The Canadian natural resources industry is undergoing enormous change. Volatile energy prices — the reality of US$55 per barrel — reduced production reliability, uncertain market access, the government’s climate change agenda, tightening environmental policy, safety, and compliance concerns along with increasing social drivers, such as social license to operate, all have resulted in industry upheaval.
There seems to be a consensus that technological innovation is now more critical than ever to maintain the competitiveness of the oil and gas industry. According to Deloitte, “The industry is at a critical juncture where companies must go beyond merely acknowledging the need to innovate and start executing upon this imperative in a systematic way or else their long-term survival may be in jeopardy.” (see note 1)
At the same time, according to Canada’s Oil Sands Innovation Alliance (COSIA) when speaking to Canada’s standing committee on natural resources, “While some technologies are already in or nearing commercialization, many, especially the more transformative ones, could take more than a decade to become available for deployment. There is about a 10-year time horizon from ideation to commercial deployment in the oil and gas sector.” (see note 2)
How does the industry pursue innovation to drive real business value realization, find more innovative ways to cut costs, increase revenues, create more productive solutions in exploration and development, and make better decisions on operational risk — all while accelerating the pace to commercial deployment?
For starters, we work together. It sounds like a cliché but when key players, producers, research and technology innovators come together, the opportunity to vastly accelerate common industry agendas is realized. The healthcare industry is a perfect example of such transformative innovation through shared agendas.
Transformative technology like AI, advanced algorithms, machine-learning and cloud systems —- powered by the IBM Watson platform —- made its first impact in healthcare in 2012 starting with oncology, the study and treatment of cancer and tumors. Why healthcare? Two reasons: First, human health impacts us all, and second, the amount of data in the global healthcare industry is massive and AI systems like IBM Watson are built for big data challenges.
Medical journals, clinical studies, medical text books, x-ray and scanning film, and personal healthcare records are full of important data, and the healthcare industry shares a common agenda — to deliver the best possible care to patients.
With this in mind, key healthcare organizations and IBM came together to build an oncology treatment advisor. Watson ingested millions of pieces of structured, unstructured and complex data — from both public and private sources — and dramatically changed the face of patient care. From there, IBM Watson and other industries joined forces to accelerate the pace of advancing common industry challenges within the banking and insurance, manufacturing, retail, education and yes, the oil and gas and mining industries, to drive real innovation across the value chain.
Secondly, when industry players work together on shared agendas, they also align current research, expertise and emergent technology solutions to existing challenges to accelerate immediate term profitability goals.
Notice we’re focusing on immediate term? We all know that when economic climates constrain, the focus rapidly turns to short-term performance as uncertainty drives up risk in longer-term innovation and capital project commitments.
Co-investment in shared industry programs delivers benefits almost impossible to reap as individual organizations, such as reduced project and development resources, reduced costs associated with common deployment environments, lower cost recovery thresholds and the benefit of higher reusability of program components and artifacts that reduces the need for redundant or new work efforts for each project initiation.
Thirdly, when industry players come together to form common agendas, they can more broadly capitalize on technological innovation and research such as the Internet of Things (IoT) and connected operations, predictive analytics, blockchain, cloud and AI. To be an innovator, you need to take risk, and with risk comes increased liability and the possibility of failure. According to the World Economic Forum, “the global oil and gas industry has at least 10 years to go before reaching a similar level of digital maturity to aerospace or automotive.” (see note 3)
The natural resources industry has access to a tremendous amount of valuable data, technology and research capabilities. They are very good at collecting data, and the growth in data management service providers in the oil and gas industry supports this data collection; however, in the last five to ten years the growth in computing power and advanced technologies to capitalize and draw insight, understanding and predictions from historical data, and public data sources, has not been fully realized.
The oil and gas industry still struggles with turning data into actionable insights that drive faster, safer and more intelligent work. The evolution of the industry from outdated legacy systems — not capable of handling the data and computer processing power available today — to more powerful operational focusses enabled digital systems will take time, effort, capital and most of all, a significant cultural change in the way the industry works and operates.
Imperative to the industry is the evolution to a modern operational architecture that can ingest the “4 Vs” of data — volume, variety, velocity and veracity — from internal and external sources, then integrate that insight into enterprise processes and workflows for meaningful outcomes.
The advancement of AI platforms focused in specific industry verticals over the last five years, enables computing systems and AI to focus on simplifying the intensive processes and complexity in data collection and information retrieval, and even predictions, allowing the geologists and engineers to make better judgement calls and actions based on their experience and the new insights AI brings to their data sets.
Strategic enablement of digital technologies in the oil and gas industry is now fundamental to its survival. At IBM, we believe there is a place for shared agendas to advance innovation through digital transformation. We’ve just launched the IBM Watson for Natural Resources Innovation program in the Canadian oil and gas industry. This 4-year, thirty million dollar value creation program will advance business transformation and focus on a collaborative approach to reduce time-to-market and drive technology ROI.
- Innovation in Oil and Gas: Canada 2016, Monitor Deloitte, Doblin 2016.
- The Future of Canada’s Oil and Gas Sector: Innovation, Sustainable Solutions and Economic Opportunities. Report to Standing Committee on Natural Resources. September 2016, 42nd Parliament, 1st Session.
- World Economic Forum, January 2017