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Digital Transformation of Oil and Gas industry

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This work is about summarizing best practices and lessons learned of oil field digitization forerunners.

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Digital Transformation of Oil and Gas industry

  1. 1. Digital Transformation of Oil and Gas Industry 26-September-2016, GBS Astana Campus Master Thesis Defense, MBA in Oil and Gas
  2. 2. Hello! I am Aidar Satubaldin Executive portfolio: - 11 years of experience in the Oil and Gas industry within Information Technologies and Service Management You can find me at - ITIL Release Control and Validation (RCV) - PRINCE2 Foundation - COBIT Foundation - Windows Servers - ITIL Planning, Protection and Optimization (PPO) - ITIL Foundation - PMI Seminars
  3. 3. Acknowledgement Big Thanks to Great People Galiya and my parents – dear Family Gulmira, Gerhard and Brad – big Bosses Nathaniel and Radomir – great Mentors Alina and Raushan – helpful Campus Marcel Gassen – thesis Supervisor Berik – experienced Project Manager
  4. 4. 1. Topic Background History & Facts vs. Myth & Forecast
  5. 5. “ Upstream is about half way through journey of at least 10 years to go before reaching a similar level of digital maturity of aerospace and automotive.
  6. 6. History of Oil Field Computerization by ExxonMobil ◎1970 ○Computerized Production Control (CPC) reporting ◎1980 ○Drilling Surveillance, Collaboration and Optimization ◎1990 ○Remote Process Surveillance ◎2000 ○Next-Generation Reservoir Simulation ○Upstream Suitcase ○Collaborative Visualization centers
  7. 7. History of Oil Field Digitization by BP ◎Phase 1 (2000-2005) communicated a compelling vision, showed the value and potential of the Digital Oil Field to prove up the concept ◎Phase 2 (2005-2011) implemented at speed and scale real-time remote monitoring solutions and surveillance by exception ◎Phase 3 (2011-present) a 20- to 30-year journey toward ubiquitous, real-time advisory and automated systems
  8. 8. “ Over the past five years, the Digital Oil Field (DOF) has become a reality.
  9. 9. Actual Facts by BP ○Delivered over 70,000 barrels oil equivalent per day (mboed) net cumulative production by implementing surveillance per exception ○Saved $200 million in capital expenditure by deploying real-time monitoring of well construction ○30 minutes pipeline check by drone vs. human’s 7 days ○Increased production in excess of 5,000 barrels per day (bpd) by the use of the operability maps
  10. 10. Actual Facts by Bain ◎Company with better analytics capabilities has following advantages: ○2x more probability of being in the top quarter of financial performance among their industry peers ○5x more probability of making decisions faster than their peers ○3x more probability of execution decisions as planned ◎
  11. 11. “ Global DOF market is expected to reach $30.78 billion by 2020 growing at CAGR of 4.31% from 2015 to 2020.
  12. 12. Forecast for Internet of Things / Everything - IoT/IoE ◎by 2015, less than 14% of industry assets will be connected to the enterprise network ◎by 2025, adoption IoE by O&G industry will ○increase Global GDP up to 0.8% - $816 billion ○generate $600 billion value at stake for industry ○translate 11% bottom-line improvement for a company ◎by 2030, industrial IoT will add $14.2 trillion to the world economy
  13. 13. Forecast for Advanced Analytics ◎by 2016, 50% of Oil and Gas companies will have advanced analytics capabilities in place ◎analytic excellence will help to improve production by 6% to 8% ◎11,900 new data analysts expected for hiring by Oil and Gas companies
  14. 14. Forecast for Workflows Automation ◎25-50% of manual processes can be automated by Internet of Everything (IoE) ◎ by 2015, global market for industrial automation will post turnover of $200 billion ◎by 2035, 47% of jobs across industries will be replaced by ○automatic robotics ○artificial intelligence ○expert systems
  15. 15. Forecast for Digital Oil Field (DOF) ◎The most conservative estimates count 3% of incremental production ◎Industry accepted figure on increase in production is approximately 7%
  16. 16. “ Unfortunately myths surround the preparation of the business organization for the use of a new technology like a DOF application.
  17. 17. Myths about Business Readiness ◎Myth 1: Software/system is “intuitively obvious” for users and so easy to work with ○Busted: Operations need help in learning to get their job done. Period. No shortcuts ◎Myth 2: Great project manager along with team will get ready all business users ○Busted: Business readiness requires appropriate authority level in the organization
  18. 18. 2. Problem Statement Purpose. Aim and Goal.
