Digitizing downstream oil and gas operations

A framework for capturing value

Anil Pandey, Jean Salamat, Dr. Reinhard Geissbauer
September 5, 2019

Executive summary

Oil and gas companies worldwide understand the potential of digitization for their downstream operations. Yet they often face challenges in launching and executing digitization projects in their core businesses that would lead to a measurable return on investment. Given the fast pace of technological innovation and the complexity of a downstream business, refiners and petrochemicals players can capture the full value of digitization only if they apply a structured, systematic approach. Based on our experience with oil and gas companies, this approach consists of three specific areas.

First, companies need to prioritize their digitization efforts by linking them to the functions with the maximum value. This includes emphasizing operations and maintenance excellence; connecting the supply chain digitally; and adopting smart health, safety, security, and environment (HSSE) and fire services.

Second, companies need to build foundational capabilities in areas such as data and analytics, technology architecture, talent and culture, and cybersecurity. Developing these capabilities will prepare the organization for ongoing digital transformation, regardless of changes to the underlying technology.

Third, rather than the traditional approach to IT implementation — large-scale programs that take years to complete — downstream oil and gas companies should apply a more agile approach. Specifically, they need to assess their digital maturity across selected lines of business, pilot a few new technologies linked to business priorities, and scale up the initiatives that have proven their applicability and delivered associated benefits.

Doing things right will lead to a technology-driven transformation in how downstream oil and gas businesses operate.

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The digital maturity scale

An organization’s digital maturity can be assessed along a spectrum of stages:

  • Digital novice: The company has some isolated digital technologies and applications in place, but they are primarily limited to the level of individual functions or departments.
  • Vertical integrator: The company has integrated some internal functions — such as sales, manufacturing, sourcing, or engineering — enabling them to collaborate more closely.
  • Horizontal collaborator: The company has digitized most of its internal operations and has taken steps to connect digitally with critical external partners and customers, using integrated platforms to exchange information and collaborate.
  • Digital champion: The company has a clear strategic position in the marketplace with complex and tailor-made customer applications provided through multilevel digital interactions.

Conclusion

The latest advances in digitization provide a significant opportunity to change the management and operations of downstream oil and gas facilities in a fundamental way. However, many management teams are overwhelmed by the sheer range of new technologies, the pace at which they are developing, and the complexity of applying those technologies across massive enterprises. To make sense of the options, companies need to take a business-first approach to technology, rather than a technology-first approach to business. By applying the threepart digitization framework discussed here, they can rewire their organizations for better performance today, and position themselves to capitalize on the new technologies that will emerge tomorrow.

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Anil Pandey

Partner, Strategy& Middle East

Jean Salamat

Principal, Strategy& Middle East

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