Industry still behind in digitalisation: Accenture survey

The volatility of the operational landscape here in Australia and around the world remains a significant challenge for upstream oil and gas organisations. Coupled with the rising threat of cyberattacks, stricter environmental standards and evolving regulatory pressures, organisations are increasingly concerned with their ability to adapt and remain competitive all while protecting their reputation and critical digital assets.
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Christophe Bourdeau, a Managing Director in Accenture’s oil and gas practice, based in Perth.

Accenture's Upstream Oil and Gas Digital Trends Survey has revealed investing in next-generation digital technologies is a key priority for Australian oil and gas businesses. 

However, although such investments are designed to reduce costs, protect assets and streamline operations, organisations both in Australia and abroad are failing to realise the same level of value and success unlocked by other sectors. 

Left to play catchup, oil and gas companies are undertaking large scale investments in new innovations without the strategic oversight, skills and partnerships needed to realise success and responsible digital development. 

These organisations must instead prioritise developing core digital competencies around cyber security, cloud systems and AI, and work with external partners to create digital ecosystems and the solid foundation needed for scalable digital investments. Without this in place, digital technologies will continue to remain unproven creating digital vulnerabilities and leaving significant value trapped in investments that cannot be effectively scaled.

Adapting business models and acting on current investments to subdue these challenges is critical. Developing specific and strategic approaches that support digital innovation at scale must be a key priority for upstream oil and gas organisations, or they risk falling even further behind. 

Realising value in the cloud and beyond 

Investing in digital continues to be a significant cost for upstream oil companies in Australia and globally. Despite this, the relative value realised from digital expenditure has decreased as organisations run into roadblocks with their digital initiatives and struggle to implement technology due to a lack of overarching strategic application. 

While many continue to invest in order to protect their competitive advantage, investment must be structured toward achieving larger transformation changes. For example, leading upstream companies are investing in digital to help with energy transition and the creation of more sustainable business models.  

Accenture's research also revealed cloud technologies provide upstream organisations with some of the greatest value from digital investment, relative to next-generation technologies such as big data, artificial intelligence (AI) and internet of things (IoT). Cloud computing can simplify the widespread deployment of technology when compared to more costly investments in on-the-ground infrastructure and reduce the future financial burden of digital investment. 

Cloud can also help organisations benefit along the whole value chain, including better communication with downstream counterparts such as distributors and points-of-sale. This will enable upstream organisations to be able react more quickly to changes in the value chain and end-user demand, which could reveal significant value.

There is still some way to go in realising the full potential of cloud, as only just over half of upstream organisations are currently investing in such technologies. Many oil and gas organisations are continuing to place their digital hopes on next-generation solutions without first putting the much-needed foundations in place. 

Bringing cyber security to scale

Large scale cyberattacks such as those on energy assets in the Middle East, has demonstrated the potential to cripple upstream organisations as the industry becomes more heavily reliant on protecting their infrastructure, digital assets and reputation. 

Earlier this year, a ransomware attack forced a natural gas company in the US to close a crucial pipeline. A single, malicious email was determined to be the attack's cause, highlighting the risks associated with developing integrated IT technology networks that allow data to flow, unchecked, across an organisation. Cyberattacks like ransomware can quickly wreak havoc on IT systems and force organisations into expensive repair scenarios. 

The industry is responding to these vulnerabilities, and as such, cyber security has become the most valuable immediate investment for upstream organisations today. According to Accenture, 61 percent of organisations are currently investing in cyber security technologies for better protection and response to threats, a 49 percent increase since 2017. Whilst this is promising, nearly 40 percent of upstream organisations are yet to invest in cyber security. 

With a growing reliance on connected technologies, cyber security can only be effective when developed with scalability. This will ensure cyber security can continue to protect organisations, more effectively support the safe implementation of connected technologies, and future-proof their use.

While cyber security is the leading focus on investment today, in the next three to five years more than half of organisations expect artificial intelligence and big data and analytics to reach the top of the investment list, consistent with the industry expectations that these technologies will be crucial drivers of future value. Nevertheless, as cyber attacks will continue to occur, upstream organisations must be ready now and not later, to detect and deflect cyber threats. 

Going at it alone is no longer a viable option

For new technologies to be effective, foundations for their widespread deployment require a clear strategic direction. Upstream organisations are clearly concerned about the need for improved capabilities and digital skills with nearly 60% of Accenture's upstream survey respondents recognising they would need to look to external providers for assistance.

Strategic partnerships with technology platform, IT providers and niche vendors are helping upstream organisations navigate implementation difficulties arising from greater reliance on digital systems and infrastructure. For example, Chevron and Schlumberger teamed up with Microsoft last year, to accelerate their development of ‘petrotechnical' and digital technologies

The benefits of strategic partnerships such as accelerating the rate of change and bringing greater value are driving upstream organisations to create broader ecosystems with external partners. Through these ecosystems and by reaching a collective consensus on the goals of technology implementation, the upstream sector can develop a more productive environment lending itself more naturally to innovation. 

Next-generation technologies which rely on vast amounts of unstructured data can easily become difficult for upstream organisations to handle, especially when organisations are faced with developing their own data analytics platforms. For example, big data collection requires an abstract understanding of complex data processes to create clear and actionable insights needed to achieve scalability and success for these technologies. External service providers are simply better equipped as advisory partners in this area.

Without the right partnerships and strategies in place, upstream organisations are left to rely on unproven and ill-equipped algorithms to provide the answers - a chance they simply can't afford to take.

Scaling for success

While infrastructure and heavy machinery only require routine care and maintenance once developed, next-generation technologies must be nurtured if they are to evolve over time. Digital investments are not a one-time cost and solution, but require strong foundations and ongoing support for them to grow into useful and financially viable tools.

By concentrating on untested and unproven concepts, and without the technological infrastructure to support development, just 9 percent of companies surveyed by Accenture were able to develop and scale more than half of their proof of concept (POC) innovations over the same two-year period, with 36 percent of organisations scaling 10 percent or less. What's more, while investment in AI and machine learning increased by almost 20 percent between 2017 and 2019, they made only a 5 percent increase on business performance.

As it stands, upstream organisations have yet to develop a solid foundation for digital development or the strategic approaches needed to ensure effective organisation-wide implementation. What's more, the organisations themselves are the biggest barrier to scaling for success, with one third of respondents identifying a lack of clear strategy and business case as the reason they're not able to unlock full value. 

For digital investments to be properly scaled, IT systems and digital technologies must be prepared to work equally well across a variety of complex organisational environments and remote physical applications to provide vital data to processing facilities. 

Defining a clear strategy for digital transformation is a critical first step in achieving scale and without doing so, upstream organisations will continue to invest without seeing optimal results. From there, setting up key core capabilities is imperative to making this happen. 

Adapting to the future 

It's not hard to see that the upstream sector is undergoing profound structural and regulatory changes. To be able to meet the demands of this changing landscape effectively, implementing the technologies of tomorrow is critical. 

Accenture's research has uncovered a crucial need for investment decisions to be met with greater strategic vision and executed through streamlined operations that will allow upstream oil and gas organisations to become more agile and release the value that remains trapped in current approaches to digital investment. 

Addressing these core competencies and laying solid foundational systems and technologies like cloud and cyber security is vital before technology can be scaled. Only then, will Australian upstream oil and gas organisations truly be able to realise trapped value from their digital investments and operate with agility both today, and well into the future. 

This piece was commissioned by Energy News and written by Christophe Bourdeau, a Managing Director in Accenture's oil and gas practice, based in Perth