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Oil and gas companies face 7 digital transformation challenges

by Uneeb Khan
Oil and gas companies
Oil and gas companies

Oil and gas monitoring software production is one sector that is primed for digital revolution. Nevertheless, development is uneven and gradual when you look at the companies that have tried. Millions of dollars have been lost on unsuccessful or poorly carried out digital transformation initiatives, making it appear as though they would have been better off giving up altogether.

The challenges of digital transformation unique to their industries simply weren’t something the businesses were ready for. Even problems that might also be present in other sectors of the economy have different ramifications for the oil and gas sector, necessitating alternative solutions.

In order to remain competitive in 2020, oil & gas companies will have to overcome unique digital transformation challenges.

Oil & gas implementation across global locations

International business is conducted by oil and gas corporations. With hundreds of distinct branches, sites, stations, and facilities under their management, ExxonMobil alone operates in at least 38 nations. It is challenging to implement digital transformation initiatives on schedule and consistently due to the dispersed nature of these operations.

It will be determined how effective—or ineffective—the transformation will be based on a specific set of factors specific to each location, which will further complicate matters. Environmental elements have an impact on the functionality, dependability, and durability of equipment, such as weather and temperature. How easily and rapidly improvements may be conveyed to a location depends on distance and accessibility. The new technologies and procedures will require training for the staff, which is often not possible remotely.

The sheer size of the digital change is another issue you must deal with. For instance, it would be simple and inexpensive to put a smart sensor at one location. That becomes a logistical and costly problem when multiplied by 100 sites.

Rollout is slow, obsolescence is fast

Programs for digital transformation, as was shown in the preceding paragraph, will take a long time to implement, especially if they involve remote sites like oilfields. Even more time will be required to conceptualize, scope, draught, pitch, review, and ultimately secure funding for the strategy.

What might happen if the deployment takes so long? The digital solution’s untimely obsolescence. We’re not referring to technology being obsolete per se (that will be covered in the next point). Instead, the fundamental character of the issue will have changed to the point where the original remedy is no longer appropriate. It is possible that the transformation took so long to implement that an alternative solution was discovered, making the entire programme for digital transformation useless.

In a glacial rollout, no matter how new or high-tech a solution is, it will not provide any value to the organization.

Changing technology phases in and out

The digital transformation effort in the aforementioned instance failed because there was no longer a need. However, it most definitely does happen that technology changes while the software is still being created or put into use.

This kind of circumstance may arise if the suggested digital solution is already outdated. It is more likely that the transformation programme will have been in development for a very long time by which time technology will have evolved. The technology being employed in the transformation programme, on the other hand, might just be a trend that swiftly gains popularity and utilization before becoming irrelevant. Or possibly the technology being used is developing so quickly that new and improved versions are appearing quickly. Although internet-connected devices may be popular right now, who knows what digital innovations may be in vogue in ten years?

Another situation would be if the business is still utilizing a legacy programme and doesn’t want to go too much beyond what it is already accustomed to. In that case, the transformation programme only serves as a show of support and doesn’t do much to advance the business. It just makes a few small but significant changes to company procedures while causing little to no disruption among users and stakeholders. As you can expect, the oil and gas industry won’t last very long with this kind of haphazard transformation approach. It offers relatively meager advantages and would represent a poor return on investment.

Decision making cannot be influenced by data

Oil firms cannot benefit from big data on its own. Key executives must constantly have access to pertinent data so that they may decide what should be prioritized in the programme. The exercise’s objective is to help management identify solutions that, directly or indirectly, will boost customer value and satisfaction.

Executives can (and often will) base their decisions on entirely unconnected and disparate issues, which is an unfortunate reality. Management will occasionally make decisions based on what they believe should be the company’s top priorities. While visionaries and startup business owners may occasionally be able to get away with this because they have more latitude to accept or reject whatever evidence they are presented with, oil and gas firms must exercise greater caution and only rely on data that has been independently verified.

In some cases, analyzing the data results in drawing the incorrect conclusions. When management is provided incomplete information or choose to concentrate on a certain set of data while disregarding others that contradict their presumptions, this might occur. The company is not benefiting from advanced analytics in this situation because they are choosing to disregard what the data is trying to tell them. The ultimate result is a digital transformation that either handles the issue incorrectly or inadequately.

A low rating for digital maturity

Understanding the significance of technological advancements and having a strong organizational culture that values technology are two characteristics of digital maturity. Companies that are digitally mature are data-driven, have flexible IT systems, and value and are comfortable with technology at all organizational levels.

Sadly, the oil and gas sector as a whole does not fit this description. In fact, the oil and gas sector only receives a five out of ten for digital maturity, according to Deloitte.

