By Christophe Bourdeau, a Managing Director in Accenture’s oil and gas practice, based in Perth.

FACED with an increasingly volatile operational landscape in Australia and across the globe, upstream oil and gas organisations have become concerned about their ability to adapt and remain competitive. Amid stricter climate standards and evolving regulatory pressures, upstream businesses must invest in next-generation technologies if they are to become more agile, sustainable and transparent.

Although designed to reduce costs, streamline operations and protect assets, these investments have yet to realise the same value as other sectors. Upstream oil and gas companies are now trying to catch up with large scale investments in bold new innovations, yet often to their detriment, as they fail to carefully outline a strategy for responsible digital development.

These organisations must develop core digital competencies such as cyber security and broader external partnerships to create a solid foundation for scalable digital investments. Without this core in place, technology will remain unproven and development misguided, leaving a significant amount of value trapped within investments that cannot be scaled adequately across the organisation.

Upstream organisations must act now to develop strategic and tailored digital approaches that better support innovation at scale. Without this, the upstream sector simply risks getting left behind.

Turning concepts into drivers of value

Some of the boldest next generation technologies, such as artificial intelligence (AI), big data and machine learning will become the largest drivers of value within the upstream sector over the next five years. However, these innovations have yet to achieve their full potential within the upstream industry.

In fact, the relative value realised from digital expenditure has decreased, even with an uptick in overall investment, as organisations run into roadblocks with their digital initiatives and struggle to incubate technology for widespread use.

Accenture’s Upstream Oil and Gas Digital Trends Survey found that although investment in AI and machine learning increased by almost 20% between 2017 and 2019, they made only a 5% increase on business performance impact.

With a focus on untested and unproven concepts, and without the technological infrastructure to support development, just 9% of companies were able to develop and scale more than half of their proof of concept (POC) innovations over the same two-year period with 36% of organisations scaling 10% or less.

Evidently, upstream organisations have yet to develop a foundation for digital development or strategic approaches to organisation-wide implementation. It is imperative that these crucial first steps are developed if trapped value is to be unearthed.

Creating a strong foundation in the cloud

Unlike infrastructure or heavy machinery, which requires only routine care and maintenance once developed, next-generation technologies must be nurtured to evolve over time. Digital investments are not a one-time cost. They require foundational legwork and ongoing support for them to grow into a useful tool.

From reactive drilling operations to smart imaging systems, next-generation technologies rely heavily on a broad ecosystem of data sharing to be effective. With such an abundance of data, effective computing and processing necessitates primary investment in platforms like cloud to help operate and grow these technologies efficiently.

Accenture’s study shows cloud technologies provide upstream organisations with some of the greatest value from digital investment, relative to next-generation technologies such as big data, AI and IoT. Unlike costly investments in expensive on-the-ground infrastructure or edge computing platforms, cloud simplifies widespread technology deployment and can ease the financial burden of further digital technology investments in the future.

For digital investments to be scaled properly, IT systems must be prepared to work equally well across a variety of complex organisational environments and remote physical applications to provide vital data to processing facilities. A robust cloud infrastructure will allow technology to connect better across sites and more effectively share data whilst providing upstream organisations with the agility they seek.

Cloud can also better integrate communication with downstream counterparts such as distributors and points-of-sale. This will enable upstream organisations to react more quickly to changes along the value chain and in end-user demand, which could reveal significant value. These processes could subsequently be automated with AI and machine learning algorithms in the future.

However, there is still some way to go as only just over half of upstream organisations are currently investing in cloud technologies, with some continuing to place their digital hopes on next-generation solutions without foundations in place.

Preventing impact from cyber security

Large scale cyber attacks have already demonstrated their potential to cripple upstream organisations as the industry becomes more heavily reliant on protecting digital assets. For this reason, cyber security has become the most valuable immediate investment for upstream businesses today, even outpacing cloud.

Unsurprisingly, cyber security investment now drives the greatest impact on business performance for upstream organisations. 61% of organisations are currently investing in cyber security technologies for better protection and response to threats. Whilst a promising start, almost 40% of upstream organisations have yet to invest in cyber security.

Just this year, a ransomware attack forced a US natural gas company to close a crucial pipeline. A single, malicious email was determined to be the attack’s cause, highlighting the risks associated with developing integrated IT and operational technology networks that allow data to flow, unchecked, across an organisation. Cyber attacks like ransomware can quickly wreak havoc on IT systems and force organisations into expensive software rebuilds to isolate the threat, determine the cause and limit vulnerabilities.

With a growing reliance on connected technologies, cyber security must be developed with scalability. This will ensure cyber security can continue to protect organisations, more effectively support the safe implementation of connected technologies, and future-proof their use.

Cyber criminals don’t discriminate between industries and cyber attacks will continue to occur. Upstream organisations must be ready to respond to the threat.

 

Partnering with innovators

Foundations for the widespread deployment of new technologies require a clear strategic direction for investment and growth. By creating broader ecosystems with external partners and reaching a collective consensus on the goals of technology implementation, the upstream sector can develop a more productive environment lending itself more naturally to innovation.

Upstream organisations are clearly concerned about the need for improved capabilities and digital skills with nearly 60% of Accenture’s upstream survey respondents believing they would need to look to external providers for assistance.

As a result, upstream businesses have begun developing strategic partnerships with IT service providers. Chevron and Schlumberger teamed up with Microsoft last year, to accelerate their development of ‘petrotechnical’ and digital technologies.

Next-generation technologies which rely on vast amounts of unstructured data can easily become problematic for upstream organisations to handle, when faced with developing their own data analytics platforms. Big data collection requires an abstract understanding of complex data processes to create clear and actionable goals that will chart a path toward scalability and success for these technologies. More specific goals than cost savings and operational agility must be developed, and IT service providers are simply better equipped as advisory partners in this area.

Without the right partnerships, upstream organisations face an uncomfortable wait for an unproven algorithm to spit out the answers, if they do.

Scaling for success

The upstream sector is undergoing some of its most profound structural and regulatory changes to date. Effectively implementing next-generation technologies is crucial for organisations to streamline their operations and become more agile. Accenture’s research highlights the need for a more strategic approach to technological development as a substantial amount of value remains trapped with current approaches to digital investment.

A strategic approach must be met with investment in foundational systems and technologies like cloud and cyber security to create a strong core that will underpin future technological implementation.

These core competencies need to be addressed before technology can be scaled. That way, Australian upstream oil and gas organisations will truly be able to realise trapped value from their digital investments and operate with better organisational agility, transparency and efficiency and respond to today’s challenging operational landscape.