MIDA Insights – Services
Active use of technology to capture new frontiers and drive productivity is not new to the oil and gas industry. The upstream sub-sector for example, has been at the forefront of several significant technological advances in the past, from supercomputing techniques for reservoir modeling to seismic and 3D imaging for drilling and project developments; while refineries have been pursuing digitalisation for more than 30 years, with technologies like advanced process control (APC) being part of the operational mix of many operators.
What is different today is how fast technology transformation is accelerating. Today’s global oil and gas industry is operating in a unique environment of a high degree of volatility and risk. Diminishing returns, coupled with forecasts for continued volatile prices have heightened the urgent need for business transformation.
This has pushed operators across the oil and gas industry to adopt digital technologies, not only to ensure efficient operations and sustainability but also to address safety and environment requirements.
The World Economic Forum, recognising digital transformation as an emerging driver of sweeping change in the world, launched the Digital Transformation of Industries (DTI) project in 2015 to better understand and prepare for new opportunities and themes arising from latest developments and trends from the digitalisation of business and society. The DTI analysis of the oil and gas industry in 2016 focused on four issues central to the industry over the next decade: digital asset life cycle management, circular collaborative ecosystem, beyond the barrel and energising new energies.
As such, developments in technologies such as cloud computing, the Internet of Things (IoT), mobility, artificial intelligence (AI), virtual reality (VR) as well as big data analytics have been significant contributors driving digitalisation trends in the industry. The DTI analysis further expounded that combining technologies in innovative ways could magnify their capabilities exponentially, far beyond their effectiveness if deployed separately. This is also echoed by McKinsey’s Commentary on “The Next Frontier for Digital Technologies in Oil and Gas (August 2016)”, which estimates that the capital expenditure in the oil and gas industry can be reduced by up to 20% with effective use of digital technologies. It also forecasts that total cash flows will improve by USD11 per barrel across the offshore oil and gas value chain, adding USD300 billion a year by 2025.
Looking at Malaysia’s very own home-grown oil and gas industry players, PETRONAS has embarked on driving the digital transformation of the oil and gas industry within the country. This includes them digitally transforming their procurement function to a flexible, cloud-native and open platform. With this transformation, PETRONAS is able to better predict demand for categories of spend, enabling them to provide more accurate signals to their vendors and suppliers by leveraging AI, big data, blockchain, and IoT to achieve transformative business outcomes. This has resulted in a win-win gain for PETRONAS, their vendors and their clients alike.
Case in point: Sky Futures (M) Sdn. Bhd., a Malaysian owned company that provides end-toend drone-based industrial inspection services using round-breaking software, sensor and technology solutions. The company’s inspection services are 85% more cost-effective than conventional inspection techniques. This is attributed by reduced shutdowns and the faster, safer and accurate high-quality data sets obtained by Sky Futures’ inspection drones for their clients to make a smarter decision in regards to their operations.
Moving forward, digital transformation will undoubtedly continue to be a focus across the oil and gas industry. The government, through various agencies, including MIDA, will continue to support the adoption of digital transformation undertakings within the industry by providing the necessary assistance and facilitation for industry players to thrive.
Some notable incentives and grants offered by MIDA include grants for research and design training, modernisation and upgrading of equipment and acquiring new technologies, as well as incentives and facilitation relating to the adoption of automation or Industry 4.0 technologies.
MIDA trusts that adoption of digitalisation within the industry will further enable competitive and economic advantages to the domestic oil and gas industry players.