Exploration and production organizations are finding new beginnings in an end-to-end digital approach.
By Brent Potts
The edict to the founders of oil exploration and production startup Assala Energy from the private equity firm backing the venture was clear and ambitious: Build and launch a viable, fully operational oil and gas company around a portfolio of brownfield oil and gas assets in Gabon, West Africa, and do it within six months, please.
An aggressive timeline to be sure, but one that London, U.K.-based Assala ultimately proved to be attainable, due in large part to a shrewd, forward-looking technology strategy. Among the first steps the fledgling E&P company took after acquiring the brownfield assets from Shell for $628 million in 2017 was to invest in a digital core. This is a powerful but simple data-driven digital ERP solution that gives it real-time visibility and insight into virtually every aspect of an operation that includes production activity in five fields, as well as interest in four non-operated fields, an onshore pipeline system and an export terminal. Standing up the company in a mere six months involved some heavy lifting on the IT side, as networks, data centers, end-user computing and more than 70 applications, plus data and documents, had to be integrated into the digital core.
All that to position the company to deliver on its stated mission: “To seek out brownfield assets where an opportunity exists to streamline operations, by making them more efficient,” and in doing so, “to increase production by maximizing uptime, ensuring high maintenance standards and unlocking the value within and around our producing assets.”
The digital core not only enabled Assala Energy to meet the six-month launch timeline, it is helping it to deliver on its mission. Having systems connected and integrated within a single ERP platform allows a wide range of data — field/machine, geospatial, RFID, from both internal and external sources — to flow throughout the company, in real time, so it lands where and when it needs to, providing actionable in-the-moment and big-picture insight. In essence, Assala Energy was born as an intelligent enterprise, more readily able to monitor its field assets, use data-powered predictive analytics to cut maintenance costs and maximize uptime, correlate and analyze data to gain business and operational insights, and generally to benefit from a high level of reliability and integrity across its operations. What’s more, digital tools give the company the ability to apply a greenfield solution to the brownfield data it has on its oil and gas reserve holdings, helping it to squeeze more value out of those assets.
This kind of end-to-end digital approach can help to launch a new E&P company or to transform an existing one, as Murphy Oil has demonstrated after integrating a host of digital technologies across its entire global E&P business, including upstream operations, production, procurement, maintenance, finance, revenue, HR, and more. In less than six months, the company went from an inefficient dependency on multiple systems, standards, technologies and processes across operating locations, to running its entire business with a simpler, data-intelligent ERP platform built on industry-specific templates that decrease asset downtime and operating costs while providing a consistent stream of strategically valuable insights from various data sources. Now it has a real-time view into operations, from the wellhead on down, enabling it to streamline departments and more efficiently deploy personnel. On the heels of its end-to-end digital transformation, Murphy Oil reported its highest net income in four years in 2018, with a registered annualized EBITDA (earnings before interest, tax, depreciation and amortization) to average capital employed of 21 percent.
But bottom-line figures like these only hint at what end-to-end data intelligence can do for an oil and gas enterprise. Here are a few examples of how digital tools and approaches can transform an E&P operation:
• With a sensor-equipped, Internet of Things-connected equipment and predictive analytics tools, an E&P company can use advanced detection and diagnosis to avoid costly failures at a well site, gathering operation, pipeline, refinery, etc.
• With an end-to-end digital platform in place, a company can shed the often-complex, siloed and expensive hardware-driven IT solutions and processes on which it has long relied, replacing them with a simplified cloud-based framework where business processes and ecosystems are integrated and connected, and where data, learning and best business practices flow freely and securely across the enterprise.
• A digital platform with machine learning and AI tools can serve as the brain of a production operation, drawing from deep learning algorithms to analyze real-time data, identify patterns and anomalies in the data, then make decisions to optimize asset efficiency. For example, by creating a virtual representation or model of a production operation — what’s known as a digital twin — a company can run data through the twin to optimize production systems quickly to unlock new production. The digital twin essentially is a machine learning-powered analytic platform for modeling existing physical systems in the digital realm, so a company can run different scenarios to determine likely outcomes, then make strategic decisions accordingly. Used in tandem with predictive tools, a digital twin not only can help maximize production, it also can foresee maintenance issues, equipment failures and the like, heading off potential disruptions.
As foreign and farfetched as concepts like digital twin, machine learning and AI may have seemed in the oil and gas business even five years ago, they’re fast becoming practical, even compulsory, for startups and super-majors alike, for their ability to deliver the deeper strategic insights, extended asset life, operational efficiency and higher returns on capital invested that oil and gas need to sustain a competitive edge, whatever the commodity price environment.
Brent Potts is senior director of global marketing, oil and gas, at SAP. He is based in Arizona.