Four Exciting Trends That Will Impact the Energy Industry in 2020
November 2019 was a busy month for Shell and its New Energies unit that reflect what’s coming in the energy market. First came an announcement that the company invested in PowerGen Renewable Energy, which develops and manages micro-utility mini-grids that deliver electricity to underserved markets in Africa.
That was followed a day later by an announcement of Shell’s intention to purchase renewable energy developer EOLFI, a French company specializing in floating offshore wind projects. Then, a couple days after that, Shell disclosed that New Energies would acquire a minority stake in d.light, which provides solar products in more than 70 developing African and Asian countries.
Then Shell punctuated the month by closing two deals, one to acquire Hudson Energy Supply UK Ltd., a British residential electricity and natural gas supplier with a renewable energy and energy-efficiency bent, and the second to purchase ERM Power Ltd., one of Australia’s leading industrial and commercial electricity retailers.
The recent flurry of transactions by Shell wasn’t just indicative of an energy super-major’s increasingly eclectic appetite for assets. It was a bellwether for the oil and gas business as a whole, providing a telling glimpse of the industry’s near- and longer-term future as it stands on the brink of a new decade.
Here’s a look at four high-level trends we see driving individual oil and gas companies and shaping the energy business in 2020 and beyond.
1. Extending Beyond the Barrel
With ventures such as Shell New Energies, which was launched in 2016 to focus on new transportation fuels (electricity, biofuels and hydrogen) and power (including low-carbon sources such as wind and solar), Royal Dutch Shell is leading a wave of traditionally hydrocarbon-focused companies that are moving their businesses beyond the barrel.
Multiple factors are fueling the move, including a desire to diversify with new revenue streams and business models that don’t revolve around oil, thus reducing reliance on a finite, often volatile resource.
Sustainability, tighter environmental regulation and corporate stewardship are also key drivers, prompting oil and gas companies to explore opportunities in the “circular economy,” for example, where materials are continually looped back into the value chain in a business model built around the zero-waste principles of reuse, remanufacture and recycle. For oil and gas companies, the opportunities could include finding markets for the re-use of CO2 and other by-products of hydrocarbon production and treatment.
2. Digitalizing Production and Delivery
By phasing out high-touch, labor-intensive manual processes in favor of an end-to-end digital platform with artificial intelligence- and machine learning-powered tools, a certain $100 billion multinational downstream oil and gas company is on its way to implementing a fully automated, cloud-centric digital supply chain that enables it not only to drive out costs through heightened efficiency but also to quickly react and adapt to changing market conditions in real-time.
Following a recent operational reorganization, the company found itself bearing the extra cost of an outdated, decentralized and highly customized ERP system that could not cost-effectively provide the agility and innovation needed to drive growth and sustain competitiveness in a low-margin business. The digital platform enables data to flow seamlessly across the company’s entire operation, so the company now can essentially track every molecule, every trade, every position and every hard asset across its hydrocarbon supply chain.
The results thus far have been game-changing for the company – so much so that it’s in the process of extending the transformation to its refineries and eventually to the retail point of sale.
It’s but one example of how an oil and gas enterprise can vastly improve the overall efficiency of its supply chain by investing in a single, integrated digital platform that comes equipped with tools to monitor, assess and predict asset health using real-time data. Now the company can truly follow the hydrocarbon molecule in real time as it moves from wells to wheels.
3. Competing as an Ecosystem
More oil and gas companies are seeing the wisdom in eliminating siloed parts of their operations in favor of an integrated, cloud-based approach in which the company, its employees, business partners and even its customers are connected in real time. They all gain the ability to transparently, seamlessly and securely exchange data and insight, and to collaborate and compete holistically as part of an ecosystem.
Powering that ecosystem is a combination of operational data and experiential data, which when fed into and analyzed by a central, digital platform, provides insights that ultimately lead to positive outcomes for all the entities within the ecosystem.
Shell Aviation created such an ecosystem – and in the process transformed the experience it was providing its airport customers – when it deployed SkyPad, a mobile refueling app, in 2017. Now in use at more than 100 airport locations in 36 countries, SkyPad digitally integrated and streamlined what had been a labor-intensive, error-prone manual set of processes for refueling airplanes on the tarmac.
As a result, not only does SkyPad enable airport operations staff to work more efficiently (cutting average transaction time by one-third to save an average of 13.3 hours per day per airport), it creates quicker turnaround times for airlines, so their customers spend less time waiting at the airport. With the ability to monitor and manage stock levels at each of its airport installations in real time, Shell Aviation gains fast, data-driven business Insights that it can use to more effectively manage fuel price risk on a global basis.
4. Unlocking Value with Technology
Unconnected, uncommunicative and redundant processes, systems, assets and devices are all too common, even in today’s increasingly digitalized energy business. But as more oil and gas companies are discovering: When intelligent technologies are embedded into those processes, systems, assets and devices, and when they are connected to one another and to an end-to-end digital platform, the possibilities for capturing new efficiencies and unlocking operational insights are vast.
Vivo Energy, a fuel retailer serving 23 countries in Africa, is an example of how connectedness from the operational edges of a business to its digital core can drive optimized, profit-based decision-making in real time. In the high-volume, low-margin business in which Vivo competes, profitability depends on efficiency. To keep pace with rapid growth in its service station network, Vivo elected to digitally integrate the ERP systems behind that network within a single platform, a move that has enabled it to streamline processes, enhance employee productivity and improve data visibility.
Using an analytics engine embedded in the platform, Vivo Energy can track the performance of each of its locations to inform decision-making and respond actively to customer demand. More detailed analytics enable employees to make decisions based on real-time insight, while predictive tools forecast demand for particular products and automate replenishment at individual service stations, reducing overall distribution costs.
Whether it’s to support a retail service station network in Africa or a floating wind project off the coast of France, these types of intelligent, connected digital solutions will figure prominently in the energy business well beyond 2020 – and well beyond the barrel.
Brent Potts is senior director of global marketing, oil and gas at SAP.