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Oil executives will have to invest in their digital futures in 2018 to keep up

The digital tidal wave is here. Whether it's monitoring home energy consumption using smart meters, remotely recording a TV programme on the set-top box at home while at the office, or hailing a cab using Uber, digital has already profoundly affected the way we live, work and interact with others.

The oil sector is no different. Although some firms pioneered digital techniques in the upstream 15 years ago, the industry as a whole has lagged others. Digital providers are bombarding firms with bright ideas to apply across their value chain, from exploration to refining to logistics to retail. But few ideas have matured into a sustainable and scalable global solution. Innovative petroleum firms that can identify a clear link to safety, efficiency or financial metrics from digital investments will gain a competitive advantage in 2018 and beyond.

Which solutions will emerge first?

Many oil executives and technologists ask if it's worth investing in digital technologies to gather more raw data through "Internet-of-Things" sensors, drones or smartphones, when only 15% of data collected in the upstream is even used. How much should firms spend on automation and artificial-intelligence (AI) applications, like chat-bots, to take over mundane administrative tasks, leaving staff to concentrate on higher-value activities? To what extent should they use the cloud to store and manage data? Big-data analytics may be valuable in looking for patterns in the unstructured world of social media, but most data in petroleum companies are fairly structured and in databases. What's needed are sound analytics to intelligently predict future performance in operating equipment or to predict delays in the delivery of raw materials through complex supply chains.

We think the five front-runners in digitalisation for the petroleum industry in 2018 will be these:

Chat-bots / AI - Those boxes that pop up ever more frequently on websites ("Can I help?") are simple conversation-simulation tools (chat-bots) to lead you through a series of choices before diverting you to a live agent. Oil traders are trialling chat-bots to ensure they have all the relevant information (such as news, commodity prices, historical trading volumes) on their screen, based on what they say in a conversation with a counter-party. The chat-bot intelligently captures the details of the completed trade, rather than at day's end, even prompting for missing information necessary to successfully close the deal. This speeds up and improves the quality of the trading decision. Built-in AI self-learns from the last conversation to add more relevant prompts for the next deal.

Fieldwork mobility solutions - First tested in mining, the use of wearable devices will significantly increase in the petroleum industry. Not only can the devices monitor a person's exact location, but they can also show their vital signs and environmental surroundings to confirm they are working within permitted limits and conditions, thus ensuring safety and regulatory compliance. Hand-held or wearable devices with augmented-reality tools will enhance the productivity of workers in the field by up to nine times.

Remote supply-chain operations - Advances in network speeds and internet connectivity will allow companies to monitor operations remotely and in real time. Until now, end-of-day stock reports and regular phone calls to multiple terminals were standard operating procedure for an oil-product scheduler responsible for a network of pipelines and terminals. It's now possible to set up a central control hub with advanced visualisation screens and Skype-like collaboration tools to allow monitoring and even remote control over a large area, entry/exit points, terminal fuel loadings, tank levels and flow rates. It all lets the hub operator optimise inventory levels and truck schedules to respond to changing demand and competitor prices in hours, rather than days.

Virtual learning - Replacing costly and time-consuming field trips with virtual reality-based learning (similar in concept to a cockpit simulator to train pilots) will become the norm in the petroleum industry for fieldwork training and employee induction.

Industry business platforms - Industry participants will set up business and data platforms, either in a consortium (benefitting the whole industry) or individually (giving them a competitive advantage). Examples are a blockchain trading platform being set up by BP, Statoil and Shell, or still-confidential projects underway in integrated oil players to enter electricity retailing and peer-to-peer electricity exchange, a hedge against the retail fuel mix shifting from conventional automotive fuel to electricity.

To stay competitive, the industry will need to place bets on a range of digitalisation applications in 2018, with returns clearly tied to improvements in safety, efficiency, effectiveness or the bottom line. Chief executives will need to think carefully about the structural and cultural changes needed in their firms for successful adoption of these digital initiatives. It demands a different skill set from those that have previously helped the industry execute some of the world's largest and costliest engineering feats.

Suraj Ramaprasad is Managing Partner, Sector Head—Energy and Resources, Europe at Infosys Consulting

This article is part of Outlook 2018, our annual book looking at energy market trends for the year ahead. To purchase a copy, click here

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