Digitalization could save up to $75 bln for oil & gas producers: Wood Mackenzie

The oil & gas upstream sector (exploration and production or E&P) could see annual cost savings of $75 billion per annum from digitalization by 2023, a report from natural resources consultancy Wood Mackenzie said.

These savings can be realized at every stage of the upstream lifecycle, the report added.

Noting that the oil & gas industry is a leader of technological innovation, the report said the exploration and production sector has been a laggard in its adoption of Big Data.

Embracing the advances in analytics, machine learning and artificial intelligence could pay big dividends for the industry, it maintained, adding that while the ultimate goal is for machine learning and artificial intelligence (AI) to process data and spot hydrocarbon-bearing reservoirs with an almost perfect success rate, secondary benefits include making better, faster decisions on where and how to drill, or whether to drill at all.

“Digitalization offers multiple prizes in exploration. The biggest would be to uncover new resources.  This may be from better processing of seismic or new understanding of well logs and chemical analysis,” said Greig Aitken, principal analyst in Wood Mackenzie’s corporate analysis team.

He said not only would this offer E&P companies the bonanza of finding new resources in existing acreage, but anyone with a competitive advantage in exploration would have a material advantage in licensing or M&A.

“By accessing effectively unlimited computing power via the cloud, Cairn Energy, which began its digital transformation in 2015, now has the ability to shave months off its 3D seismic processing,” Aitken said.

For an exploration-focused company such as Cairn, the improved speed at which it can make drill-or-drop decisions is transformational, he said.

Since 2014, upstream operators have spent, on average, $50 billion annually on exploration.

Using the 2014-2017 average activity and spend levels as the base, Wood Mackenzie’s analysis shows that over the next five years, potential cost savings of $5 billion-$7 billion (10-15 percent) per year in exploration could be achievable.

Similar savings could be achieved in drilling and completion, but digitalization’s potential benefits really come to the fore in field development.

While new developments stand to benefit most from digitalization, it can also be implemented at existing fields, with remarkable results, the report added.