Oil and gas companies are weighing the risks and benefits of partnering with the tech sector to automate oilfield operations with digital technology.
Faced with volatile prices, abundant reserves of shale oil, and uncertain long-term demand, the energy industry is at a turning point. Rather than looking for ways to increase their reserves of oil, companies are increasingly focusing on how to extract it more cost-effectively and protect their profits. Digital technology seems to have the answers – and tech sector giants like Amazon, Microsoft and Alphabet, along with some startups, are eager to provide them.
Microsoft was one of the first to break into the energy market, which presents a massive opportunity. In February ExxonMobil announced that it would use Microsoft’s cloud, AI and other services at its oilfield operations in the Permian basin in Texas. It hopes they will help the company drill and deploy staff more efficiently, and curb methane leaks. Amazon is a newer arrival, but the size of its oil and gas team has tripled in recent years, and it is now working with giants such as Halliburton and Shell.
Unlike many other industries, oil and gas has generally been slow to adopt digital tools. Many managers struggle with how to use data, though it holds the promise of cutting costs and increasing output. But as the costs of sensors, data storage and computing power drop, technology investments are becoming more attractive.
Companies that have started implementing data technology are seeing positive results. BP, for example, by combining real-time data gathered from sensors with its own models and analytics, is finding ways to optimise output. The company estimates that digital tools increased its oil production by over 30,000 barrels per day last year. Yuri Sebregts, Chief Technology Officer of Shell, points out that while it could take a geoscientist months to map faults below ground, software can perform the same task by analysing seismic data in a matter of hours for about $20.
The spread of digital adoption within the energy industry is reflected in evolving talent strategies as more firms pair the tech sector’s offerings with in-house expertise. Last year Google Cloud hired former BP executive Darryl Willis to lead a new energy group as VP of Oil, Gas and Energy. He estimates that the industry is only using 1-5% of available data. Alphabet, Google’s parent company, has signed deals with Total of France, and with U.S. firm Anadarko, which is testing automated drilling and has an AI specialist on its board of directors, The Economist reports.
At the same time some trepidation remains, on both sides. Oil and gas companies are hesitant to expose themselves to hacking. Technology firms are unsure about motivating young talent to work with the energy industry, as they have been known to protest industries that clash with their ideals. “We are a partner and we follow the energy partner’s needs,” says Caglayan Arkan, Global Lead, Manufacturing & Resources Industry, who oversees Microsoft’s work with the energy sector. Nevertheless, the potential for resistance should be factored into the talent strategies of tech firms looking to court oil and gas companies.