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Digitalization is now or never

Perfect Storm Calls for Change and Evolution

With this unprecedented double crisis composed of Covid-19 pandemic and barrel price war, the Oil and Gas industry is now facing an uncanny situation.

Never before has the drop of demand for Oil been so sharp, leaving no time to producers to adapt their level of Oil supply and letting prices nosedive to historical levels.

Out of this sudden crisis, some new challenges appear for the Oil & Gas industry with medium term perspectives.

After this shock of demand and a global recession around the corner, the volatility of the barrel price should last for a while.

How to Restore Profitability after Containment?

Thus, tomorrow challenge for the Oil & Gas operators which will survive this quarantine period is clear: how to restore their profitability?

In short-term, cutting capital expenditure (Capex) is the easiest decision, but is not a sustainable solution, as new projects have to be developed to replace fields depletion.

The only long-term option available in operators’ hands is to decrease their operational expenditure (Opex) and restore gross margin again.

Yet reducing Opex is not an easy task, it requires a constant effort in innovation and a new mindset to explore new ways of producing.

No time to wonder, jump in the digital train

For sure times to come are going to be shaky and companies response to this challenge should be prompt to reduce operational costs.

In this context, today most important opportunity for operations enhancement and cost reduction clearly comes from new technologies.

Yet quietly introduced in the Oil & Gas industry, digital technologies have proved to be efficient in other industrial sectors, creating a large room for improvement to operators.

This opportunity to turn digital is even more realistic now that many suppliers have developed solutions to increase production efficiency.

These so-called Solution Providers are today offering answers to the cost reduction problematic although an additional initial capital investment being needed.

Despite digitalization representing a risk, the greater threat should be to miss taking advantage from the current flow of innovations.

Moreover the economical context is not leaving much choice than making this evolution jump if companies want to survive.

Eight Building Blocks to go Digital

Once the context awareness done, the question is no more “if” but “how” should the Oil & Gas and Petrochemical industry turn digital.

For this purpose we defined the eight building blocks of the Digitalization:

  • Data Capture
  • Connectivity & Data Formatting
  • Data Operating System
  • Assets Digital Twin
  • Process Digital Twin
  • Cybersecurity
  • Augmented Operator
  • Health, Security, Safety and Environment (HSSE)

Designing and deploying these eight building blocks for an existing plant or a new one will create value but they will require a minimum of investment.

To Make Digitalization a Source of Value

Before Covid, the digitalization was often managed as a “nice-to-have” goal by itself for communication purpose to rejuvenate conventional industry or make up startups.

After Covid and its consequential barrel price collapse, the integration and deployment of digital technologies is a “must” mean, but as long as it proves to create value.

These eight building blocks were designed in this purpose, to facilitate their cost evaluation on one side and their potential value creation on the other side.

They aim at the operators to help their go – no go investment decision based on return on capital employed and rank digitization priorities.

They are also targeting contractors and solutions providers to make tangible their value proposition, addressing some of these digitization building blocks.

In this perspective, www.projectsmartexplorer.com is now able to evaluate the cost of these eight digital packages necessary to implement in projects each category of technology.

Giving this information enables operators and solutions providers the possibility to identify opportunities per projects worth to make the digital push to save time and money for their operations.

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