7 minute read 11 Feb 2019
engineering climb process plant gas processing

Why it’s time to invest in digital oil


Jeff Williams

EY Global Oil & Gas Advisory Leader

Global energy executive. Passionate technologist. People developer. Husband and father. Outdoors enthusiast.

7 minute read 11 Feb 2019

Digital transformation creates opportunities to connect disparate operations, creating a tipping point and delivering real value.

New technological developments have consistently pushed oil and gas operators into new frontiers — deeper waters, more remote reservoirs and unconventional plays — that were once out of reach. While advances have spanned the value chain, horizontal drilling and hydraulic fracturing unlocking shale resources played a major role in creating the oversupply responsible for the market shift and resulting in low crude prices.

The shift to abundance from the “peak oil” concerns of the not-too-distant past and the slow demand growth has reset oil and gas prices to lower levels and created a mandate for oil and gas companies to focus aggressively on both capital and operational efficiency to reduce costs.

Digital solutions that support this new approach are how the oil and gas industry will transform to succeed both today and in the future.

Digital imperative — the convergence of supply and demand

Many oil and gas companies exist as islands of technical excellence. Technology advances and engineering brilliance exist in silos, rather than being fully disseminated and embraced by the enterprise as a whole. And one doesn’t have to look too hard in most companies to find business operations that still employ outdated means of data entry, simply because that is the way it has always been done and innovation is typically focused at the well site.

This traditional mind-set is costly and inefficient, particularly in today’s sustained low oil price environment. Many companies have already scaled back their workforce, slashed budgets and pushed their suppliers for price reductions. Adapting to this new normal in market fundamentals, companies are taking a hard look at their operating models and asking themselves how they can change to survive.

The fundamental driver is simple: leveraging the power of digital technology to transform business operations can deliver real, sustained value to the bottom line. Another reason that the time is right for digital in oil and gas is the robust nature of the latest technology. The consumer internet couldn’t handle the volume of data oil and gas needs for digital to be meaningful.

With the advent of the industrial internet, there is now the infrastructure to handle the vast amounts of data generated along with advanced analytics, cloud storage and increasingly reliable mobile communications. These recent technological advances enable digital technology to transform the oil and gas industry.

According to Oxford Economics, IoE adoption by the oil and gas industry has the potential to increase global GDP by up to 0.8%— or US$816 billion — by 2025.

Where to start on the digital path forward

If there is a place where digital technology offers the greatest impact and highest returns in oil and gas in the short term, it is compressing and standardizing disaggregated operational supply chain processes. To do so will create a step change in efficiency, similar to what is has been seen in other manufacturing industries.

In oil and gas, secure digital technology can bring together producers and consumers of common sources of information to create greater operational efficiency. These networks can be internal or external to the enterprise. The broader these networks extend, the greater the scale and potential for operational efficiency gains.

How these networks create value within the oil and gas context is by enabling better and faster operational decisions, leading to greater asset utilization, reduced operating costs and increasing efficiency. Today’s digital technology makes this feasible by enabling what EY has coined as “process compression.”

Process compression brings together three foundational digital capabilities, all of which exist in the marketplace today: smart assets, paperless processes and data analytics — all in a secure environment. When applied across the oil and gas supply chain, digital technology can simplify and synchronize processes and accelerate integrated decision-making.

  • Get connected: Start by connecting critical assets and machines. Connecting operational data to each other and the people who need it are crucial to begin your journey.
  • Get insights: Use intuitive methods to analyze data to determine true root cause and opportunities to improve or resolve. You have enhanced ability to quickly evaluate anomalies and take the correct action.   
  • Get optimized: Leverage digital to optimize the total lifetime performance of your assets to increase availability, minimize costs and reduce operational risks.

Five areas for process compression

  1. Topside production optimization: Topside production can be optimized at a lower cost with improved interconnection between data sources and physical locations to drive better, fact-based decisions.
  2. Predictive maintenance and repair: When decisions on production assets are reactive rather than proactive (i.e., based on actual, historical failure data), this leads to maintenance overspend, duplicative inventory and suboptimal resource allocation. Today, tracking devices on inventory and asset management applications can connect tool delivery and management to preventive maintenance schedules.
  3. Logistics and warehousing: Checking that equipment and (fleet) resources serving critical assets are tracked across all parties involved in the network and connected to business processes is critical to production maximization. Without this capability, deliveries are missed due to route delays, assets are not loaded efficiently, and there is only paper-driven recognition of services.
  4. Integrated planning and execution: Directors, asset managers and rig locations often do not have the same live understanding of production status and plans. And when changes are not integrated and communicated consistently, there is no shared consciousness. The legacy operating model is based on a siloed engineering legacy, which is now dealing with the complexity of an interconnected world. Digital toolsets such as process collaboration and analytics can enable cross-functional understanding and collaborative decision-making based on total situational knowledge.
  5. Digital finance transformation: Massive amounts of paper-based manual transactions can result in 7% to 15% overpayment or coding errors. Digital solutions can combine mobile, cloud and interfaces to finance systems to achieve live automation of invoicing in the field. Real-time views of back office activities and expenditures can increase accuracy and timeliness in billing releasing work capital.

These processes not only drive down operational costs, but also position early adopters for the future. The industry is facing a generation of workers who are digital natives. Organizations that harness digital technologies and the drive and energy that they unleash have a chance of achieving true differentiation — not just in terms of increased efficiency, but in the ability to attract and retain the next generation of brainpower.


Challenges still abound — how can companies justify the investment, given the constant influx of new digital applications and during a time when companies need to be extremely selective in their spending? The short answer is to start by deploying digital in areas where the technology can affect the cost curve in the short term and deliver immediate results.

About this article


Jeff Williams

EY Global Oil & Gas Advisory Leader

Global energy executive. Passionate technologist. People developer. Husband and father. Outdoors enthusiast.