The Implementation of Industry 4.0 in Oil and Gas

The Implementation of Industry 4.0 in Oil and Gas

January 13, 2021 | Oil and Gas

Digital transformation initiatives are driving the fourth wave of the industrial revolution with technologies like Artificial Intelligence (AI), the Internet of Things (IoT), robotics and advanced analytics. As a result, spending on advanced infrastructure has increased significantly. According to IDC, worldwide spending on digital transformation will reach $2.3 trillion by 2023, which will be more than 50% of all technology spend. Digital transformation is fueling long-discussed Industry 4.0 initiatives and the shift to real-time data access and intelligence is transforming the way enterprises conduct business. However, most Industry 4.0 projects are still in the early stage with limited use cases.

The Present Scenario of Industry 4.0 in Oil and Gas

When it comes to the oil and gas industry, the last decade saw a massive upgrade in terms of technological enhancements. Oil price drops in 2014, along with increasing regulations, forced the oil and gas majors to shrink their IT spending. However, the wide spread of oil and gas operations, coupled with volatile and risky work conditions, have led companies to leverage the benefits of Industry 4.0 technologies. Companies are significantly adopting technologies like IoT, AI, advanced analytics, and robotics to enhance operational efficiencies, cut costs and optimize manual processes.

A Game-Changer for the Oil and Gas Industry

According to the International Energy Agency, the widespread use of existing digital technologies in the oil and gas sector could decrease production costs by 10% to 20%. Companies are increasingly investing in applications like logistics and inventory management that can be enhanced with the help of digital technologies. Predictive maintenance for equipment and digital process optimization are a few of the applications gaining traction in oil and gas.

Technologies like seismic imaging are helping companies to experiment with 4D models in exploration processes and sensor data is being leveraged to determine the right drilling methods in production. In midstream operations, key areas of transformation have been data management to track inventory levels and running logistics operations seamlessly. Digital procurement, predictive maintenance, labor training and real-time operations monitoring have been few of the key areas of transformation in downstream segment. Automating oil rigs and smart exploration have been the use cases in the upstream domain.

Challenges of Industry 4.0 Implementation in Oil and Gas

Despite all initiatives, the gap in failed and successful implementations in oil and gas is not narrowing. One of the primary reasons for the failure in seamless implementations has been a lack of digital maturity. According to global studies, on a scale of 1 to 10, oil and gas companies have a digital maturity between 4.5 and 5.

When it comes to leveraging real-time data and insights, the oil and gas industry is falling behind. The operations of most oil and gas companies are cross borders and the decentralized nature of these operations makes it difficult to roll out Industry 4.0 initiatives in a seamless and timely matter. The processes of conceptualizing, scoping, draft, pitch, review and funding are complex. By the time, the projects reach the final implementation stage, the nature of the core business problem will have shifted in a way that the solution is no longer appropriate.

The rollouts of digital technologies in the oil and gas domain are slower, which even lead to the technology becoming obsolete by the time it’s implemented. Lack of in-house technical expertise, reluctance to move on from traditional work practices and complex regulatory compliance in the sector are a few of the other primary challenges that companies have reported to be facing with Industry 4.0 implementations.

Strategic Approach Towards Industry 4.0 Implementation in Oil and a Gas

Companies need to start their Industry 4.0 journey by making their workforce realize the potential of the digital transformation. Companies can consider upskilling or hiring a workforce to enhance the technology skillset in-house. The next step should be to identify the current baseline of equipment and technology in the organization. Once the baseline infrastructure is assessed, identify the goals of Industry 4.0 implementation and decide whether the need for digital technologies is to fill the operational gaps or to enhance the current operations. And in the final stage, organizations should work on the use case and the technology with which they need to start their journey towards a digital enterprise.

Certainly, oil and gas hasn’t been a front runner in this space, but it has proved to be one of the quickest to realize the potential of Industry 4.0. Industry leaders like Shell, Chevron, and BP have not left any stone unturned to mark their presence in the fourth revolution and have made billions of dollars of investment collectively. It’d be interesting to see the outcome of the ongoing technology implementations which are expected to be visible by 2025 and are expected to completely revolutionize oil and gas.

One of the key aspects in the journey of these big enterprises has been the wide scope of their implementation, which was extended to companywide initiatives and not just limited to a particular technology aspect. To achieve its complete potential, Industry 4.0 should be observed from the perspective of an enterprise-wide initiative that would meet the present and future goals of an organization. Doing so, will not just result in companies with seamless operations but also a significant return on their investments for a long time.

What’s Your Plan for Procurement and Supply Chain?

As 2020 turns into the year of disruption, GEP’s unparalleled software and strategy solutions  featuring end-to-end digital transformation  ensure your procurement and supply chain organization stays resilient and effective. Find out how GEP can help  talk to us today.

Santosh Nair

Vice President, Technology

Santosh has over 12 years of experience managing large-scale procurement transformation engagements for leading Fortune 500 companies.

At GEP, he’s responsible for developing new products and services by incorporating complex aspects of mobile interfaces, social media, cloud computing and big data.

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