As the common adage goes, April showers bring May flowers. Just so, it looks like this month may finally be bringing some positive news for the oil and gas industry, following months of plunging oil prices. Record low prices were spurred in large part by the global pandemic and vastly reduced travel. Rising tensions between oil producing countries have only added stress to an already-weakened oil, gas and energy industry.
Companies around the world have resorted to oil production cuts as countries deal with an oversupply of crude oil and gas. They have cited limited storage capacity for already-produced oil and gas, vastly reduced travel and shelter-in-place mandates around the world as factors significantly diminishing demand.
As restrictions are lifted, demand for gas will begin to increase and production cuts should lessen. However, there is concern about what a potential second wave of the virus in the coming months would mean for the petroleum industry and oil companies around the world.
Currently, the oil and gas industries are mainly focused on taking immediate action to alleviate the demand shock. While this is a necessary priority, companies with the foresight to plan ahead and pivot will effectively position themselves to emerge from these adverse circumstances as industry leaders.
Modernizing the Supply Chain
As more industries are pushed toward digital transformation, oil, gas and energy businesses should remain aware of technological advancements and be informed about their benefits. The adoption of technology can reduce operational costs, improve production efficiency and drive decision-making that lessens the burdens of adverse events like the COVID-19 pandemic.
Technology is becoming imbued in every facet of the oil, gas and energy industries — whether it is upstream through extraction, drilling and the manufacturing of rigs and equipment, midstream through transportation and storage, or downstream through refining and distribution.
- Machine Learning, AI and Advanced Analytics – ML and AI have many applications in the oil and gas industry, providing a systematic and always-improving means of analyzing data that drives decision-making. The benefits of machine learning and artificial intelligence technology are many – they can be used to optimize drilling, monitor processes, improve production efficiency and manage equipment performance, to name a few. The value of AI in oil and gas has been predicted to near $3 Billion by 2022.Predictive maintenance is a valuable benefit of advanced analytics for oil, gas and energy, proactively helping businesses reduce their operating expenses by addressing breakdowns before they occur.
- IOT devices – The oil and gas industry has also tapped into the Internet of Things, using IOT devices and sensors to manage processes throughout the supply chain — from drilling and refining to shipping and delivery. IoT connected devices monitor equipment such as pipelines, oil and gas rigs and cargo ships. It is projected that, by 2024, “Global WSN revenues for oil and gas exploration, production and pipeline operation will reach $2.2 billion up from $480 million in 2017.” Through the adoption of IoT, Oil and gas companies can reduce inefficiencies, save money, improve production and increase worksite safety.
- Data governance – When dealing with multinational companies and industries, proper data governance is not only essential, but mandatory. Keeping track of regulations for extraction and refining, managing shipments and navigating international trading laws is no easy feat. However, the importance of data is not lost on company leaders. In 2018, 81% of executives considered Big Data to be a top priority for oil and gas companies. Data lake creation and data governance platforms allow businesses to manage their data effectively — streamlining reporting, data security and data management. Additionally, custom data governance platforms often allow businesses to tap into data visualization and analytics, connecting multiple benefits of technology into one easy-to-use platform.
Thanks to technology, companies are finding new ways to modernize the supply chain, creating simplifications that reduce costs and improve operations.
The Rise of Liquefied Natural Gas (LNG)
Recently, companies in the oil and gas industry have been shutting down, cutting costs, and slowing production in an attempt to ride the plummeting oil wave. However, those looking to rebound may find what they are looking for in new sources. As an established and trending energy source, many may pivot toward the LNG market.
As the name implies, Liquefied Natural Gas (LNG) is defined as “natural gas that has been cooled to a liquid state.” This liquefied state — achieved through a process called natural gas liquefaction — allows gas to be shipped and stored more efficiently. LNG is returned to a gaseous state before use and expands the market to areas beyond the natural pipeline grid. A few benefits of liquefied natural gas include its smaller packing and shipping size and natural gas’ reputation as the cleanest burning fossil fuel. LNG is most commonly used for heating, cooking, electricity, and fuel for transportation.
In their April issue of Natural Gas Monthly, the EIA reported that LNG continues to drive the year-on-year increase in exports for the United States, more than doubling the monthly numbers of the year prior. Current projections show promise for those that are preparing for increased demand in the coming years. Companies like Shell, ExxonMobil, Chevron and BP have all taken action to prioritize liquefied natural gas.
Last year marked record growth for LNG production and the industry was on track to keep growing. The young market in the U.S. has taken a hit with the recent pandemic, but time will tell how the industry forecast will improve.
Renewable and Clean Energy Alternatives
Other companies are focusing on solar and renewable energy. Solar and clean energy alternatives have seen extreme growth in the past decade, driven both by demand and declining costs. The Solar Energy Industries Association (SEIA) reported that, in 2019, the solar industry generated $18 billion of investment in the U.S and comprised 40% of new electricity.
Texas, in particular, is a hub of growth for solar energy. Just last month, Lighthouse BP announced its partnership with BP on a $250 million financing package for its Impact Solar project, which will be focused in Lamar, Texas.
Oil, gas and energy companies are no stranger to shifting markets, surviving depressions and booms, and operating during times of wealth and poverty. While the demand for oil and gas may have slowed, the amount of time that companies must ride out the demand shock is temporary. Successful preparation for what is to come requires addressing technological advancements within the oil, gas and energy industries. Those who take this time to adapt their strategies and adopt ROI-producing technologies will rebound from COVID-19 and come out even stronger.
If your business is interested in developing a technology, software or data governance strategy, 7T is available for consultation. We offer consulting and development services for custom software projects, data governance and data lake creation, cloud and system integrations and mobile applications. Learn more about Machine Learning, AI and beacon technology and find out how your business can innovate by adopting these technologies.