Of all the mega trends that are impacting the oil and gas industry, the wave of digital innovation sweeping across the landscape is amongst the most intriguing – and offers significant potential for Singapore to play the role of innovator and disruptor at the forefront of what’s been dubbed “Oil & Gas 4.0”.
The oil and gas sector is being reshaped by fundamental changes in demand and new technologies. Growth in demand is shifting to the Middle East, Africa and Asian economies and away from Europe and North America. Since anything that can be digitised will be digitised (start-ups and capital markets will make sure of that), it is only a matter of time before the effects of digital innovation are felt in oil and gas.
Singapore, of course, is one of the world’s leading oil trading and refining hubs supported by downstream industries that are pillars of its economy. Even if it has not been entirely immune to recent challenges, Singapore has made clear that its overarching goal is to be a leading digital economy that continually reinvents itself.
Factor in a world-class digital infrastructure which has attracted the planet’s top tech companies, the quality of talent that comes through its educational system, plus the government’s commitment to initiatives like the Singapore Digital (SG:D) movement – and the ingredients are there for a major contribution to the digital transformation essential to the future of O&G.
The country’s potential to lead this industry-wide transformation is well reflected in recent initiatives and innovation in just one sector vital to oil and gas – shipping and maritime technology. Earlier this year, the Maritime and Port Authority (MPA) launched its new Maritime Innovation Lab (MIL). Autonomous ships are a key element including both creating the technological port infrastructure that will allow Singapore to receive such ships in the future and the initiation of autonomous vessel projects with various companies, amongst them ST Engineering and Keppel Singmarine.
The purpose-built MIL will enable the test-bedding of innovative services and intelligent operations. It also further supports and encourages R&D amongst industry, regulators and the research and technology communities across the O&G spectrum.
Overall, the oil and gas industry can harness the effects of digital technology both directly in the business and indirectly through the adoption of digital technologies in other sectors.
For example, as 3D printing improves as a technology, suppliers will offer high-quality 3D printed parts for oil and gas equipment, lowering costs, shortening the time to repair and accelerating the time to value for resource production. Printing a part locally also lowers greenhouse gas emissions through a reduction in shipping costs. Applied across manufacturing globally, 3D printing could transform entire supply chains whilst simultaneously delivering a reduction in fuel consumption.
Different responses to digital technology may be appropriate depending on where in the value chain a company participates. A technology company selling software to greenfield oil installations will need to respond more quickly to this technology than a pipeline operator that has long contracts and a captive market, for example.
Regardless of competitive position in the value chain, companies will eventually face a new digitally enabled market entrant. Since wait and see is not an option, companies can harvest the hard-to-digitise profit pools in the industry, abandon the market or defend their position. These are clear and present opportunities and Singapore’s oil and gas and offshore marine companies – as well as others who can see where their expertise fits– can and should be leading these types of innovation.
Integrated oil and gas companies are amongst those in a unique position to manage digital change. The operations of these companies cover the whole oil and gas value chain, across the “upstream,” “midstream” and “downstream” sectors—i.e., everything from the discovery and tapping of the crude resource to the refining and distribution of the product to consumers. By participating in many segments of the industry, these players can more readily detect the arrival of creative new digital solutions and the conditions that enable these new solutions to take hold.
With visibility of the entire chain, and blessed with vast holdings of data on the industry, they have also have latent assets to harvest for insight, value and competitive advantage.
According to Accenture, as many as 10 distinct technologies are likely to disrupt the oil and gas sector: analytics, artificial intelligence, augmented/virtual reality, mobility, robotics, cloud computing, the Internet of Things, advanced computer modelling, 3D printing and blockchain. Interestingly, local start-up BeeX received funding from the National University of Singapore’s Graduate Research Innovation Programme earlier this year to commercialise its autonomous underwater vehicles (AUVs) – programmed with artificial intelligence – that could replace the bulky remotely operated vehicles currently used by the offshore oil and gas industry.
Major players in the oil & gas sector are already moving to explore and develop these digitisation opportunities. ADNOC (Abu Dhabi’s National Oil Company) has integrated the 10 technologies cited by Accenture into its own “Digital & AI Strategy” to prepare for the “Oil & Gas 4.0” moment. This transformation initiative, announced at the 2018 ADIPEC conference was, unsurprisingly, a dominant theme again when the industry recently gathered at ADIPEC 2019 where Singapore was significantly represented as one of 29 international pavilions and with nearly 30 exhibitors.
There is a significant amount at stake. Accenture’s analysis indicates that digital transformation could unlock more than US$1.5 trillion in new value for the global industry. The benefits include everything from increased revenue, as a result of increased production and reduced downtime, to increased capital efficiency, via improved asset use and capital reduction. Cut production costs and overheads would result in reduced operating expenditure; reduced asset risks and improved health and safety programs would dampen down operational risks; and sharing data across integrated companies would create fresh insights and value.
Today, Singapore is well-placed to grasp and build on these opportunities, with the established capabilities and potential to be a key driver in the digital transformation of oil and gas. Collaboration amongst industry, government, academia – and the leveraging of the country’s brightest minds – have always been amongst Singapore’s strengths and will be crucial in an oil and gas sector that must invest in re-shaping, recalibrating and re-inventing itself.