While NOCs have an advantage over many IOCs in terms of the vast reserves they hold, IOCs still have a stronger commercial footing. NOCs can overcome this shortfall by leveraging digital technologies like the internet of things (IoT), artificial intelligence (AI) and the cloud. These tools will allow them to improve recovery, reduce the cost of extraction through automation, accelerate strategic decision-making as well as control and manage assets from anywhere in the world. In fact, some NOCs are already successfully implementing digital technologies in various ways to achieve this.
Transitioning to a new operating model requires NOCs to assess the current state of their digital technology systems and then determine where these systems need to be improved to achieve desired business goals.
First NOCs should define the set of outcomes they will track to ensure they are hitting their business targets. The outcomes, which include common metrics like return on assets, earnings per share and operating margins, provide clarity on the type of data needed.
Secondly, NOCs should ensure they are collecting the correct data sets by using the right combination of enabling technologies — digital systems that capture and analyze data.
The role of the CEO
If you were the CEO of a NOC leading your organization through this transition, how could you best leverage digital technologies to ensure a smooth transition from volume to value? Fundamentally, you would use digital to sharpen your view of the business through two different lenses — the physical and the financial.
The physical lens focuses on the real-time flow of your physical asset — hydrocarbons — through various parts of your business: from the reservoir to the wellhead, from the refinery to the retail gas station. But, currently, the view is hindered, if not outright obstructed, by the real or virtual silos and barriers put up between business units and throughout the supply chain. These barriers segment both the flow of hydrocarbons, and the various data sets recorded on this flow, many times. They also create a significant amount of data error making accurate business forecasting near impossible — or approximate at best.
Digital-enabled data transfer breaks down these silos to provide a seamless view of hydrocarbon flow, open and transparent knowledge sharing, and a clear picture of which units are running efficiently or falling behind. This physical representation of the value chain is represented by operating technology.
The second lens — financial — provides an accurate view of costs, market prices and other valuation information. By overlaying financial metrics on top of the physical view, one can track earnings, costs, and value gained or lost at each step of the asset value chain. This financial overlay on the physical value chain is represented by information technology.
The true power of digital technology lies in that “sweet spot” where the operating technology and information technology meet. Getting these technologies to work seamlessly together requires the right infrastructure — one that tracks both physical volumes and the financial value of those volumes at each step of the process. It should be structured to mimic the real-world operating technology environment and with robust cybersecurity measures in place to ensure reliable and secure operation.
Using analytics to answer questions
With the two overlays of the business fully developed, focus shifts to deciding which type of analytics makes sense at any given point in the value chain. The digital technology platform must support analytics that answer some fundamental questions:
- What kind of analytics will have to be performed to better understand and optimize various parts of the business?
For example, machine learning to optimize operations.
- What kind of performance will be required from the operating environment to deliver the desired financial and performance objectives?
- Which processes should be changed or optimized to drive greater returns?
A properly implemented digital technology infrastructure can give NOCs a significant performance edge across the asset chain and help set them up for long-term growth.