  19. 19. How To Repeat Success of Digital Forerunners? ◎Computation has 30+ and Digitization 15+ years experience in the Oil and Gas industry ◎Supermajor companies already sharing some lessons learned and best practices ◎Now it is time to repeat their suceess and harvest benefits of digitization effectively
  20. 20. 3. Importance of the Research Impact of the Study
  21. 21. Universal Rules. Lessons Learned and Best Practices. ◎Most of companies will leverage practical insights of already digitized peers ◎Universal rules of deploying Digital Oil Field technologies and systems revealed ◎Oil and Gas companies will benefit from findings, conclusions and observations
  22. 22. 4. Theoretical Foundation Innovations & Ambitions
  23. 23. “ Innovation is the creation of a new and viable business offering with value to the customers and ourselves. All organizations need one core competency: innovation.
  24. 24. Innovation Ambition Levels ◎Innovation occupy one of three “ambition levels”, which define its purpose or result ○core innovations optimize existing products for existing customers ○incremental innovations expand existing business into “new to the company” business ○new innovations are breakthroughs and inventions for markets that don’t yet exist
  25. 25. Innovation Culture – Five Behaviors ◎Build collaboration across your ecosystem ◎Measure and motivate your intrapreneurs ◎Emphasize speed and agility ◎Think like a venture capitalist (VC) ◎Balance operational excellence with innovation
  26. 26. “ Global Digital Trends reshaping the Oil and Gas industry. Digital has the potential to address key challenges faced by the Oil and Gas industry today.
  27. 27. Digital Trends ◎Wearable Technology ◎Virtual Reality ◎Drones ◎3D Printing ◎Analytics & Big Data
  28. 28. 5. Conceptual Framework DOF Concept & DAM Framework
  29. 29. “ Companies improved net present value of up to approximately 25% from Digital Oil Field related implementation.
  30. 30. Digital Oil Field (DOF) Concept – Lack of industry definition ○Diverse asset portfolios, business context, operating models and technology competencies ○Broad, cross-functional concept with the complex implementation ○Individual companies randomly implemented different choices, innovations and proprietary in-house developments ○Different companies have started their initiatives at different points in the Digital Oil Field (DOF) life cycle
  31. 31. Digital Oil Field (DOF) Concept – Categories ○Vision ○Business model ○Skills and Competencies ○Signature Technology ○Infrastructure Concern ○Impact of Politics
  32. 32. “ Given the diverse starting points, and the array of choices faced by Digital Oil Field (DOF) practitioners, industry requires a simple framework.
  33. 33. Digitization of Asset Management (DAM) framework ◎Asset Lifecycle Management as a workflows framework ◎Service Oriented Architecture (SOA) as a design framework ◎Open Platform Communications Unified Architecture (OPC UA) an industrial M2M communication protocol as data framework
  34. 34. 6. Research Questions Terra Incognita
  35. 35. Main Questions ○What is a Digital Transformation and its benefits? ○What is a Digital Oil Field (DOF) concept? ○How Digital Oil Fields (DOF) built? ○How to measure success, progress and maturity of company in the terms of Digital Transformation? ○How digital success can be repeated in other organizations?
  36. 36. 7. Methodology Survey & Materials
  37. 37. Online Survey and Digital Materials ◎Literature Review ○Analysis of consulting agencies ○Brochures of vendors ○Materials of SPE library ◎Online Survey ○13 questions ○Google Forms ○LinkedIn fellows
  38. 38. 8. Specifics on Methodology Analysis of Data Collections
  39. 39. Limitations and Methods ◎Limitations ○Time limit: 16 days of survey duration ○Audience limit: participants dominated by IT ○Interaction limit: Online only and no physical chat ◎Methods ○Digital: Online survey ○Verbal: No personal interview ○Physical: No paper broadcast
  40. 40. Participants and Demographics ◎Participants: 57 LinkedIn & SPE members ○50 (87.7%) from Oil and Gas ○7 (12.4%) from other industries ○41 (71.9%) with IT as majority ○10 (17.5%) with ProdOps as majority ○6 (10.5%) with no majority groups ○35 (61.4%) team leads with IT as majority ○22 (38.6%) engineers with IT and RM equal domination
  41. 41. 9. Findings Convincing & Significant
  42. 42. Survey Observation Explanations ◎A: Most of engineers do not recognize adverse impacts on the company, while managers see wider picture of unfavorable effects along with their peers from core functions. ◎B: Companies spend much time in ensuring preventive efforts to be better and quality, but proactive monitoring and agile support should be strengthened further.
