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Digital adoption lagging in energy industry

Sibahle Malinga
By Sibahle Malinga, ITWeb senior news journalist.
Johannesburg, 23 Aug 2016
It's time for the energy industry to get on-board with digital and adapt, says PwC's Derek Boulware.
It's time for the energy industry to get on-board with digital and adapt, says PwC's Derek Boulware.

Oil and gas companies are slower than other industries to respond to using new technologies, particularly digital.

This is according to PwC's 'Africa oil & gas review 2016', which found oil and gas companies are much less likely to use social media, data analytics and CRM systems than other industries such as the financial services sector.

Speaking at a media briefing in Johannesburg yesterday, Derek Boulware, senior manager, Advisory Services at PwC, unpacked the research findings, which revealed that oil and gas leaders don't embrace technology to the extent that other industries do because the energy industry is inherently conservative, considering the high capital investments and long payback periods. He added the industry prefers proven solutions.

"These findings reflect an interesting dynamic given that oil and gas companies have traditionally been receptive of technology, engineering tools, and innovate new ways of reducing costs.

"But these activities have always been at operational level, mainly used for production in the oil fields as opposed to optimising the way things are done using data analytics, and getting information to and from locations. But the external environment around the energy industry is changing and it's time for them to get on-board with digital and adapt to new ways of doing business," revealed Boulware.

The report, which was carried out among a group of 60 leaders of African oil and gas businesses from countries across the continent, focuses on the strategic challenges faced by energy leaders in their businesses, following the decline in the global oil price which has led to a reduced level of activity across the African continent.

It also highlights areas where technological innovations are already taking place and where they could make a difference in the future.

Among other revelations, the report found although digital transformation and technological breakthroughs are slow in the oil and gas industry, there are a number of trends that will ultimately transform the South African energy sector. These include: the Internet of things, using digital innovations to build alliances, simplification and standardisation, solution-based buying, and knowledge transfer from international oil companies to oilfield services companies.

In comparison to a previously conducted report, the Annual Global CEO survey, which surveyed CEOs from all sectors, found that oil and gas companies are much less likely to use social media than the total survey sample (35% vs 50%, respectively).

In the survey, oil and gas companies rated data and analytics as the top connecting technology (59%), followed by CRM systems (52%). Crucially, oil and gas CEOs do not rate these technologies as highly as the total survey population (68% and 65%, respectively) from other industries, says the report.

With depressed oil prices, it is not surprising that many local businesses are looking to cut costs and increase operational efficiency, using technological innovations, and there are those who are slowly adapting, noted Boulware.

"Actuators and sensors are now being used on the oil drilling platform for monitoring the flow of production and to detect the type of hydro carbon that is pumped out of a well. Different sensors are also placed in the well cavity to measure chemicals being discharged and give feedback to the control centre.

"Also, 3D printers are being used to produce machine parts especially in remote areas. Although the printers can be costly, shutting down oil production because of a broken piece of equipment can be financially damaging," observed Boulware.

The energy industry, said Boulware, is slowly embracing the use of drone technology, which is used for various reasons such as monitoring onsite equipment and capture images on the amount of oil left in an oil rig. Drones are also useful in the refinery for taking images or monitoring a weak point in the production system.

Chris Bredenhann, Oil and Gas advisory leader at PwC Africa, believes the complexities and challenges facing Africa's oil and gas industries have become daunting as uncertain regulatory frameworks, taxation requirements and corruption continue to rank at the top of industry's challenges in Africa.

"Players must look at the current state of the industry as an opportunity to reinvent themselves. Given the state of the industry, we think that stakeholders must also consider making changes to their business models. Change is the way to survive in the 'new energy future'," concluded Bredenhann.

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