Oil Companies Demand Digital Their Way.

The oil industry’s rush to capitalize on digital change has scrambled relations with service providers big and small, giving the oil companies a greater say in the process.

February 15, 2021, By Stephen Rassenfoss, Journal of Petroleum Technology

Oil industry executives surveyed last year ranked the potential positive impact of big data analytics at the top of the list of trends, higher than even changes in oil demand.

That bold conclusion was from a survey by accounting firm Ernst and Young (EY), putting big data analytics among the top trends that could aid business growth in the next 3 years, even above the demand swings that move oil prices.

The survey may have reflected the mood last summer when the outlook for oil consumption looked so weak that cost saving was the only path to better results.

“The survey speaks to a high-level ambition across the operator community to use digital as a mechanism to drive down costs,” said Toby Summers executive director for EY. The promise there is that digital can allow them to scale up operations with fewer hires in good times and scale back with fewer layoffs when the cycle turns down.

These projects also cost less than other cost-cutting options.

“Digitization is one of the cheapest ways to get the business more resilient,” said Patrick von Pattay, a vice president for Wintershall Dea, a Germany-based independent, and chairman of the Digital Transformation Committee of SPE’s Digital Energy Technical Section.

Process changes supported by digital analysis can cost a couple hundred thousand dollars; that is not a lot of money in a business where a single offshore well often costs hundreds of millions.

What is not obvious is who does the work.

The rush to digital has scrambled traditional relationships with oilfield service companies and brought in new players, from Silicon Valley giants to a flurry of startups in the oil business, a few of which have become established players.

As a result of the change in the technology, and the business models of the upstarts, oil company technical teams can and do play a more active role in digital technology development and use than in the past.

Changes began in 2014, when the sudden end of $100/bbl oil forced oil companies to drop their long-time reliance on owning their own computer systems. Oil companies finally joined the decade-old shift to buying data storage and processing as a service from giants such as Amazon and Google. That facilitated digital innovations by centralizing their data, eliminating splintered storage systems that hindered analysis.

The giant looming over the service business now is Amazon Web Services (AWS). The cloud storage arm of the online retail and logistics giant has grown exponentially, doing everything from selling an array of digital tools to promoting a list of preferred energy providers.

Digital newcomers disrupted relations with service companies that had built software solutions and sold equipment programmed using proprietary coding.

Increasingly user-friendly tools for visualizing and analyzing data, plus the ability for smaller companies to buy data capacity, allowed engineers to do more and allowed midsized companies to act like big ones.

“There has been a shift now; the independents have access to the same tech as the big guys,” Summers said.

Those big players, as well as smaller names from the tech and oil sectors, eagerly courted oil companies, selling things based on widely used software languages such as Python.

“What we get from young fresh companies with a great vision, with a great drive to deliver, they are giving us the opportunity to grow beyond the classic service companies,” von Pattay said.