Digitalisation in oil & gas capital projects is – as for all industries – becoming the backbone for many of the advancements and innovations happening in the sector, helping to streamline processes and providing productivity, safety and budgetary benefits.
In many ways, Covid-19 has been the catalyst for the increased use or exploration. It forced greater activity around digitalisation in day-to-day activities that in turn softened resistance to its use for other functions. Some CEOs admit that their organisations have embraced digitalisation for projects delivery far faster than thought possible.
The value of Gulf Cooperation Council (GCC) oil & gas contract awards in 2021 has increased significantly compared with 2020. First half value alone was just over $26bn, compared with around $5bn for the same period in 2020. That rapid rise is due to project investments coming off the back of lows caused by the Covid-19 pandemic.
|GCC oil & gas capital projects – Underway|
|Project||Client||Project value ($m)||Country||Construction start||Expected completion|
|North Field Expansion Project (North Field East Project & North Field South)||Qatar Petroleum, Qatargas||40,000||Qatar||Q1, 2019||Q4, 2027|
|Kuwait New Refinery Project||KNPC||16,700||Kuwait||Q4, 2015||Q1, 2023|
|Marjan Crude Increment Program||Saudi Aramco||15,000||Saudi Arabia||Q1, 2020||Q1, 2024|
|Hail and Ghasha Sour Gas Development||ADNOC||15,000||UAE||Q2, 2020||Q4, 2024|
|Duqm Refinery & Petrochemical Complex||Duqm Refinery and Petrochemical Industries Co.||14,000||Oman||Q3, 2018||Q4, 2023|
|Source: KNPC= Kuwait National Petroleum Company; ADNOC= Abu Dhabi National Oil Company; Source: www.venturesonsite.com (October 2021)|
Bellwether Saudi Aramco said in March 2021 that its capital projects spending for 2021 would be $35bn, down from the original plan of $40-45bn. That $35bn figure still represents a 30% increase on 2020 levels and will be its highest capital expenditure since 2018.
At the time, Aramco’s President & CEO Amin H. Nasser said: “[T]he accelerated deployment of digital technologies across the company significantly enhanced our performance and we continued to make progress on breakthrough low-carbon solutions.”
Companies globally are realising they can enjoy significant improvements in innovation and productivity through digitalisation. US-based Independent Project Analysis found in 2020 that 65% of companies surveyed within oil & gas have digitalisation projects underway in the capital projects sector. But it said these plans lacked focus, covering the entire value chain through to operational phases.
For GCC oil & gas capital projects, progress towards digitalisation has varied widely. In conducting research to produce the white paper attached to this article, it was found that some oil companies have fully embraced digitalisation and are actively using or testing new technologies that will benefit their processes. Others are closer to the beginning of the journey, employing consultants to advise them on how they should approach their individual digitalisation strategies.
Laying the foundations for digitalisation
Successful digitalisation requires a clear understanding of the business objectives and the end goals an organisation wants to achieve. Without this, it will be hard to measure results and benefits, making it more difficult to judge its success. In planning a digital project, companies need to produce a framework of requirements, identify the people who will lead and maintain the technologies, and build strong internal and external partnerships.
Those interviewed advised against taking big-bang approaches to digitalisation, suggesting instead that companies run smaller, proof-of-concept pilot studies. By doing so, an organisation can first ensure they have a clear business case, understand the value of the challenge being solved, and know how success (or failure) will be measured.
Where possible, companies should avoid overly customising the product, particularly once moving beyond the pilot stage into a full digitalisation project, as this increases risk through additional complexity and costs for all involved.
It’s also important to build support by identifying the product champions who will promote the technology to others, if possible at board-level as this will make the investment case easier. That also means understanding how to get buy-in from a diverse range of stakeholders internally and from the supply chain to provide richer feedback. Good training is also essential.
Longer-term, it should be recognised that capital projects teams are dynamic, with people moving on post completion. Therefore, it’s important to ensure knowledge on any digital technologies embedded into processes is stored centrally, so that it is not lost or its use diminished over time.
This is especially true for data, the bedrock of any digitalisation strategy. Ensuring it is standardised, correctly tagged, properly stored and without bias is critical. Without this, real-time analysis will be difficult.
A range of technologies are helping improve efficiency in oil & gas projects, providing data that is allowing faster, more informed decisions and increasing site safety.
For instance, RFID tagging can be used to better track the flow of materials from fabrication to site. Used properly, it can be used to reduce project delays, by understanding time-to-manufacture for a material to optimise ordering schedules, or journey time to site to optimise logistics and traffic patterns, or time between arrival on site and its actual use.
Artificial intelligence will come in many forms and shape many of the decisions taken in future. Early examples in capital projects include risk management, such as monitoring worker welfare or better understanding behaviour onsite to predict potential dangers.
Oracle recently released a solution that uses machine learning to analyse organisations’ project data to identify potential risks and improve decision-making. The predictive AI application, Oracle Construction Intelligence Cloud Advisor, can for example assess the health of a project schedule before works begins and then apply “active” intelligence throughout the construction phase to alert organisations to new potential issues that could cause delays.
Use of the cloud to store and share data during a project is rising, but not always as simple as thought. Data sovereignty requirements, particularly for critical infrastructure, can result in the development and use of local cloud or even cloud at customer to assuage concerns about information leaving a country’s borders.
The move towards digitalisation has shifted beyond lip service, and this is borne out by the IPA research, which highlighted both how many organisations are undertaking digitalisation projects and how fractured the approach currently is. Companies are exploring options and trying to understand how such technologies will improve safety, keep projects running to schedule and on budget, and the opportunities that data will bring for future decision making.
Working practices for capital projects will be reshaped as companies embrace digitalisation. Champions will need to show benefits and evidence for board sign off, but as examples of use filter through the industry, it will become increasingly difficult for senior directors to ignore the benefits. If they don’t have a digitalisation strategy, they will lose out to those organisations that do.