The oil and gas industry has been subject to a turbulent few years – it was only a little over 3 years ago that the price of crude oil fell below zero, resulting in OPEC+ countries agreeing to cut production to reduce supply and push prices up. Now in the past year we’ve had the Russian/Ukraine conflict, which has had a huge impact on natural gas prices and general supply.
However, has this been the biggest challenge to the industry? ESG goals and targets continue to be front of mind for investors which heavily finance the development of this industry and provide industry players with much-needed access to capital/investment.
This big shift towards investment portfolios filled with green companies (e.g. Facebook) vs brown companies (e.g. ExxonMobil) has been somewhat of a stick vs. a carrot method, meaning when you make it harder for brown companies to gain access to capital, they become short-term focused and not long-term. This is why every oil and gas company’s website has added ESG targets and goals to their earnings call. They are trying to appease the investors.
With all of that said, the world continues to rely on this ‘black gold’. However, have we reached a tipping point for the traditional oil and gas industry, or does it need to transform?
As major countries agree to switch to more renewable energy sources, the turbulent market conditions are set to continue as the oil and gas industry will be forced to transform the way they think, operate and ensure longevity for the future. It’s this need to think about the future that is making many companies review their existing set-up, from their labor force and capital equipment to their IT infrastructure and investment strategy. The outcome – an ongoing major digital transformation.
Digital technologies are being used to improve all aspects of the oil and gas value chain, from exploration and production to refining and transportation. Here are some specific examples of how digital transformation is being used in the oil and gas industry:
In addition to improving efficiency, digital technologies are also being used to reduce costs and improve safety in the oil and gas industry. For example, remote monitoring and control systems are being used to reduce the need for manual labor in hazardous environments, and predictive analytics is being used to identify potential problems before they occur.
Digital transformation is also helping the oil and gas industry to meet the demands of a changing market. For example, consumers are demanding cleaner energy sources, and digital technologies are being used to develop new technologies for extracting oil and gas from unconventional sources, such as shale and tight sands.
The digital transformation of the oil and gas industry is still in its early stages, but it is already having a significant impact. As the industry continues to adopt digital technologies, we can expect to see even further improvements in efficiency, safety, and environmental performance.
Here are some of the key benefits of digital transformation in the oil and gas industry:
The digital transformation of the oil and gas industry is not without its challenges. One challenge is the cost of implementing new digital technologies. Another challenge is the need to train employees on how to use new technologies. And finally, there is the risk of cyberattacks on digital systems.
Despite these challenges, the digital transformation of the oil and gas industry is inevitable. IFS continues to be at the front of this transformation, supporting companies that are embracing digital transformation enabling them to better positioned to compete in the future.
Thank you to our IFS Guest Blogger : Daniel Talbot , IFS Global Marketing Manager