The oil sector believes that the digitisation of the industry is a solid option to cut costs and survive a volatile market, while meeting consumer demand.
Russia is one of the clearest victims of the big drop in energy prices registered since last year. That is why the St. Petersburg International Economic Forum, which concluded on Saturday (18 June) was also a good occasion for the industry to discuss how to keep business going in a challenging environment, and whether it should start worrying about a world without oil.
Russian President Vladimir Putin has suggested that the fall in global oil prices that is hurting Russia’s economy was caused in part by political manipulation.
In a panel with the bosses of ten of the largest energy companies, and VIP attendees such as former German Chancellor Gerhard Schröder, currently the chairman of the board of North Stream, and the Russian Minister of Energy, Alexander Novak, the conclusion was clear: the digitisation of the oil industry could be the “silver bullet” to overcome current problems.
The chiefs of a number of big oil firms including Rosneft, Exxonmobil, BP, Total and Eni, among others, agreed during the panel that technological progress and the optimisation of the production could be the key to maintain the adequate investment level required to meet a growing demand that will add 2 billion costumers in the next two decades.
The economic slowdown suffered by “big oil consumers” like China, and the impact of the ‘fracking’ revolution in the US cut prices by two thirds since summer last year.
This crisis made Saudi Arabia, the world’s largest oil exporter, rethink its whole economic model to diversify its sources of income and to partly privatise Aramco, the world’s biggest producer.
As Nobuo Tanaka, former director of the International Energy Agency commented, the sector is leading towards “digital oil”.
The eruption of tech innovations is what turned the US into the number one producer of oil and gas, thanks to fracking, and provoked the mismatch between demand and supply, making attempts by OPEC to control prices useless.
But as Lorenzo Simonelli, Chief Executive Officer, GE Oil & Gas, underlined, thanks to the large amount of data and the digitalisation process “We can be more predictive and improve the outcome, while creating new products and innovative services and progress on standardisation.”
GE is helping to digitise the industry by introducing an improved monitoring and management system for the wells to maximise its productivity and better plan its downtime periods.
“We have to keep challenging ourselves through innovation and digitalisation,” he added.
The CEO of ExxonMobil, Rex Tillerson, recalled that the importance of technology development for the industry was already shown with the irruption of fracking.
The reduction in oil prices should be a good opportunity for Europe to put in place the appropriate tools for combating climate change, and to start the transition to a sustainable economy, writes Alberto Majocchi.
He pointed out that the oil sector has “an enormous task ahead to meet the expectations of affordable price for consumers” over the next years, because “that is what is expected”.
He added that those who saw the end of the oil sector wrote a “premature obituary”, but in order to escape from this premature death, he stressed that firms should never be short in technology.
The head of Total, Patrick Pouyanne, agreed with him, given the growing demand needs and the free fall of 1.1 billion dollars in investment and new explorations since 2014. “We need to do our best to lower the cost. That is why digitalisation is a powerful ally,” he said.
Even if a barrel of oil surpasses the $60 threshold, as some analysts expect over the next two years, Igor Sachin, board chief of Rosneft,believes that this price would not be sufficient to finance all of the projects needed.
“The price volatility is a litmus test for the market fundamentals,” he warned.
That is why the sector is witnessing a “paradigm shift”, in which technology and financial tools “will play a crucial role”.