Digital acceleration during Covid-19June 17, 2020
Craig Hayman, CEO of AVEVA, talks to The Energy Year about how the Covid-19 and oil price crises are poised to spur further digitalisation in the energy industry and how the digital drive can benefit employment. AVEVA is a global provider of industrial software and services.
Will this crisis be a tipping point for the industry’s digitalisation?
We are currently in two crises: Covid-19 and the oil price downturn. This is a classic supply chain problem, where we have oversupply and reduced consumption. There is nowhere to store oil in the supply chain, which led to oil price futures dropping dramatically, and even into negatives.
If you provide milk, wheat or other products, you have the same issue and the same dynamics. In oil and gas you have the same tools and techniques available to address this, and that is based on data. You need information to understand the supply chain, the end-to end view of it. I think in oil and gas, everyone looks at a different piece of the data, but only when you look at it end-to-end does it actually make sense.
As an example, in production planning, a schedule is typically run a couple of times a year to understand how to go through refineries, which vessel and storage facilities to use, which products to create for end markets. You find that oil prices and demand are changing more rapidly than any major’s ability to rerun production planning. So the market is changing faster than suppliers’ ability to change.
So you need data to adjust to that, which is the core idea of the digital transformation, and you need expertise to do something with the data. So if oil majors have a good end-to-end visibility on the data – from upstream to downstream, even on end-market pricing and consumer demand – they are in a much better place to use that data to drive a reduction in their operational expenses.
There is a cartoon which asks you: Who do you think drives the digital transformation of your company? Is it the CEO, the chief digital officer or Covid-19? And of course the answer is Covid-19. We are in a different industry with less than 5,000 employees producing software, but Covid-19 has forced us to be entirely digital. We are lucky as 95% of our employees are now working from home, which was set up over the course of two months. Covid-19 has driven this digital acceleration in many industries, and oil and gas is not alone.
Is there a difference in how IOCs and NOCs approach digital transformation?
Like with any change, people have to see their success in it in order to take part, whether it is a state-owned or an independent company. If they don’t, the different groups or bodies are trying to be successful in their own right and don’t understand how they are interconnected. And at any large organisation, this is very complicated.
However, when you put the data in front of them, something magical happens. They see all of their dependencies in the upstream, midstream and downstream, and all the different operating companies, facilities and stakeholders. And then they see how dependent they are upon all of that.
To take another example, I once asked a client how much oil his company produced that day, and he got different answers from all of his departments. Each was right, but from its own perspective. So, it is hard for them to make a change when no one can agree on how much oil they have produced. So our approach has been to set up one of our digital operation centres within four to eight weeks. ADNOC’s 50-metre digital wall [which visualises its distribution network] took eight weeks. The next question is what you then do with the data. This is where AI and other techniques come in.
What are some of the benefits digitalisation can bring to the nature of employment in the energy industry?
This is all about productivity improvement. If you take the example of retail, financial services or telecommunication, all these industries became very digital, and they have driven productivity improvement without any labour reduction. There are many levels of productivity improvement and we are nowhere close to the labour impact.
Some of our customers have a lot of heavy equipment – compressors, pumps and the like. Those pumps fail, creating downtime, and the individual who is maintaining a pump will use his own data and experience to understand what is wrong with it. We’re able to give more data to that person and he will have much more information about it. He will have better insight on when the pump will fail again. We put the information in the hands of the people already in charge of a facility.
Another example can be seen in scheduling. We have many people working on scheduling of the flow of oil and gas from underground and by running a supply chain optimisation you can optimise the flow of the feedstock to the downstream or midstream. So they can run the supply chain planning much more quickly using the cloud and they are more effective.
In the case of ADNOC, they say that whenever they run this optimisation, they generate USD 100 million worth of economic value, and they do it 12 times a year. ADNOC has over 16 different operating companies and ownership structures and they all had a different view. But now, as they all have access to the same data, they have been able to bring in these scenarios – be it performance management, machine learning or optimisation using the cloud – and that is how they got to the billion-dollar economic value.
What opportunities do you see for AVEVA in the downstream and green energy sectors in the post-Covid-19 environment?
There are many activities regarding downstream performance – from improving safety and operational performance to providing data – and technology can help. 40% of AVEVA’s business is in oil and gas, split between up-, mid- and downstream. In downstream, there is a lot of facility monitoring and presenting data to the operator in a way that is useful for them.
Regarding green energy, AVEVA delivers software for a sustainable future, which is very relevant to our customers in oil and gas as they are very much focused on sustainability. When it comes to optimisation of feedstock planning and supply chain, that can be applied to carbon emissions.
Or let’s say someone introduces a higher-grade, greener fuel which needs to run through the system, and can be sold at a higher price with lower emissions. You have fuel and you have energy. Fuel is typically focused around aviation, heating oil, automotive etc. This is somewhat of a consumption-based model. But then you have energy in chemicals, and the faster you can turn that into electricity, the more efficient it is to distribute. Whether the energy comes from hydrocarbons or wind, you want to get to electricity as soon as you can because it is much more efficient to distribute it this way than in its raw material form.