This month, I saw something which would have been unthinkable twenty years back. One of the world’s largest oil and gas majors committed itself to being a net zero company by 2050. This followed on from Davos, a global event not known for talk about the environment. At this year’s event, Greta Thunberg, a 17-year-old climate change activist was the main draw.
We are living in interesting times, especially if you’re in oil and gas. Large multinational oil companies are now setting serious goals to slash greenhouse gas emissions in a way that can reduce the impact of fossil fuels on our planet. Some of the largest European oil producers have now committed themselves to net-zero greenhouse gas emissions by the middle of this century.
These initiatives have come in the wake of greater pressure from governments and wider public opinion for more concrete action to be taken to tackle climate change. Efforts to meet ambitious targets to cut greenhouse gas emissions from the production of gasoline, jet fuel and other products will have a profound effect on the world we live in.
Currently petroleum meets over 95 percent of global transportation demand. Fossil fuels are deeply linked with economic prosperity. As such finding balance between fossil fuels, economic development, and sustainability is a complex challenge for the global economy.
Future growth for oil and gas companies will increasingly be based on a portfolio that will include renewable energy in various forms. According to a Wood Mackenzie report, renewables such as wind and solar, which generate 20 percent of global power, offer potential growth. Concerns about global warming are increasingly reshaping investment policies, with some of the world’s largest investment management firms saying out loud that businesses must improve their environmental, social and governance metrics. This shift will act as a catalyst for oil and gas companies across the region. There is huge potential for companies in the Middle East, to not only lead the way in reducing their impact on the environment but reap tangible business and financial benefits by becoming more operationally efficient.
Sustainability has a measurable value on economic, social and the environmental metrics. Organizations that integrate sustainability performance into their core ethos and daily operations remain profitable. Sustainability is more commonly associated with diversification into renewable energy but can also relate to business operations. Companies that adopt an holistic approach reduce costs while increasing equipment availability, management of energy consumption, minimize accidents and releases, while increasing worker training, and more.
For this to happen, sustainability and digital transformation need to be more than popular buzz words and become definable policies with achievable timetables for adoption and integration into business operations.
But how can these ideas become tangible benefits for a company? Technologies such as The Cloud and Edge Computing are now mature enough to be implemented into existing operational structures to truly realize the potential of the industrial Internet of Things (IIoT). The cost of smart technology for sensors, field devices and wireless technologies has dropped making it a far more attractive option for oil and gas operators. In fact, wireless technologies also eliminate expensive cabling costs and lower installation outlays. IIoT can act as a force multiplier by allowing companies to improve energy management, automation and safety modeling. Cloud-based solutions allow for remote monitoring and analysis that enables real-time decision making. And then there’s the digital twin concept: the opportunity to replicate each actual physical asset, whether that be a cargo vessel or a refinery, as integrated data and information. In real time, oil and gas majors can understand what their carbon impact is. If you can measure it, you can manage it.
We are already seeing how innovative technology solutions are helping to make businesses smarter through improved efficiency. Edge computing, for example, places devices and equipment at the ‘edge’ of an integrated network thereby reducing latency and improving performance. This technology is particularly useful in remote areas to monitor pipelines and ensure optimal performance. Sections that require maintenance or replacing can be located quickly to allow work crews to complete repairs saving time and money.
Devices no longer operate in isolation. To become sustainable and hit efficiency targets equipment now talks to each other, relaying information between devices and to a central monitoring hub. This allows operators greater insight into how their system is running with the ability to anticipate problems before they arise.
Technologies such as this are an ideal companion to the introduction of renewable energy sources. IIoT, when combined with digitization strategies, delivers greater visibility across a company’s energy consumption and helps to develop energy efficiency priorities. By integrating energy management and control systems, oil and gas companies can monitor energy consumption, power quality and system health in real-time. This emphasis on smarter energy use makes operators more efficient and crucially extends the life of critical equipment while reducing the risk of failure and protecting workers.
Digitization is becoming the driving force for change in the oil and gas Industry where significant boosts to productivity are being seen. However, the industry cannot rest on its laurels and as technology continues to evolve and improve, investment in digital innovation must continue for operators to remain competitive in a world where the focus is turning to energy transparency.
Digital transformation can support the oil and gas industry on its path to greater efficiency while meeting shareholder obligations to remain profitable. The paradigm shift the sector is undergoing need not mean less profits. Indeed, by realizing greater efficiencies through the introduction of sustainable policies and processes, operators are positioning themselves towards a far brighter future.
Sustainability and profitability are not mutually exclusive concepts. The oil and gas industry will have to work within increasingly more stringent regulatory frameworks as public pressure to take greater step to safeguard the environment intensify. Fortunately, by starting the process to build an infrastructure of integrated and digitized systems, companies can meet the challenge of protecting the environment while remaining profitable.