In December 1941, the Dutch broke the Japanese code and quickly learned of an impending attack on Hawaii, so an American military attaché named Elliott Thorpe cabled a warning to Washington. A week later, the Japanese launched a surprise attack on Pearl Harbor even though, wrote historian Roberta Wohlstetter, the U.S. military “knew at the highest levels that an attack was coming.”
The reason the warning never reached Oahu is similar to a mission-critical problem facing the oil and gas industry: It’s hard, if not impossible, to make the right decisions when information is stuck in silos built for a recently bygone era when amassing resources outranked targeting efficiencies. To survive in this new era, oil and gas companies must tear down those silos and connect everything from assets to workforce to supply chains.
Unlike Pearl Harbor, however, the threats are well known. What is unknown is information needed to smart decisions. All the data needed to make decisions is being kept, albeit unintentionally, from the decision-makers who have no real-time visibility into, for example, which wells are profitable, how to most effectively deploy workers, or how to match capacity and demand with suppliers. Without connectivity and optimization, operators are forced to make educated guesses in an outdated paradigm, and only months later are they able to learn what decisions they should have made.
What is needed to survive is an end-to-end connection that allows holistic optimization of operations. This goes far beyond the “digital oilfield” that’s been talked about for decades. That vision imagined sensors setting off alarms to summon humans into action in an updated version of the break-fix model. The future we’re looking at puts digital technologies at the core and feeds data into an applied intelligence engine that enables smarter and faster business decisions.
Here’s what that looks like: Digital infrastructure assumes routine activities while predictive optimization prevents problems, freeing up engineers to deliver their highest and best use. Workers have tool-belt connections to the data to make the right decisions and to augmented and virtual reality to facilitate collaboration and remote working. Suppliers and operators share integrated ecosystems to provide visibility on needs and capacity.
By optimizing their end-to-end operations, oil and gas companies can improve their performance in a way that really adds up, including a 5%-15% uplift in production, 10%-25% improvement in resource efficiency and operating expenses, and up to a 95% reduction in decision-making time. In total, connecting all parts of their operation can result in an improvement in economics, such as break-even point in upstream, of up to 40%. All told, connecting oil and gas operations unlock more than $500 billion across the value chain. This is the new business model for survival.
This new model is about more than just a margin improvement. It’s about achieving end-to-end gains through connectivity. Monitoring and managing emissions and the carbon footprint through sensors and industrial IoT technologies enhances the ESG quotient that investors are increasingly demanding. Remote work enabled by edge computing and 5G and connected worker technologies, including mobility and augmented reality/virtual reality platforms, improve safety, collaboration, and the overall employee experience. Transparency on supply – what is available, where it is, how much it will cost – and demand – what customers want, where they want it, how much they will pay for it – enabled by track and trace technologies, network optimization analytics and connected supply chain control tower(s) reduce service times and improve service levels.
True end-to-end connectivity and optimization cannot be achieved by simply breaking down silos and sharing data. That’s just the start. Leadership, culture, and an embrace of change have to be in place. The value realized by this transformation multiplies if you have ways of working and are making decisions across the system, internally and externally, enabled by technology and optimized through analytics.
All of these elements need to be there working in concert. Only then can you truly deliver on a Connected and Optimized Operating Model that unlocks the full value of the system including the supply chain, increases workers’ safety and improves their experience, and drives improvement in sustainability performance.
Here’s a specific example of how this pays off when operations are all connected: An operator in North Dakota was spending way too much money trucking water in and out of the wellsite. There was an obvious solution – truck less, pipe more. Moving water by pipeline is vastly cheaper than trucking it, but the midstream and production groups were stuck in silos, leaving decision-makers blind to the data needed to make the right decision.
Unlike the failure in Washington to relay the intelligence to Pearl Harbor, the people in this case in North Dakota were literally on top of the information they needed to reroute some of the water from trucks to pipes. They just couldn’t see it. In many cases, the pipe had capacity, but they didn’t have visibility. Other times, the people in charge of removing the water could not predict timing. Having no visibility into the information they needed to make the right decision, they defaulted to the wrong one and ended up paying for 3,000 truck trips a week.
By connecting the production and midstream teams on the same digital platform, they were able to start talking with each other and identifying bottlenecks. In three and a half months, they were able to move the same amount of water with 77% fewer trucks.
The attack at Pearl Harbor led to the creation of the Central Intelligence Agency, an attempt to prevent actionable intelligence from getting lost in bureaucratic mazes again. Reasonable people can debate whether they did so, but everyone agrees that oil and gas companies are facing an existential challenge to adapt or perish. Unlike the people in charge of Pearl Harbor’s defense, oil and gas companies know the threat has arrived. The problem is not having access to the right information when they need it. Connecting and optimizing the entire oil and gas value chain will put the right information in the hands of the right people while there’s still time to make the right decision.