Oil and gas industry: On an upstream journey

India recorded a production fall of 5% in crude and 8% in natural gas for the fiscal ending March 2021. While further provoked by the pandemic, India’s slumping trend of oil and gas production isn’t new. With successive annual declines, India’s last recorded growth in production came in 2011-12, while imports continue to supplement ~86% of crude demands. The country, thus, faces the twin challenge of surging import bills and inadequate domestic production.

More than 90% of India’s production comes from old and ageing fields. The newly acquired blocks under the government’s Open Acreage Licensing Policy (OALP) will need at least 5-6 years before reaching desirable levels of production. Thus, for the short-term, the only recourse lies in augmenting technological investments, particularly in digitalisation, to enhance productivity; especially in improving fortunes upstream where digitalisation promises to sharply reduce operational costs, improve production and make way for greater profitability.

Research suggests that the global market for Internet of Things (IoT) in the oil and gas industry is expected to reach $39.40 billion by 2023. In India too, downstream activities have long been aligning to the digital uptick. The steep decline in oil prices experienced in 2014-16 had compelled many to adopt smart technology. This digital switch has saved global oil and gas companies ~$50 million on just reducing downtime. The challenge, however, lies with upstream activities.

Marked by vast expanses of land, imposing infrastructure and personnel in bright coveralls–permanency in operations dominates oil fields. Everyday operations, especially, demand palpable human presence. The COVID-19 pandemic challenged this dependency. Identified as a sector of critical importance, the oil and gas industry did not stall operations even when the rest of the country had locked down. As people became unavailable, the upstream permanency was pushed out of its inertia and the anticipation of going digital became unavoidably real.

A study by BCG on digital transformation in the oil and gas sector suggests that upstream companies are now beginning to innovate with a new wave of technology solutions. Simultaneously, the report argues that the current difficult environment is leading to a convergence of interests between oil companies and suppliers, with growing willingness to consider new, digitally-driven commercial relationships.

In exploration and production — seismic mapping, application of AI/ML in controlling ground operations, use of artificial lifts, remote drilling– have all made a gradual entry. A study by the Ministry of Petroleum & Natural Gas (MoPNG) suggests that AI/ML has reduced seismic survey data interpretation time and cost by 50-60% while operators have reduced up to 70% engineering hours through field architecture optimization. The real-time analytics-driven integrated well design and planning has made well drilling 20-30% faster while Industrial IoT (IIoT) enabled real-time data has augmented production in excess of 3-5%.

Digital innovation, today, must be embraced holistically. At the top organisational levels, the leadership must adapt a new vision that prioritises investments in IIoT. Simultaneously, AI/ML (Artificial Intelligence & Machine Learning) must be utilised to address challenges in reservoir management, particularly for aging fields. Further, today, even Surface and Sub-Surface Operations are countering unwanted losses with digital-led efficient work processes.

We are also witnessing a growing inculcation of Health, Safety and Environment (HSE) practices and positive asset maintenance through digitalisation and predictive-analysis applications. Bringing a shift from reactive to proactive engagement, this promises to enhance output and longevity while achieving efficiency in operations and sustainability in practice.

Most importantly, digitalization is pivotal to upcoming explorations and new field development. By reducing the time to first oil through cloud-based data management and high-performance applications, digitalisation aids quicker identification of resources and reserves.

Moving ahead, along with technological foresight, we must also address human challenges. Studies suggest that limited knowledge sharing, insufficient digital training and lack of digital talent will emerge as primary barriers to digitalisation. Organisations have a key role to play here in assisting people’s adaptation to this new ecosystem.

As is now evident, today’s digitalisation of core manufacturing processes alone can determine survival tomorrow. The fourth industrial revolution is unfolding as we prepare to become a $5-trillion economy. By ushering digitalisation, the oil and gas industry can accelerate India’s journey of achieving energy autonomy and becoming a reckoning superpower. The industry has been experiencing diminishing output and contributes less than 1% to India’s GDP — a digital push, particularly for upstream activities, can vastly improve this condition.

Experts believe that at least 40% of all businesses will die in the next decade unless they accommodate new technologies. A fair warning, the oil and gas industry must now ensure that its survival is no longer a question but an assurance that will propel our country of 1.3 billion into its $5-trillion dream.

By Anand Laxshmivarahan, Chief Digital Officer, Vedanta Ltd.

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