Digital transformation is taking place in oilfields all around the globe, but the Middle East is pursuing it most aggressively.
RnR Market Research has reported that the Middle East is the largest market for digital oilfields, followed by North America and Asia Pacific.
“Saudi Arabia continues to drive the demand for the market in the region,” reads a May 2019 RnR report. “The use of digitization techniques … enhance the production output synergies thereby enabling the oilfield operators to improve their operational efficiency.”
It is estimated that Middle Eastern oil companies have more than doubled their investments in digital technology over the last four years, said Vivek Chidambaram, managing director of Accenture Strategy, a multinational consulting company. The reason begins with the fact that simple oil cannot last forever. And even if it could, the writing is on the wall for oil as an energy source: Renewables are on the horizon.
Diversification and Digitalization
“The Middle East collectively depends on liquids more than gas, and liquids demand will be the first to come under threat,” Chidambaram said.
With the ultimate goal of diversifying their economies, many Middle Eastern countries are digitizing oilfields to lower production costs and free up funds for a wider range of investments for the future. They are taking advantage of the low rates many service companies have offered during the industry’s lingering downturn and investing in digital technology to explore shale oil, produce petrochemicals, reduce staff and find ways to use new technology outside the industry altogether.
“There is increasing uncertainty in terms of demand because of energy efficiency, the switch to gas and electric transportation. Capital dollars therefore are going to what can get you to first oil the quickest,” Chidambaram said. “Old oil was large – it took a long time to mature but little operating cost to keep it going. That is now competing with a new source of energy, shale, which requires low capital to get in but a longer spend profile to maintain production. Digitization helps with that.”
Skills Gap, Big Data
The Middle East has moved aggressively forward in digital transformation in the last five years, said Julian Pickering, CEO of Geologix Systems Integration Ltd., naming Saudi Arabia and the United Arab Emirates as countries that appear to be surpassing the United States, the United Kingdom and Europe in their digital investments.
“Easy oil is not widely found anymore. Reservoirs are more complex, oil and gas are becoming more difficult to separate and extract,” Pickering said. “Add to that the fact that there is a loss of expertise in the industry due to attrition and people who have switched to a different industry because of the downturn. So, you have less in-house, qualified, experienced resources. Companies are turning to technology to fill that lack of experience.”
Now that heaps of real-time data are pouring into computers from the oilfield, the technology sought after today is that which can consume that data and statistically analyze it on a second-to-second basis.
“It’s about analytical process, statistical analysis, improving visual data, virtualization,” Pickering explained.
This enables operators to make quick, accurate decisions and reduce costly mistakes.
Integrated Service Companies
Despite the Middle East’s recent and rapid foray into the digital transformation, even the region’s giant, Saudi Aramco, is not yet completely up to speed, said Hani Elshahawi, the digitalization lead for deepwater technology at Shell. “Aramco has been putting together a data science team for the last two or three years focused on geoscience, petrophysics, and drilling optimization use cases,” he said. “But to do this at scale, more subject matter resources and internal trainings are required. Deployment at scale remains a challenge.”
To become less dependent on oil as a country, Saudi Arabia and other Middle Eastern countries must determine if they can use gas – including tight and sour gas – to free up more oil for exporting, and focus more on producing petrochemicals and other more value-added products, he added. The UAE is currently going after sour gas as well as unconventional oil. Bahrain has also recently made an unconventional discovery in similar settings to Saudi Arabia and is currently marketing it heavily, Elshahawi said.
For countries that have offshore oilfields, digital oilfields help reduce the number of people working on a rig, said Jay Hollingsworth, chief technology officer of Energistics, a member-funded and member-sourced organization that develops standards for drilling, production and information transfer.
Furthermore, lowering the cost of production helps alleviate oil-dependent countries from the large burden of financing their countries’ payrolls, Elshahawi said. Reducing dependence on oil and gas can liberate financial resources to power energy diversification.
“The digital transformation is closely related to decarbonization and the energy transition and require Middle East oil exporting countries to become more resilient through less dependence on crude oil,” he said.
In that respect, the industry is also seeing for the first time indigenous, integrated service companies popping up. National Energy Services Reunited, Corp., which recently passed the market cap of Weatherford International, and Saudi Arabia’s TAQA are two examples of these emerging full-service service companies, Elshahawi said.
Rather than acting as the classic “pass-through” agencies of the past, more integrated service companies have been set up to more holistically address their client’s needs by either sourcing locally or shopping for the right technology to get the job done, Elshahawi added. Essentially, they are mixing and matching available technology and personalizing it for their clients’ needs..
As the Middle East presses forward in the digital era, Saudi Arabia is leading the way in terms of adopting standards as well. Using Energistics’ drilling standard, WITSML, and the relatively new data exchange protocol, Energistics Transfer Protocol, Saudi Aramco is ensuring that data received from all of their wells is streamed in real-time and arrives in one consistent format, Hollingsworth said.
“Saudi Aramco is arguably the world’s largest oil company and many people want to do business with them. Imagine if they received drilling data from more than 1,000 wells that arrived in 63 different formats from all of their vendors,” Hollingsworth said. “They can’t do business without some kind of standard for exchanging information. If not, who pays the price? The engineer or the geoscientist. Someone has got to take all of that information and convert it into one format. That takes time and money.”
By requiring its vendors to use WITSML data standards in its contracts, Saudi Aramco has become the first country in the Middle East to adopt a company-wide policy for these standards, further reducing their costs in the oil patch.
“The rest of the Middle East is looking to them to find best practices in terms of how they run their businesses,” Hollingsworth said.
Saudi Arabia’s public announcement of Saudi Vision 2030 – its plan to reduce dependence on oil and diversify its economy – is evidence that the Middle East’s largest oil producer is committed to diversification, said Rami ElDebs, a senior manager at Accenture, emphasizing that other Middle Eastern countries are beginning to adopt national strategies that deviate from a strong reliance on hydrocarbons as well.
ADNOC declared “digital” as a strategic priority at the CEO-level at the Abu Dhabi National Exhibition Centre last year, ElDebs added.
“This move into the technology transformation is a stepping stone to providing more than three sources of energy, with no one being as dominant, as it used to be, in the future,” Chidambaram said. “Technology is providing the answer to that.”