This year, humankind quietly passed a historic turning point: As of September, more than half of the world’s population—roughly 3.8 billion people—now live in middle-class households. That number is set to climb to five billion people by 2030.
As the middle-class grows, so too will its demand for energy—both in the form of fuel and in petrochemicals for everyday products derived from today’s primary energy sources. This reality has become a call-to-action for the oil and gas industry, which last month convened for the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) to discuss this and other big challenges and opportunities facing the industry.
Abu Dhabi National Oil Company (ADNOC), the event’s host, has called on the industry to deliver a robust response to the 4th industrial age. The “Oil & Gas 4.0” mission is built on the recognition that the oil and gas industry will continue to play an expansive role in the energy required to drive the 4th industrial revolution and must embrace disruptive technologies in order to enable this massive step change in human development.
“Oil and gas has historically been at the forefront of technology, and it is undergoing another step change to ensure it is at the forefront again,” said Daniel Yergin, vice chairman of IHS Markit. “Across the size spectrum, the industry is capturing opportunities from greater computing power, data storage and the cloud, to sensors, business intelligence tools and analytics. ADNOC is at the forefront of Oil & Gas 4.0 as it proactively embraces and pushes the digital transformation of the industry,” he added.
Here are a few ways that the energy industry is using people, technology, and partnerships to make Oil & Gas 4.0 a reality.
As the business world goes digital, the oil and gas industry is also embracing emerging technologies to become smarter, more efficient, and to maximize value from every barrel of oil.
The industry is particularly excited about artificial intelligence, which promises to transform all parts of the hydrocarbon value chain, from exploration to refinery maintenance. Blockchain is similarly enticing. While best-known for its use in cryptocurrency, blockchain unlocks new ways for oil companies to, for example, track shipments and draw up “smart contracts” that only take effect when pre-determined conditions are met.
“The big U.S. West Coast tech major companies are engaged in a way that they never have been before owing to Oil & Gas 4.0 and the massive opportunities with artificial intelligence, machine learning, and big data,” Yergin said.
And then there are the industry’s cutting-edge extraction techniques, which promise to help companies both extract oil and gas from harder-to-reach places and get more fuel from existing sites. For example, using seismic waves, geophysicists can scan features deep underneath the earth’s surface, letting them create intricate 3D models of potential energy sites.
“We believe that the 4th industrial age will see capability move from ‘scale economies’ to ‘insight economies’ as the ability to forecast, anticipate, and prepare for change becomes automatic and routine,” said Luq Niazi, global managing director of chemicals and petroleum industries at IBM. “Leaders in oil and gas will benefit from smarter devices, machines, and processes. Ultimately, the companies that have become enlightened by the great strides made in technology innovation will create capabilities to generate more energy more efficiently to serve the needs of the growing population and middle classes.”
The oil and gas workforce is aging: As of 2016, the average age of offshore workers was 42.7, an increase from 40.7 in 2014. At the same time, the integration of digital technology into more parts of the production process means that energy companies will need more workers with digital skill sets. To solve both of these challenges, the oil and gas industry realizes it needs to make an active effort to recruit and retain young talent.
Technology and education are key here. To get young people excited to work in the energy industry, companies need to update their processes to be more agile, collaborative, and tech-focused. “We need to transform at scale within the business cycle and it must become part of the fabric of our companies, our ecosystems and the way we shape and engage with the education system,” Niazi said. “The consumer side of technology has changed so fast that firms struggle to keep up.”
Companies in the energy space also need to create cultures of continuous learning, said Yergin. “Changes related to the era of Oil & Gas 4.0 are not exclusive to how companies approach their operations. The shifting dynamics also impact how individuals approach their jobs, which will bring with them challenges such as reskilling existing employees or bringing in new ones with different capabilities. It is not just a process of implementation and execution but also a process of learning,” he said.
So how are today’s oil companies addressing their recruiting challenges? Some are making those big cultural changes mentioned above, adopting new technologies, and revamping working environment, culture, and compensation to align with the expectations of young employees. At the same time, universities in oil and gas hubs such as Houston are starting to offer more courses in data science, which are increasingly central to the future of the industry.
The oil and gas industry has made sustainable development a core priority. Recognizing the responsibility that the industry has towards the environment, many companies, have taken steps to reduce greenhouse gas emissions, research lighter and recyclable plastics, and invest in renewable energy. ADNOC, for example, was amongst the first companies to invest in technology that lets it capture and reuse the carbon from nearby industrial facilities. One of its facilities is equipped to capture over 800,000 metric tons of carbon dioxide a year, which is then used for enhanced oil recovery prior to storage. (The world’s 17 large-scale plants that use the technology collectively capture 40 million metric tons of carbon dioxide annually.)
Technology also plays a key role in sustainability, according to Accenture managing director Tracey Countryman, who focuses on the oil and gas industry. When processes go digital, they become easier to track. “If I’m an energy company and I can better optimize my facilities to have fewer flares, for example, then that’s something I should be looking at,” she said. Put another way, when energy companies have better visibility into their operations, they can make smarter decisions that will make their operations more efficient, safer, and cleaner.
While the internet and digital technology have made it easier for people to connect and collaborate, the oil and gas industry has traditionally remained fragmented—not just between companies, but within individual business units. The typical refinery, for example, can include hundreds of systems running different parts of an operation, many of which don’t communicate directly.
That fragmentation is changing. Some of the biggest energy and technology companies have supported The Open Group, an open standards initiative that’s developing vendor-neutral technology standards and certifications. Here, too, is another area where blockchain can make it easier for companies to work together. In January, 90 companies agreed to participate in an industry-wide effort to bring blockchain to the global supply chain, giving companies real-time shared access to key shipping data such as temperature and location.
Collaboration will be key to the future of oil and gas. As demand for energy and its products continues to climb, the onus is on energy companies to partner up in an effort to reduce costs, share knowledge, and invest in key technologies to meet the world’s needs. “How the industry really moves fast is through collaboration at scale to drive some of these things that have largely been left up to individuals,” said Accenture’s Countryman.
In the end, all of these efforts connect to a single central theme: the energy industry has always been a driver of new technology. Technology to discover new energy sources, extract more from increasingly difficult and deeper places, and improve the entire energy delivery process. If it is going to enable the 4th industrial age, the oil and gas industry needs to be in the driving seat of innovation and embrace new emerging technologies.
“The only reason that oil is out of the ground is because of technology,” said Abdul Nasser Al Mughairbi, ADNOC’s digital senior vice president. “We liquefy gas at negative 165 degrees, and we transport it from the coldest places on earth to the hottest places on earth. That’s what the oil and gas industry does. Technology will always be key.”