Refiners are gaining financial benefits from digital technologies but are missing out on the additional value that the most cutting-edge technologies could provide, according to new Accenture research.
In addition to addressing the financial benefits that digital technologies can provide, the research also suggests that refiners are not investing sufficiently to address the increasing number of cyberattacks resulting from the proliferation of digital technologies.
“The Intelligent Refinery,” Accenture’s second annual study on digital technology in the refining industry, is based on a survey of approximately 170 executives, functional leaders and engineers at refiners globally.
Forty-one per cent of respondents reported that their company can now determine the financial value of using digital technologies, including 30 per cent who reported that the technologies increased their refining margins by more than seven per cent in the last 12 months. One-fifth (20 per cent) of respondents said digital technologies are adding US$50 million to US$100 million or more in value to their business, with another one-third of respondents citing between US$5 and US$50 million.
This tangible financial benefit may explain why more than half (59 per cent) of companies surveyed – approximately the same proportion as in last year’s survey – are spending more or significantly more on digital technologies than they were 12 months ago. Additionally, three-quarters intend to increase spending in the next three to five years, up from just over 60 per cent in last year’s survey, indicating that demand for digital technologies remains strong.
Likewise, almost half (48 per cent) of refiners now rate the use of digital technologies within their company as mature or semi-mature (up from 44 per cent in last year’s survey). At the same time, however, most refineries have yet to move beyond deploying well-established digital technologies, such as analytics.
Indeed, when asked to identify the digital technologies driving the greatest margin improvement in refining operations, respondents most often identified advanced process control and advanced data analytics, cited by 61 per cent and 50 per cent of respondents, respectively. These are also the technologies to which refiners expect to allocate the largest proportion of their digital budget over the next 12 months.
Cutting-edge technologies that could unlock additional value – including internet of things sensors and edge computing, mixed reality, mobility and blockchain/smart contracts – are only seeing partial adoption or pilot programs and are likely to receive less investment than the other well-established technologies over the next year, according to Accenture.
In light of this, there is a need for more effective management of refiners’ digital strategies, with one-quarter (24 per cent) of executives saying there is currently no clear role within the organization driving the digital strategy. In fact, 43 per cent reported that this lack of a clear digital strategy is a barrier preventing further adoption of digital technologies in their refineries.
However, change is afoot. While only 11 per cent of respondents said their company currently has a chief digital officer driving the digital agenda, many refiners are making governance changes to drive greater digital transformation and address the convergence of information technology and operational systems. Specifically, one-third (34 per cent) are creating new organizational structures, more than one quarter (28 per cent) are launching a steering committee, and 15 per cent are creating new C-level positions.
“Refiners are currently reaping just a fraction of the value that digital can yield,” Tracey Countryman, managing director for Global Resources Industry X.0, Accenture, said in a statement.
“The next step will be to combine and deploy multiple technologies at scale to totally reinvent business processes and drive plant-wide transformational change. Our recent Accenture Disruptability Index pinpointed the energy industry as the most susceptible to future disruption. Increased and tactical digital investment can better enable the efficiency and performance improvements to help refiners weather the storm. There are signs refiners have realized this and are taking action to capture these benefits.”
Greater investment needed to bolster cyber defenses
With a growing number of cyberattacks, there comes the associated need to constantly upgrade cybersecurity resilience and response. Indeed, 28 per cent of respondents said they are seeing more or significantly more cyberattacks than last year. Most worryingly, at a time when operations are becoming increasingly connected and exposed to these kinds of threat, one-third of respondents said they don’t know how many attacks they are experiencing.
The need becomes more pressing considering that 38 per cent of respondents said they see data security as a barrier to adopting digital technologies in their organization. Among the risks respondents most often associated with cybersecurity are operational impact (67 per cent), impact on workforce health and safety (39 per cent) and data breaches (39 per cent).
However, only 28 per cent of executives cited digital tools to improve cybersecurity in one of their top three priority areas for investment in digital technologies. Respondents were more concerned about how lack of digital investment will affect their competitiveness (cited by over 67 per cent), how digital can support cost reduction and improve their margins (64 per cent) and how weak digital investment might affect their operational reliability (58 per cent).
“With the increased exposure and risk from ever-greater connectivity of digital technologies comes a need to invest to stay at least a step ahead of the growing threat,” said Jim Guinn, a managing director at Accenture who leads the cybersecurity practice within the company’s Resources operating group. “In order to do that investing now in fundamental security capabilities will be crucial to safeguard future operations.”
The online survey was conducted in March by PennEnergy Research in partnership with the Oil and Gas Journal. The survey was developed with HSB Solomon Associates LLC, a benchmarking and global advisory services company for the global energy industry. Respondents are subscribers to PennWell publications and comprised 169 refining industry professionals across 48 countries, including executive and mid-level management, business unit heads, engineers and project managers from a cross-segment of the industry.