  43. 43. Survey Observation Explanations ◎C, D: Companies spend many efforts in predicting unplanned outages, utilization of big data, ensuring integrity of production assets and comprehensive real-time control ◎E: Participants were in doubt whether their companies already implemented expert or AI systems. It seems that corporate functions on their way to deploy it, because they are currently do research and development.
  44. 44. Survey Observation Explanations ◎F: Amongst top leading benefits from deploying new digital technologies are ○cost reduction ○predictive maintenance ○safety incidents prevention and ○business workflows automation
  45. 45. Survey Observation Explanations ◎G: IT is still considered as a Service by majority of managers and contributors ◎H: External drivers were ○emerging technologies ○sustain competitive ○enabling by industry peers Note: Surprising moment was to see that contributors are ahead of managers in acknowledging new technologies
  46. 46. Survey Observation Explanations ◎I: Strong voice of contributors from IT and ProdOps, where they are keen to improve and automate operational workflows. ◎I: Worries of managers were around cost savings and operational excellence along with safety.
  47. 47. Survey Observation Explanations ◎J: IT managers identified how to drive towards partnership with business through ○showcase potential business advantages ○produce innovative technologies ○collaborate in making decisions ◎J: IT managers clearly understand their place in the business and eager to help with ○new competitive advantages ○innovation and ○collaboration
  48. 48. Literature Findings ○Digital Trends are streamlined innovations ○DOF concept has vague industry wide definition ○DAM framework required to outline DOF concept ○Business Case is the main means of investments ○Integrated Operations are key DOF executors ○Maturity Assessment is an integral part of success
  49. 49. 10. Conclusions Summary of Learnings
  50. 50. Conclusions – Part I ○Digital Transformation starts from Business Strategy and its goals. All the next steps should be aligned with company needs ○Innovation center or committee oversees general concept of digitization according to business plan and serves as a primary guiding council ○Joint Information and Operational Technologies / Integrated Operations Technologies (IOT) Group or department is an executive, leading body in digitization of organization on the level of company or entire enterprise
  51. 51. Conclusions – Part II ○Digital Oil Field (DOF) concept should take into account organizational culture, knowledge, resources and capabilities assessment ○Digitization of Asset Management (DAM) framework should be cross-discipline collaboration across the assets, standardize processes and build investments on long-term technologies ○Business case is the main means for deploying any new technologies to prepare asset and organization for implementation
  52. 52. Conclusions – Part III ○Pilot projects should assure test of feasibility, identify early pitfalls and provide recommendations for enterprise wide roll-out ○Deployment across organization should be done to leverage efficiency at scale ○Assess Maturity to measure success, sustainment of benefits achieved over time and check back if any improvements or adjustments should be done at each step above ○Note: All actions above are circling around four key elements: People-Technology-Process-Organization ○
  53. 53. Strengths. Weaknessess and Limitations. ◎Strength of this work is in honest and open participation of O&G representatives ◎Weakness is in narrow set of representatives with majority from IT only ◎Limitations is in small number of participants and lack of interviews with senior managers on the level of CxO
  54. 54. 11. Implications For Future Researchers
  55. 55. Reaserchers & Practitioners ◎Validate feasibility of findings in practice ◎Test conclusions and recommendations ◎Assess necessity in Innovation Comittee ◎Outline DAM framework in more details ◎Observe impact of Integrated Operations
  56. 56. 12. Recommendations For Public Auidence
  57. 57. Theory. Policy. Practice. ◎Feed IT with business needs, delegate to provide business solutions and build collaborative environment in order to enable synergy ◎Along with business IT is also going through fundamental transformation, where the role of its’ is moving from managing IT infrastructure to enabling innovations
  58. 58. 13. References Cited in the presentation
  59. 59. Authors & Books ○Steve Roberts, 2012 ○Digital Technology by BP, 2016 ○Dutch Holland, 2012 ○DOF market by marketsandmarkets.com, 2016 ○Andrew Swart et al., 2016 ○Andrew Clark et al,. 2016 ○Andrew Smart et al., 2015 ○Bruna Martinuzzi, 2014 ○Rob Shelton, 2016 ○Digital Trends by nesglobaltalent.com, 2016 ○Jeff Dickens et al, 2012 ○Wikipedia.org, 2016
  60. 60. Thank you! Panel Committee Members Dr. Gacem Mr. Marcel Gassen
  61. 61. Appendix. Backup Slides Here more details

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