By Emmanuel Udeh, Subsurface Data Analyst at Shell
The current uncertainty caused by the oil price collapse is reflected on the balance sheets of many companies within the oil and gas sector.
For an industry already burdened by increasing project costs because of the complexities involved in maturing today’s hydrocarbon assets, high production costs and high taxes, the oil price collapse has significantly reduced investor confidence. This has led to reduced investment in asset and infrastructural development, deferment of planned projects whose viability has lessened, and severe job cuts. In extreme cases, some companies have become insolvent.
While this is not the first price shock in the industry and will surely not be the last, there is still not much to cheer at the moment. Industry experts forecast a further decline to the mid $50s per barrel, only recovering to the $60s later in 2015. Optimistic projections point to a price rebound up to $80 per barrel by the end of 2017. With this continuing uncertainty, many oil companies will need to revise their corporate strategy, focusing on core assets and cost discipline. This is where having an effective data and technology strategy comes in.
Big Data and technology can boost competitiveness
One learning from the recently concluded Big Data Analytics for Oil & Gas conference in Abu Dhabi, is that real-time advanced analytics utilizing data and technology will be increasingly important. These analytics are required by the oil and gas industry to maximize efficiencies of existing assets and improve decision making, as well as reducing cost. According to the Halliburton Chief Data Scientist, Dr. Satyam Priyadarshy, the event had come at the right time to help companies optimize their business value even with low oil prices.
A clear example is the way today’s revolution in computing power is adding value to the analysis of seismic data. In 2013, BP built the world’s largest supercomputer for commercial research. The computer has the capacity to perform 4,000 trillion calculations a second. This means that seismic imaging work that took a geoscientist months to complete, just a few years ago, can now be done in days!
According to research by Bain & Company, organizations with better analytics capabilities are twice as likely to be among the top financial performers in their industry. They are also five times more likely to make decisions faster, and three times more likely to execute decisions as planned, than their peers. Sadly, the research also found out the only four per cent of oil and gas companies have the talent and skills they need to draw tangible business value from analytics.
Interestingly, some studies show a significant increase in Big Data and technology investments within the oil and gas sector. Although this increase in investment is a marked departure from current levels, it is important to note that it remains far below the levels in other industries such as aviation, healthcare, telecoms and finance. In the current oil price uncertainty, companies are seeking ways to derive the most value from current assets and to mature newer assets at a minimal cost.
With this desire to improve operational efficiencies, companies must determine which key performance indicators they seek to address using data. Big Data and technology can help organizations make informed decisions faster and efficiently because of an increased ability to analyze, model and visualize scenarios, even before they unfold. This helps to optimize maintenance, identifies opportunities to maximize production and manages project costs. All these together help to drive innovation and improve operational efficiencies.
Technology alone is not enough
Most executives in the industry agree that successfully harnessing and implementing Big Data initiatives will unlock volumes and add business value by driving efficiency. However, this alone cannot bridge the efficiency gap. There are important factors which play a central role in achieving this promise:
- The business should ensure that technology deployments are targeted and fit for purpose. Even though technology is a key enabler to aid analysis and provide insights, it is important not to get sucked into the technology trap.
- Existing workflows and processes need to be constantly reviewed to prove that the application of these initiatives can provide high-value business solutions.
- The oil and gas industry should recognize data management as a discipline in its own right, rather than continue to see it as a function of IT. Competency frameworks and career development roadmaps for educating and recruiting new and current practitioners should be developed to encourage professionalism and accountability.
- Ultimately, the business must identify its critical data and aim to get the right quality out to the right people at the right time. The biggest obstacle to using real time data is often the quality of the data. Companies should invest in better ways to manage their data for optimum performance.
Low oil prices, rising cost profiles and market volatility have created uncertainty in the industry. Integration, standardization and collaboration, driven by strong corporate leadership, will be the differentiator between well prepared companies and those playing catch-up.
More articles by Emmanuel Udeh:
- Why data is the key to integrated reservoir evaluation
- Data quality in the Oil & Gas industry
- Big Data in Oil & Gas: Implications for the E&P organization