By: Paul Carthy, Managing Director, Energy Industry Group – Middle East, Accenture
With today’s evolving business landscape, staying up to date with emerging global digital trends is imperative to improving operations, increasing profits, being environment-friendly and planning for the future.
The upstream oil and gas industry is no different. Whether it is the geopolitical shifts to alternative energy sources or the transition from legacy industry processes and mindsets – we realize it’s now more important than ever to examine how we can employ digital technologies in upstream businesses. What are the possible barriers and the likely benefits?
According to the seventh edition of the Accenture Upstream Oil and Gas Digital Trends Survey 2019 – a global survey of 255 industry professionals, including C-suite executives, function leaders and engineers – cybersecurity had the greatest impact on business performance in 2019.
Cybersecurity leads digital investments. Cybersecurity is now a boardroom-level concern that is monitored closely by governments, stakeholders and consumers. In 2019, this domain was the number one investment focus, with 61 per cent of survey respondents (a 49 per cent increase) indicating that they were investing in cybersecurity technologies for prevention and detection of threats. However, while cybersecurity has the greatest impact at present, big data/analytics, and artificial intelligence, are poised to take the lead in the future.
Moreover, based on our research, other key takeaways include:
- Digital investments continue to increase. Digital remains a significant annual investment for upstream companies, in a bid to stay relevant and retain their competitive advantage. Digital investments are indeed key to unlocking business value. However, they should be geared towards achieving transformational changes that help businesses move beyond proofs of concept (POCs). Moreover, we are seeing leading upstream companies investing in digital to advance the energy transition and create more sustainable future business models.
- Digital helps optimise core businesses. The survey respondents believe that digital solutions can make their upstream companies more agile. Most oil companies are looking to digital to help them reduce costs and make their operations more efficient. Through optimising their core upstream business, they work to become as lean as possible to compete in a challenging environment.
- Upstream oil companies are not realising the full value of their digital investments. And the reason is not lack of good ideas or lack of POCs. The primary challenge is that oil businesses are unable to scale their digital solutions due to the absence of a clear and articulated strategy and the necessary base capabilities. Research indicates that companies need to define the ‘true north’ of their digital transformation strategies and then set up a ‘base camp’ of key capabilities to make it happen. This involves creating an operating model supported by new digital capabilities and skills, innovation to scale processes, digital platforms and ecosystem partners.
- External skills and partnerships are key to unlocking the value of digital. Oil and gas companies are now realising that they lack some of the skills needed to unlock the value that digital can offer their businesses. Therefore, they are starting to tap into a broad external ecosystem of partners, such as startups and boutique organisations. We believe that upstream companies need to rethink not only with whom they work, but also how they work to leverage their partners’ capabilities for innovation, co-creation and co-development that are so critical for digital transformation.
Interestingly, the number of executives who said their companies plan to invest more or significantly more in digital technologies over the next three to five years – 72 per cent – was relatively unchanged compared to the 2017 survey (71 per cent).
Oil companies should invest robustly in digital so that they can remain competitive as the energy transition progresses and leading players continue to move to sustainable business models. As the challenges facing the industry increase, digital can allow oil companies to preserve their licenses to operate with greater transparency, enhanced safety measures and environmental friendliness.
Finally, investments in digital can help upstream oil and gas companies reduce costs and make faster and more informed decisions. However, as is the case with all industries today, only continuous skill development can enable them to realise their full potential.
This column first appeared in the March issue