data, interconnectivity, AI and cyber security, are being an integral part of the design. Without integrating the latter from the start, forcing third party vendors and engineering companies to adhere to oil company standards, the technology leap will open up the box of Pandora. NOC’s, such as ADNOC, can take however the advantage of being the full owner of the national system. Al Jaber’s dream is only going to become reality if his own workforce, experts and managers, are lined up and educated to deal with the unknown. The Future is Unknown, with Oil and Gas 4.0 ADNOC is leaping into the future, of which several parts are unknown. The knowns should however be enough to mitigate risks. The role of third party breaches, insider risks or the ever-growing state-actor risks, should be taken into account. Investing in the latter at the start of a project will increase CAPEX, but will bring on the long-run OPEC down. Further integration of new technology, such as sensors combined with AI, also can bring maintenance and operational costs on a daily basis down.

The full focus on Data Mining, declaring Big Data the new Commodity, some security and risk factors are still overlooked. The commercial drive to bring down costs, to address commercial and financial factors to increase resilience in a company or system, is not enough.  ADNOC at present hopes that incorporating artificial intelligence into the way it spuds wells and gets oil to market could reduce drilling time by 30 per cent next year and generate efficiency savings of up to $1 billion from last year.

From the start, the whole constellation or business sector should be equipped with a supporting system in which enough personnel and experts are lined up to support. For the mid- to long-term future, an applicable education system needs to be set up to address local or national challenges with regards to the local indigenous workforce. Without preparing for a ‘nationalization’ of the workforce, a new challenge will emerge as expats will still be ruling the sector for decades.  The targeted diversification of the national economy is still ongoing. Until now most of the diversification efforts have been targeting new economic and commercial sectors, putting new future life in the country after oil. Successes have been there, as shown in the growing IT, finance and logistic centers in the country. However, Oil & Gas 4.0 or Abu Dhabi 4.0 should not only focusing on technology implementation or high profile projects.

Al Jaber, and his team, have still another hurdle to take. Even that at ADIPEC, and at this week’s ADNOC Investment Forum, attention was given to transformation, gender equality and inclusion, the road to success is still long. Inclusion of 50 percent of the available national workforce (WOMEN) into the future of a NOC and NATION is needed. Strategies and plans are easy to set up, but implementation of such change in society is slow and full of hurdles. When taking Oil & Gas 4.0, implementation of new technologies, set up of Emirati Silicon Valley companies or new High Tech Universities, will take time and a lot of efforts.  Putting money on the table or inviting Western and Asian high tech champions to the UAE or GCC is necessary but no guarantee for success. Oil and Gas 4.0 needs to become Abu Dhabi 4.0, in which a real symbiosis will exist of Emirati men and women, both leading one of OPEC’s leading producers to the 21st Century as champions. Data is key, technology an instrument, but humans the driver, solution and reason for change. ADNOC’s partnerships of the future should include a full-scale investment of partners into the development of an Emirati/GCC based technology savvy young generation, made up of locals. Emiratization or Saudization is the future for stability, strength and progress. Technology is an instrument, a base requirement enabling change, while ADNOC’s Emirati employees are the future beneficiaries.