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Transition to Industry 4.0: How far have we come and what's next?

23rd October 2018

Kristina Sabirova – Managing Partner of BGS Group and organizer of closed-door international congresses in Oil and Gas.

The spreading of such technologies as IoT, remote sensing, data combination, and more in Oil and Gas is known as the 4th Industrial Revolution or Industry 4.0. How are O&G projects’ automation going; what's new in upstream, midstream, and downstream projects; what challenges should companies be ready to face and how to avoid the common mistakes by investing in innovations?

Kristina Sabirova
Kristina Sabirova, Managing Partner of BGS Group

Oil & Gas Technology: During the last decade we all have seen how automation became the must-have update for the companies in Oil and Gas. Looking back, what exactly was the starting point for these transformations and what processes are we witnessing now?

Kristina Sabirova: Well, specific features like operations in widespread, remote locations and the huge consequences of safety issues make the O&G market a perfect field for the implementation of automation technologies. 2017 has seen huge investments into automation and digitalisation: Statoil company unveiled a 1 billion Kroner digitalisation initiative, BP invested $20 million in the A.I. company Beyond Limits, and GE is ready to integrate their digitalisation platform in a $6 billion revenue stream by 2020 ( . But this strong growth has its particular reasons.

The June 2014 oil price collapsed and caused a major contraction in spending by Oil and Gas companies. On top of that, industry is under pressure from new regulations and the developing alternative energy segment. The companies in this sector are looking for the ways to cut costs by maximizing operational efficiency. Automation is an effective tool for this as it reduces costs from man-power, transport, logistics, and warehousing. It also cuts down the number of activities undertaken through a greater understanding of the current situation, options for intervention, decision-making, and confident predictions of outcomes.

According to the IEA (International Energy Agency) the widespread use of existing digital technologies could decrease production costs by between 10% and 20%.


OGT: So are these industry transformations based more on economical or technical issues?

KS: Both. The recovery factors for unconventional reservoirs are currently much lower than those for conventional ones. Recoverable O&G resources could be boosted by around 5% globally with the use of existing and emerging digital technologies. For example, up to 90% of the gas from a conventional reservoir can usually be recovered with existing technologies, while the recovery factor for an unconventional shale gas reservoir is between 15% and 35% (International Energy Agency) . Digital technologies may offer a wide range of tools to increase the recovery factors: enhanced modelling and tracking of fluids within the reservoir, automated production control of wells, and advanced processing for seismic data to yield more reliable and high-resolution digital images. The improved reservoir simulations will help the operators to optimise the spacing between wells, the lateral length of horizontal wells, and the amount of proppant used during hydraulic fracturing. As a result we may
achieve maximum output while minimising the investment in wells and facilities.

Automation also goes in line with the restricting environmental regulations either by lowering the direct cost of detection –for example, using drones in localised facilities– or by helping to analyse the data to develop parametric and predictive monitoring systems.


OGT: What challenges do companies face in their transition to the newest automation technologies?

KS: First of all, the Oil and Gas industry is very capital intensive and large projects typically take many years to develop. Digital technologies evolve much faster, so it is difficult to introduce the design changes. In addition, many Oil and Gas facilities need an adaptation before a digital transformation, as they were installed some time ago. Long-term demand trend has a great influence as well. With the deployment of low-carbon technologies and energy efficiency innovations the companies may raise the production, but in that case, Oil and Gas resources may be larger than the total amount that will be consumed. The technical benefit from the use of digital applications is undeniable, although it does not necessarily match the economical one.

Aside from the economical and technical reasons there is a management issue. The deployment of new equipment, including new digital options, often requires high-level management approval. The delays accompanying such an approval may add to costs.


OGT: Are there any patterns companies should follow to make the transition to automation easier and to avoid mistakes?

KS: The Industry 4.0 concept requires a well-developed IT infrastructure, a well-trained workforce, and –which is the most important– the readiness of the decision makers to introduce an innovative approach. The posts for the specialists in charge of digital transformation and automation, Chief Digital Officer, for example are relatively new. They have to guide the company through all of these challenges, the internal and the external ones, so you can imagine the amount of time it will require. And in the beginning of this long journey they should understand what area to begin with.

Before implementing the next level technologies, a company needs to achieve the baseline infrastructure from a hardware and software perspective –sensors, networks, and real-time platforms. Then it is possible to look beyond traditional, purely technical and hardware automation. The automation level may be raised through software, through optimising corporate activities. One of the must-haves is capturing and storing data in an efficient and accessible manner. It requires clean, standardized data as a prerequisite for automation.

The next step is to inventory end-to-end processes and map them to the task level of detail; it is needed to identify the value-added instances for automation and select processes that should be automated to be beneficial for that particular business. Identify the right problems to solve based on your inventory and classification along with an understanding of time to value and return on investment.

And of course keep yourself up to date with the newest research and technologies.


OGT: As a coordinator of business events in O&G, can you tell us what segment is ahead in terms of the introduction of innovations?

KS: Taking into consideration the last projects, downstream probably has the fastest pace of progress. It is easily visible from the broad evolution of one of the most advanced and impressive digital technologies –Artificial Intelligence and Machine Learning. Smart Plant and Digital Twin technologies are used there to provide the coherent system of predictive maintenance and overall equipment efficiency monitoring. Among others, I would like to highlight the future Sinopec refining project featuring the construction of 10 intelligent plants with a goal of a 20 percent reduction in operation costs. Another interesting direction are virtual assistants –online chat platforms helping customers to navigate product databases and processes general inquiries using natural language. Royal Dutch Shell was the first in downstream to use this technology on their website.

OGT: In this case, what are the perspectives of upstream and midstream projects, regarding their renovation?

KS: In the upstream segment we already have fully automated drilling, smart completion systems based on autonomous or remote-controlled choking back of high gas and water producing zones, rigless plugging and abandonment, etc. Upstream A.I. however is in its infancy. It has great prospective: automated optimisation of drilling operations in real-time, exploring potential drill sites, operational performance of well facilities, optimisation of engineering and seismic interpretation processes. The intelligent robots for hydrocarbon exploration and production are yet to come. One of such projects is the one ExxonMobil and MIT started in 2016 and is devoted to the design of A.I. robots for oceanic exploration of the natural seep detection.

In the midstream such problems as unreachable locations are already solved by robotics or drones. Sensors help to get information about the state of equipment in real time, providing the predictive maintenance. Then this information is stored in cloud and analysed with Big Data processing. One of the latest trends is the integration of digital ecosystems technologies involving industrial Internet of Things that harnesses existing data so that the operators may –again– cut costs and remain competitive in the market. 

Overall the Industry 4.0 revolution is unforgiving of delays. The segments are interconnected, and the continuing implementation of innovations is strongly needed not only for upstream and midstream, but for downstream as well. We need a well-balanced development of each segment, otherwise there is a risk to face the situation similar to the Cyber Security crisis in O&G five years ago. At that time, the lack of attention to the digital transformation caused huge damage for the companies, and made the Oil and Gas market one of the five most problematic ones. That’s why we find it important for our upcoming congress, AUTOMA 2019, to cover automation and digitalization in each sector of Oil and Gas: upstream, midstream, and downstream. This is the networking platform aimed to help decision makers of companies and the technical solutions providers meet face to face. It also gives the opportunity to observe practical cases of colleagues –to consider their experience, share yours, and to set your own investment priorities for the innovations.

If you’re interested, you can join us in Zurich, Switzerland on October 14-15, 2019. To learn more about AUTOMA 2019 follow

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