Guest Blog by Marcel Cappetti, Managing Director, Oil and Gas, Global Enterprise Theater
I’ve just returned from CERAWeek in Houston—an international event that could be described as “Davos for the energy industry.” It’s a gathering of the power elite, including industry, finance, technology, and government leaders from around the globe. For me, it was the perfect sensing post for all the angst and opportunity that pervades the industry today.
It was my privilege to participate in a panel on “Leveraging Operational Excellence to Drive Margin Expansion”—a key concern of oil and gas (O&G) executives following the crash in oil prices. Too often in previous downturns, companies have relied heavily on deep cost cuts—including massive layoffs and cancelled projects—to keep margins afloat. But this time seems different. There is general agreement in the industry that we will not be returning to $100-a-barrel oil prices any time soon. So it’s time for more than a course correction. It’s time for digital transformation. Digital transformation will drive operational excellence and, yes, margin expansion.
During my talk last week, I shared highlights from a new Cisco study discussing the new reality in O&G and the opportunity for digital transformation through the Internet of Everything (IoE)—the networked connection of people, process, data, and things. Key findings include:
- “Operational efficiency of existing projects” and “maintenance of assets and infrastructure” will be the top two areas of increased investment over the next 24 months.
- O&G leaders clearly understand data’s potential—they named “data analytics for faster, better decision-making” as the No. 1 driver for IoE investment.
- Business transformation—including breaking down organizational silos and converging IT and OT people, processes, and technologies—is essential for digital transformation. According to Cisco’s study, 59 percent of respondents do not believe their IT and OT organizations are aligned.
- Companies that transform will have a significant bottom-line impact. Analysis by Cisco Consulting Services shows that by implementing a range of IoE-empowered solutions, oil and gas companies can capture their share of $600 billion of Value at Stake between 2016 and 2025. For a $50 billion firm, this translates into an 11 percent bottom-line (EBIT) improvement.
Cisco can help O&G companies in their journey to digital transformation through the investments we have made in key technologies—such as analytics, data, sensors, wireless, and mesh—and through solutions developed with key partners. For example:
- Remote Operations—Developed with GE, our Connected Oilfield solutions increase personnel safety and improve asset integrity with predictive maintenance; real-time analytics at the edge and virtual expert support enable faster and better decisions.
- Pipeline Automation—In partnership with Schneider Electric, Cisco’s Connected Pipeline solution uses analytics at the edge to improve security and environmental protection with predictive detection of pipeline intrusion, leakage, and deformation.
- Wireless Operations—Developed in partnership with Honeywell and Emerson, this Connected Processing Plant solution improves personnel safety and process efficiency with wireless real-time tracking, video analytics, and automated incident response.
- Secure Operations—Industrial cybersecurity solutions improve security and risk management to combat new and evolving cyber security threats, specifically in the process control domain. A good example is a project for Royal Dutch Shell that provides remote proactive monitoring and SLA-driven management of security, applications, and infrastructure. We are working with industrial control system delivery partners such as Yokogawa Electric and Rockwell Automation to support this solution, which Shell plans to deploy at all upstream, downstream, and lubricant sites.
When the price of oil stood at more than $100 per barrel, the need for oil and gas companies to improve operational efficiencies was primarily driven by the competitive marketplace—and many firms took no action at all. With the recent price collapse, however, increased efficiency has become a business imperative that will determine both survival and competitive advantage. The time for oil and gas companies to act is now—through a strategic transformation underpinned by a new approach to people, process, and technology.
Join the discussion. Tell me what you think by commenting below.