What's new in production

“It’s tough to make predictions, especially about the future.”

Yogi Berra’s possibly apocryphal observation about the peril of predictions clearly hasn’t dampened anyone’s enthusiasm for making them. So, January—the high season for such things—is the perfect occasion to look over the shoulders of a few prognosticators in our part of the present.

For its report, Oil and Gas 2030, IBM interviewed more than 100 corporate-level executives from different parts of the industry ecosystem. “Because of the long investment cycle of the industry, we looked two decades ahead, to 2030.”

Some survey highlights: While 61% consider technology progress to be an important external force today, a full 81% expect it to be important in 2030. For the same period, 42% of respondents included energy source availability as one of the top five external forces. Interestingly, they anticipate that it will carry the same importance—no more and certainly no less—in 2030, as it does today.

Improved production technologies are essential. Seventy-three percent of the executives … interviewed said that improved production technologies were essential to enhance operations in the future and reduce environmental impact. Fifty-nine percent of respondents named seismic/reservoir data modeling as the area with the greatest potential for technology to improve business and operational performance, closely followed by integrated operations (51%). Business process management rounded out the top three (35%).

One survey respondent, a vice president of corporate strategy, made this interesting, forward-looking comment: “In the future, we need more R&D partnering among oil and gas companies, as the future R&D is too complex for any one company to manage.” The report underscores the idea, with this comment: “Companies have historically depended on service providers and collaboration with research institutions and universities for technology development and deployment. Increasingly, advanced R&D alliances with entities within and outside the industry will be required to develop solutions for future operational challenges.”

The energy transition. While not a topic normally under this column’s purview, we note that “transition” is a word appearing with increasing frequency in predictions regarding the oil and gas industry’s business side. To illustrate, PwC, in “Oil and gas trends 2019,” asks: In light of the growing impact of the energy transition, is it inevitable that major oil companies will own utilities or other non-traditional businesses, such as electric vehicle charging stations—and if so, are they well placed to succeed?

The company answers: Inevitable? Maybe not. Worth considering? Certainly. As the energy transition gathers pace, the larger integrated oil and gas companies will need to consider the shape of their portfolios, and whether they include more grey and green molecules, to ensure longer-term sustainability. This is not to suggest that hydrocarbons don’t have a place in the energy mix of the future. Long-term forecasts still suggest that about 75% of global energy demand will be met by hydrocarbons well into the future. So the global economy will still need oil and, to a greater extent, gas. Moreover, the importance of gas will grow, given its role as a transition fuel to the low-carbon economy.

However, as the world seeks more low-carbon energy sources, and as the electrification of energy is growing, there is a compelling logic to include non-traditional enterprises in a business portfolio. With the added benefit of owning the platform—including the customer interface—a combination of current retail stations, electric vehicle charging sites and offshore wind power generation could create powerful new business models, which also might include alliances with players outside the traditional market… For oil and gas majors, considering acquisitions of power utility companies, for example, or investing in low-carbon plays from wind energy to electric vehicle (EV) charging makes sense.

Beyond the digital frontier. Just when you thought you had both feet firmly planted in the digital frontier, a report from Deloitte says you probably don’t. Tech Trends 2019: Beyond the digital frontier is the latest in the series, all with a persistent theme: “…the increasing, often mind-bending, velocity of change. A decade ago, many companies could achieve competitive advantage by embracing innovations and trends that were already underway. Today, this kind of reactive approach is no longer enough. To stay ahead of the game, companies must work methodically to sense new innovations and possibilities, define their ambitions for tomorrow, and journey beyond the digital frontier.”

Top-of-the-iceberg technologies. The report is not industry-specific, but the application of its ideas to oil and gas is easy to visualize. Among other things, the report looks at trends emerging in “top-of-the-iceberg” technologies, such as AI, intelligent interfaces, and experiential marketing. There’s also a focus on server-less computing, advanced connectivity, and “DevSecOps” (essentially the integration of security culture, practices, and tools into software development) which the company says are more foundational and enabling, although no less critical to innovation and growth. And, it offers this reassurance: “Those feeling overwhelmed by change may take some comfort in the fact that all of these trends are grounded in the nine macro forces. As in chaos theory, patterns and structures eventually emerge from perceived disorder.” You might take more comfort if you knew what those nine macro forces were, but don’t worry; the report explains them. While it’s hard to know how reassuring it is, the report also makes this observation: “With macro forces, it’s the controlled collision that leads beyond the digital frontier.”