Going digital has been on the agenda of oil companies for quite some time. They have, however, been taking their time, testing the digital waters before diving in. That was then. Now, oil companies are in a rush to digitize.
Energy companies’ investment agendas were just one more thing that the coronavirus changed dramatically. Exploration is on the back burner for most. It is all about survival now. And things like data analytics, remote monitoring, and cloud computing can ensure this survival because they reduce costs without negatively affecting operational efficiency. If anything, they can help boost that, too.
“The COVID-19 pandemic has accelerated the timeline for some digital technology adoption from five years to three months,” says EY Global Oil & Gas Consulting Leader, Jeff Williams. “The cost savings digital can deliver is critical for survival in today’s low-price environment, as oil and gas companies look to gain greater operational efficiencies and drive productivity across the value chain.”
It seems the industry is well aware of this. According to a new study from EY titled “Oil & Gas Digital Transformation and the Workforce Survey 2020,” most executives in the industry believe that investing in digital technology has become urgent, and they are planning to do more of it.
The pandemic has already forced most to adopt some forms of digital technology even if they didn’t want to previously. Remote operations, for example, became very popular during lockdowns. Two of the top oilfield services providers earlier this year reported that most of their drilling activity had been supported by remote work during the second quarter of the year. And now that oil companies have gotten a taste of it, many of them might like it—and the costs that remote work saves—to make it a permanent option.
But it’s not just remote work. Data analytics plays a huge part in the digital transformation of the oil industry, as it does in any other industry. Some 85 percent of oil companies that took part in EY’s survey said they were already using advanced analytics. Insight derived from using data analytics was seen as one of the top three digital trends that would have a positive impact on the industry by 43 percent of EY’s respondents.
However, a readiness to invest more in digital tech to turn the business around in unprecedented lean times is not enough. Oil’s digital transformation looks like it will be a bumpy ride.
“The more we use the data the more potential issues we’re seeing with the data in either the way data is collected or the way data is used. It’s really driving the need for better data, more data, and then also people using it correctly and then interpreting the results,” one industry insider told EY during the survey. Indeed, a change of this scale would require massive intra-departmental coordination, greater agility, and perhaps most importantly, finding and training the right talent for the new oil industry that relies heavily on everything from mobile apps and cloud computing to process automation and augmented reality.
The workforce replacement trend has already begun. Even before the coronavirus upended the industry, some companies were starting to hire more tech talent, having figured out that it will be an essential component in a future that will feature a lot more automation and data analytics. And now, with the sudden addition of the urgency angle to the digitalization drive, oil companies are facing a new kind of talent shortage: a shortage of employees with the right skills for the post-pandemic era.
“The challenge for oil and gas is immediate,” says Tim Haskell, EY US Oil & Gas People Advisory Services Leader. “It’s not enough for companies to simply spend more on technology. Investment in the workforce is needed to scale and integrate technologies and ultimately capture the intended value. Companies must find an investment balance while addressing market pressures. Otherwise, the industry will lose crucial years and potentially a generation of workers.”
That sounds like yet another challenge on top of so many others already piled up on oil executives, but there is a bit of good news: existing employees can be retrained for the new work landscape. This will, of course, take time and resources, which are currently in short supply, but it should pay off in the long run. The fact that the overwhelming majority of EY survey respondents identified workforce reskilling as crucial for their success over the next three years is telling enough. The fact that, according to EY, some 60 percent of employees will need to be reskilled or upskilled, means the task will not be an easy one.
The digitalization of the oil and gas industry appears to be unavoidable at this stage. Companies that are having to deal with a suddenly much shorter outlook horizon because of the pandemic-driven uncertainty can save billions from automating and utilizing data at a time when money is tight, and every saving counts. What’s more, the retraining that this shift would involve will reduce the loss of jobs that would have otherwise been unavoidable. This crisis is indeed a crisis like no other, helping oil and gas companies evolve into leaner but maybe not meaner versions of themselves, in which they will rely on digital technology a lot more than they do now.