2020 proved a difficult year for the oil and gas industry. Driven in part by the Covid-19 pandemic, global oil consumption fell from over 100 million barrels per day in 2019 to around 92 million barrels per day the following year, reaching a low of just 80 million barrels per day at one point.
This collapse triggered a decline in the growth of all oil and gas companies, with the value of firms shrinking by 3.4% over the year. Yet as the impacts of the pandemic fade, and work returns to a semblance of normality, there is optimism for the future of oil and gas.
The US Energy Information Administration forecasts the annual GDP growth arising from the oil and gas sector to increase by 6.3% in 2021 and 4.8% in 2022, undoing some of the damage sustained in 2020. This is also an opportunity to not just return to the state of the industry prior to 2020, but help address some of the long-standing challenges that have affected the oil and gas industry for years.
One possible solution comes from Axora, a company that works to develop digital communities and solutions for the business-to-business sector. Axora has unveiled its “Cost-Saving Technology Challenge”, a call for technological innovation in the oil and gas sector that will grant 10 successful applicants the opportunity to pitch their ideas to Axora, with the winner receiving a sales and marketing package worth around $13,800.
The competition is simply the latest in a string of projects and initiatives to help encourage innovation in the oil and gas sector, and could help direct the future of the industry.
Innovating fast, innovating smart
The challenge aims to promote digital innovators, and integrate their solutions into the oil and gas industry much faster than is usually done in the sector, which has historically been hesitant to embrace change.
A 2019 Deloitte report awarded the oil and gas sector an average “digital maturity” score of just 1.3, the lowest of any sector assessed, and beneath sectors such as power and utilities (1.4), aerospace and defence (1.9), and retail and distribution (2.7).
Indeed, the average length of time required for a digital innovation project to achieve a return on investment is three years, according to Axora, and the company is eager to support any innovation project that can deliver a return on investment in just one-third of this time.
“Ultimately, it’s all about helping oil and gas companies find the technologies they need without the usual complex business cases or long-term budgeting,” explains Dr Nick Mayhew, chief commercial officer at Axora. “The industry is still feeling the effects of the global pandemic, price wars, and recent ransomware attacks, so we anticipated the need for digital solutions that do much more much faster.
“Quick-win digital solutions, like the ones we’ve been looking for in this challenge, will enable oil and gas companies to budget much more effectively while still gaining access to the technology they need.”
The need for rapid change is particularly important considering the widespread support for digitalisation across sectors. A separate Deloitte report noted that the use of artificial intelligence in financial reporting, for instance, could improve productivity by 33% and reduce errors by 37%.
While these figures refer to a different sector to the oil and gas industry, there is certainly potential for one sector to learn from another, or one company to learn from another within an industry, and this collaborative ideal is another of Axora’s key goals.
“Promoting collaboration and knowledge sharing across the oil and gas sector is one of Axora’s main aims,” says Mayhew. “We’ve already started the conversation with our latest Innovation Forecast report and in it, respondents expressed a clear need for an online community; 99% of them said they wanted one.
“We hope the Axora Community will become a useful forum on digital transformation for the whole of the oil and gas industry. We hope it will help the industry connect, share information, and future-proof their companies ahead of the energy transition.”
Building on past projects
Beyond collaborating with other companies and innovators, Axora is also eager to build on the work it has already done with regards to encouraging digitisation. In the last year alone, the company has launched a smart mining resource centre to provide insights to mining companies and its “Oil and Gas Resource Centre” to provide digital solutions for the oil and gas industry.
“With initiatives like the Oil and Gas Resource Centre, our aim was always to make it easier for the oil and gas industry to discover, procure, and deploy digital technologies,” explains Mayhew. “That initiative, for example, helped to raise awareness that there are digital solutions available to solve pain-points in the sector.”
Mayhew also points out that the launch of the resource centre highlighted a need for greater innovation from those in the oil and gas industry, creating a clear line of development from the mining resource centre to its offshore equivalent, and now to a fully-fledged offshore innovation challenge.
“The resulting conversations with our customers indicated a real need for fast-acting technology with full payback within one budget year and this became the inspiration for the Axora Cost-Saving Technology Challenge,” he adds.
This legacy of encouraging innovation could yield results sooner rather than later. Mayhew notes that seven of the possible 10 finalists have already been selected for the final assessment, with Axora’s panel of judges set to make a decision on the winner this autumn.
While Mayhew didn’t comment on any of the entries in particular, they are expected to be a diverse group, with the competition attracting entries from, as Axora put it, “entrepreneurs, start-ups, academics, and sector leaders”.
This project will not be the end of Axora’s involvement in digitalisation, or even the end of technological innovation in the oil and gas industry more broadly. Mayhew discussed Axora’s “Innovation Forecast”, a report into future trends in innovation and technology in oil and gas, in June this year, which concluded that the future of oil and gas is set to be determined by emerging technology.
“We recently released our first Innovation Forecast report, in which 150 senior decision-makers across the oil and gas industry were interviewed, and which outlines the technologies and trends that will shape the industry over the next five years,” explains Mayhew.
The report profiled companies with as few as 50 employees and as many as 5,000, and many of these firms reported interests in similar themes: 99% of those surveyed said that innovation would be crucial to their company’s survival, and 89% said they had increased investment in digital transformation over the past year.
Mayhew also notes that “particularly medium-sized companies”, those with between 250 and 999 employees, are among the leaders in recognising and implementing the benefits of digital technology.
Indeed, the report showed that 38% of the workforce of such companies had “started seeing benefits from digital technologies”, an impressive figure considering the relatively recent adoption of such technology in the sector. Should this trend continue, the future of oil and gas could be dominated by smaller, more agile companies, rather than multi-billion dollar majors that are too big to adapt to a rapidly changing world.
Yet Mayhew is adamant that there remains work to be done to deliver a more innovative and flexible oil and gas sector. The work of Axora is not the end goal, but the start of a broader shift towards embracing digital technology.
“There is still more to be done ahead of the energy transition, but we hope that the Cost-Saving Digital Technology Challenge showcases that rapid change is possible and that the industry is ready to embrace it,” explains Mayhew.
“We hope that by raising awareness in this way, at a time when efficiency is more important than ever, that more oil and gas companies will be able to take advantage of the benefits of digital technology, which can save costs, [as well as] simplify and accelerate processes across the value chain.
“We hope that greater awareness of the digital technologies available will help oil and gas firms make decisions that better balance short-term returns with long-term benefits and better prepare them for the future.”