This is a significant obstacle for any programme aimed at implementing digital transformation because it suggests that any new technologies or operational procedures may encounter fierce internal opposition. This opposition hinders the use of the new approaches, which reduces their efficacy and leads to subpar outcomes. As a result, management loses faith in the transformation and becomes even less supportive.

The concept of the digital transformation may even be complicated by low digital maturity. The ability to propose novel solutions may be hindered by a lack of respect for technology, and skepticism may result in transformation concepts that are watered down and politically viable but have so few implications that they have no impact.

A clunky and archaic workplace

Despite all of the potential and validated advantages that digital transformation may bring to an oil and gas company, it cannot by itself revolutionize the entire enterprise. It must be backed up with contemporary, effective work procedures that support both the transformation’s guiding philosophy and the subsequent work process.

Old and archaic work practices in the oil & gas sector deliberately hamper the success of their companies.

As an illustration, higher management may still insist on receiving reports on paper, taking notes, and then having those notes typed up and distributed to the rest of the management team. This procedure is a time and paper waster. There are digital technologies that make it simple to share feedback with others, and a data visualization tool that offers advanced analytics in real-time is a far better method to get this kind of information.

This kind of technological bias is not exclusive to the labour. If an IoT-capable surveying instrument existed, a surveyor could utilise it to upload data straight into a cloud database rather than insisting on using antiquated tools and having to transcribe notes with ink and paper or, god forbid, from memory.

It’s possible that people are resisting digital transformation because they are afraid of change rather than because of the technology. That is why any endeavor to transform an organization’s digital presence must include change management. Any programme that ignores it is destined to fail because users won’t understand how the new approach will ultimately benefit them. The only way for a company to effectively employ technology to increase operational efficiency is by implementing fresh, customer-centered work processes.

Inadequacies in leadership and technical expertise

If the firm lacks technical competence on both the leadership and resource sides, digital transformation will be challenging.

Many decision-makers are unaware of the reality that technical expertise is not universal. Technical mastery in one area doesn’t always translate into mastery in another (for example, app development versus database management). However, despite their best efforts, the resources working on digital transformation initiatives still lack the necessary expertise to effectively apply the transformation solution.

Deep technical expertise isn’t as important when it comes to leadership roles, but you still need a leader with experience managing technical projects and who is at ease using cutting-edge or specialized technology. The ability to act as a mediator is a trait of a successful digital transformation leader. In this situation, a mediator excels at translating management direction and concerns to the transformation teams while also effectively expressing technical concepts and issues from the team in a manner that management can understand.

Long review cycles caused by stakeholders’ hesitation and nitpicking are another effect of poor leadership. Another sign of poor leadership is scope creep, which has the potential to dramatically increase expenditures. Even worse, scope creep can force the digital transformation programme to deviate from its original purpose, leading to a haphazard solution that tries to solve several problems at once but falls short of solving its main one.

What if an oil and gas company, however, chose to hire outside professionals to carry out the digital transformation? Even with outside help to plan and carry out the programme, it still might not succeed. The fact-finding and approval processes might be hampered by stakeholders or company subject matter experts who lack technology literacy or who are opposed to it.

Successfully transforming into a digital organization

Like any other sector, the oil and gas business faces issues related to digital transformation. The distinction is in the character of those difficulties and how they relate to the operations of oil and gas firms.

In order to overcome–or at least address–the challenges listed above, a digital transformation team must have the following:

clear objectives for the digital transformation. Less likely it is for the digital transformation campaign to effectively solve issues the larger and more generic it is. Setting clear objectives will aid in concentrating the efforts of the transformation team and result in a workable solution that will benefit the business and its consumers.

Data and reporting tools are available. A transformation team that lacks access to pertinent data is equivalent to a man lost in the wilderness. Data will identify the problem that the transformation programme must address, the most effective approach to solving it, and whether the problem even has to be tackled at all. Data will affect management choices and help determine how much support and resources the transformation team receives if it is presented properly.

internal assets and knowledge. The most effective transformation teams have both hands-on experience with the technology being used and deep operational knowledge of the organization. Considering how to use the technology within the framework of the oil and gas company’s operations and culture is just as important as handling the technology itself.

steadfast management assistance. When higher management openly backs a digital transformation initiative, it will be easier to mobilize internal resources and request the participation of the concerned departments. A transformation team would be more likely to run across resistance and internal interference without that kind of backing.

As a conclusion

The enormous scale on which oil and gas firms operate makes the already significant problems of digital transformation even more challenging. However, the return is equally significant and will provide observable user advantages (and business earnings) years or even decades in the future.

Even with their size, these obstacles can still be overcome if you offer the teams in charge of the transformation the necessary tools, backing from management, and power to cut through bureaucracy and modernize your business processes. As your core business is strengthened, you will be better positioned to benefit from new business models.

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