Energy accountants’ brows needn’t always be furrowed amid $60 (Dh220) a barrel price and geopolitical uncertainty. There is a tactic to win this guessing game. Enter predictive analytics.
This pivotal tool can shift the oil and gas industry’s mindset from a retrospective to a predictive approach by finding and analysing data to give visibility around currently-opaque corners for the world’s biggest oil companies.
Yes, leveraging data to move decimals on balance-sheets in your favour requires a deep-rooted cultural shift and, yes, it will take time. Don’t play hide-and-seek with data — the rewards are worth it. Predictive analytics are saving companies $7 million on gas pipelines in the eastern US by giving a heads up on failures.
Other companies are saving $325,000 per rig by using machine learning to predict drill-bit locations, as detailed in Lloyd’s Register’s special report — “Predictive Analytics in oil and gas: The future in focus”.
More than half of the world’s 100 largest oil and gas firms have already figured out the trick to winning the game. Integrated oil majors — such as Shell, Chevron and ConocoPhillips, and field service companies, such as Schlumberger and Halliburton — are applying predictive analytics across their global value chains. But why is 40 per cent still lagging?
It’s a mixture of psychology and awareness. Some fear the unknown and others are distracted by the business of hitting commercial targets amid colliding pressure points of lower oil prices, stricter environmental goals and rising energy demand.
Generally, three camps have emerged. In the first group, the fourth Industrial Revolution may as well be in outer space, intangible and difficult to contextualise. The second group appreciates the value of technology and digitalisation, but it still feels largely out of reach, at around 40,000 feet up.
And the third group has its feet on the ground, with a strong understanding and utilisation of the tools that give it the sharpest competitive edge. Which group are you in?
Embracing predictive analytics and the wider toolbox is only half the story; successful application is the other. That requires excellent storage of what is a rapidly growing market of knowledge — proper data management (PDM) matters.
Unsurprisingly, the global datasphere will grow from 33 Zettabytes (ZB) in 2018 to 175ZB by 2025, said the International Data Corporation (IDC). That is roughly a five-fold growth in seven years. Consider this against the fact that more data has been generated in the last two years than in all previous recorded history.
Much of the limitless reams of numbers can be “data diamonds”; information that needs PDM and expert analysis to reveal its potential to increase efficiencies and cut costs. Approximately 3 per cent of the possible data on an oil rig is harvested: what knowledge is hidden in the remaining 97 per cent?
Cybercrime damages will cost the world $6 trillion annually by 2021, up from $3 trillion in 2015, therefore representing the greatest transfer of economic wealth in history, according to Cybersecurity Ventures.
Predictive analytics can lift the veil of ambiguity by shining light on dark digital corners and identify weak spots in the value chains, therefore strengthening the walls of the “digital fort”. Energy companies need digital sheriffs; naivety or fatigue are no longer an option.
Predictive analytics is still in the early stages of its exploratory journey; this is just the tip of the digital iceberg. What energy companies do next really boils down to one simple question: do you want to win?
— Gareth Kirkwood is Managing Director for Middle East and India, Lloyd’s Register.