As a part of the ever-changing and volatile world of oil and gas, you always need to be looking for ways to improve operations and gain a competitive edge. In a recent article, McKinsey & Co breaks down their formula for doing just that, including tips on improving oil and gas capital-project performance to keep costs low and maintain timelines.
We wanted to take a closer look at their suggestions and break down how improvements in three areas of operations can revolutionize your capital-project performance.
Automation and Tech
There is no doubt that technology and automation is revolutionizing how every industry, including O&G, is getting work done. And we have Industry 4.0 to thank for the advancements.
Industry 4.0 is all about the connection between the digital and physical world that enables artificial intelligence and automation. The spread and application of Industry 4.0 technology is changing how we do things at home (think of a smart home and being able to turn off the lights on command) and at work.
When it comes to approaching capital projects, McKinsey explains how the application of technology can improve every aspect of the construction process, in turn cutting down on manual tasks and saving time and money. For example, they write, “five-dimensional building-information modeling (5-D BIM) will likely eliminate the manual execution of many repetitive tasks, reduce the effort required for contract management, and make it possible to automate some quality-control functions.”
They go on to list other technology applications such as:
- Automating and digitizing purchase-ordering processes
- Cloud-based should-cost modeling
- E-auction and electronic-request tools
- Digital twins
- Radio-frequency identification and Bluetooth tagging
Let’s take digital twin technology as an example. A 'digital twin' is an incredibly accurate digital model of a real, physical object that can be as in-depth as needed. Digital twins can be a digital representation of a physical object, or it can be an incredibly complex model that shows how a system is functioning in real-time through thousands of sensors. This level of visibility has previously been unattainable and can bring incredible value.
When using digital twin tech across your operations, you can:
- Prevent and prepare for problems by playing out multiple scenarios
- Test concepts and trade-offs without having to put money or time into physically testing it
- Understand where assets or job sites are located and what stage they are at
- Create a better decision-making process by running what-if scenarios for upgrades, materials, locations, and more
- Reduce health, safety, and environmental risks
- Shorten time-to-oil from better data
- Lower the cost of operations by having the data and sensors answer questions and reduce errors
- And so much more
While this list is just a handful of the many benefits that come from digital twin models, it gives you a glimpse into the benefits that come from having this technology when applied to multiple areas of your operations.
The O&G space is not collecting or using their available data to the fullest potential. This is the case because data is being collected in a variety of ways and then not being stored cohesively. McKinsey explains:
“Data exists in thousands of electronic spreadsheets or even on paper, with no central repository. And since O&G project reporting is done in different formats, styles, and systems, the way data are captured is not standardized. As a result, any data generated from a project are in effect lost once it has come to an end.”
We see this problem throughout the operations of O&G. When there isn’t a system in place to centralize, organize, and update data, it leads to a lack of visibility into operations. By creating processes to easily organize, store, access, and analyze data, you will not only be able to make better decisions, but you will make operations more effective.
In their article, McKinsey suggests starting to analyze already existing data to make improvements. For example, by analyzing existing environmental data, shift records, and incident reports, you can create a safer working environment for your employees going forward.
In terms of capital-project performance, McKinsey suggests applying an agile management approach that can rely on “small, exceptionally well-coordinated cross-functional teams, rapid learning, fast technology-enabled decision cycles, and a common sense of purpose to get to key decision points faster than other approaches.” In turn, this agile approach can help projects respond quickly to problems or even a change in the competitive market.
While the oil and gas industry has been fantastic at embracing some new approaches to how work gets done, in other areas things have been done the same way for years. As Lance Richardson, CGO and Co-founder of Hitched, writes in the Industrial Technology Solutions Have Failed Us blog post:
“Our industry is no stranger to innovation. Developing and revolutionizing how we get resources out of the ground is at the heart of oil and gas. And sure, we’ve stepped up our game in making the most of GPS and RFID tech in the field, but bringing innovation to the back-office is practically nonexistent. I’m talking about those time-consuming, complex processes that fill our days with menial work. Things we do every day, like managing our job sites, sourcing equipment, tracking quotes, and the like remain completely unaddressed.”
Embracing change when it comes to innovation, whether that is new management styles, new technology, or a new way of organizing data, will help move your company forward and help you have an edge over your competition.
Change is Necessary to Stay Competitive
Innovation is not a choice anymore of the oil and gas industry. To stay competitive, keep costs low, and production levels high, the O&G spaces needed to be implementing new technology and processes. By ignoring or not searching out new innovations, you are leaving room for others in the industry to outperform your company. It’s time to embrace the change.