In the energy sector, it’s not just change that organizations must prepare for – it’s the speed of change. In October last year, the price of Brent crude was as high as $85 per barrel. Optimism was in the air and there was talk of new capital investments and new development projects. By early this year, however, that price had fallen to just over $54 a barrel. The caution that energy industries – oil and gas, especially – have experienced since 2014 is back.
In its predictions for the oil and gas sector in 2019, Deloitte suggests that “investors will likely want to see sustained returns and capital discipline, not just volume growth”. While energy companies must continue to focus on operational excellence to boost efficiencies and returns, this doesn’t diminish the major business opportunities that are likely to occur as all energy markets change. According to PWC, companies should ‘double down on digitization’ to drive efficiencies and open up new opportunities. With this in mind, here are five trends that will have a major impact on energy companies this year and beyond.
Trend 1: Industrial IoT at the heart of everything
The Industrial Internet of Things (IIoT) is now a commonplace within energy sectors. Companies understand that the use of IoT devices can transform many parts of their operations. IoT not only connects machines and appliances, it also allows for greater connectivity across entire assets – drilling rigs, refineries, pipelines, grids, etc., – to optimize performance and minimize downtime, while enhancing health and safety and environmental performance management. We are beginning to see the introduction of ‘Digital Twins’ that use data from IoT devices to create a virtual simulation of an asset to improve efficiencies and enable predictive maintenance.
In 2019, as the pace of IoT adoption increases, energy companies will need to meet the challenge of properly capturing and exploiting IoT data while ensuring the security and performance of their growing IoT networks through an identity-driven IoT platform.
Trend 2: Operational excellence puts the focus on content services
In 2019, PWC recommends that energy companies ‘stay the course on cost reduction, standardization, and collaboration to make sure inefficiencies do not creep back in. Ensure all operational decisions — including new country entry, production optimization, and acquisitions and divestments — are reviewed under the lens of ‘full-cycle project economics’. Operational excellence is top of the energy CIOs priority list.
Effective content management has been a mainstay of energy operations for many decades. As this technology evolves into what Gartner has termed ‘content services’, energy companies can gain even better control of their content. Additionally, micro-services and mobility functionality gives users access to exactly the information they need wherever and whenever they are.
Trend 3: Increasing profit margins means greater asset utilization
The desire to increase revenue and profit margins means that companies will look to ‘sweat the assets’. Whether oil and gas or utilities and power, companies are used to focusing primarily on asset utilization and reliability. However, across the energy sector, assets and infrastructure is aging. This raises two challenges for energy companies: They must minimize unplanned outages through the use of predictive maintenance and they must monitor asset performance closely to ensure the decision to replace or retire equipment or assets are made at exactly the right time.
Trend 4: Achieving collaboration in evolving value chains
The value chain across all the energy sectors is changing. Within oil and gas, companies are moving from the traditional ‘owner operator’ model of working with suppliers, towards a model of working with organizations that have complementary skill-sets to build ecosystems, enabling them to quickly embrace new opportunities and business models. This includes the large oil and gas companies that are now entering low carbon plays by investing and acquiring renewable energy resources.
The increase in distributed energy resources (DERs) and micro-grids will impose a similar evolution of the utilities value chain. The traditional model of large, top-down and centrally distributed energy production is being replaced by modular, consumer-driven and evenly distributed power generation. Providers must work out how to cooperate with the new players in the power generation business. In 2019, energy companies will seek to forge alliances in their value chain ecosystem and find better ways for them and their partners to work and collaborate together.
Trend 5: AI-assisted analytics gains greater adoption
The hype that has been surrounding terms like artificial intelligence (AI) and advanced analytics is beginning to become a reality. Energy companies are starting to gain greater control over the data and are turning it into actionable insight to drive faster and sharper decision-making. The application of AI-assisted analytics is fairly established in areas such as predictive maintenance.
This year is likely to see an extension of this through prescriptive analytics. This type of analytics allows companies to move from a product-based to a process-based approach. Companies can quickly see where failures in the process are likely to occur and take remedial action before it becomes a problem. As the analytic engines become more sophisticated, the front-end business intelligence capabilities become more user-friendly. Simple interfaces, visualizations and dashboards make it easier for users at all levels to analyze the data.
For energy companies in 2019, deploying the correct digital technologies will be vital to keeping operations lean while delivering the flexibility and agility to meet business and customer demands. If you’d like to know more about how OpenText can help improve operational excellence in your energy organization, please contact us.