Gas demand in India is increasing by 4.5 per cent on a year-on-year basis with city gas distribution (CGD) being a major contributor. Environment considerations and policy initiatives are driving this growth. NITI Aayog has envisaged a roll-out plan of the CGD network in over 326 geographical areas in a phased manner by 2022. A compressed natural gas (CNG) corridor is being laid along 12,500 km of national and state highways. Around 36 per cent of the 98 planned smart cities have approval for a CGD set-up. The CGD business is driving major changes and the adoption of digital technologies.
New-age solutions
Digital technologies are being used to unlock value in the oil and gas industry. They are being deployed at various levels. The physical production process (process manufacturing/discreet manufacturing) is monitored through sensors. The next step is monitoring of operations and controls. This is done through level sensors, temperature controllers, chart recorders and pressure regulators. A plant lifecycle management system is put in place at the execution stage. The last level is business planning and logistics, where solutions such as enterprise resource planning, customer relationship management, and asset management systems are used. Thus, this is a general framework of monitoring, predicting, managing and controlling business through industrial internet of things, artificial intelligence (AI) and machine learning.
Technologies such as AI, augmented/virtual reality, data analytics, digital clones and mobility can be used across the oil and gas value chain. For instance, cloud computing holds relevance in trading and marketing, 3D printing technologies are used in upstream and midstream operations, and data analytics is deployed across the value chain – upstream, liquefaction and shipping, trading and marketing, regasification, and transmission pipelines.
In terms of priority areas for investment in the next three years, maintenance and reliability ranks the highest among oil and gas companies. This is followed by health, safety and environmental compliance; quality and yield management; raw material and procurement supply; capacity expansion; energy management; production planning and scheduling; digital technologies and capabilities; and logistics and secondary distribution. While digital technologies and capabilities are not in the top three priorities of companies, leading oil and gas players are increasing their investment in this area.
Providing a solution to numerous challenges
Digital adoption will help organisations deal with the following challenges:
- Meeting the pace of innovation and change, which is outstripping current in-house experience and capacity
- Entrenched thinking in current value chain and industry dynamics limits ability to create step-change improvements in value
- Limited knowledge of capabilities and investments required to deliver on the strategy
- Traditional separation of business and IT in a provider-supplier model
- Legacy structures/silos with vested interests
- Intense focus on operational execution and digitalisation but limited focus on innovation and digital business model disruption
- Internal organisation and divisional structures that inhibit new ideas and digital combinations
- Limited visibility of best practices in other industries and of disruptive players
- Uncoordinated pursuit of a number of tactical ad-hoc digital initiatives instead of an integrated, digital enterprise operating model
Business benefits
Over $1 trillion of potential value can be unlocked in the oil and gas industry from digital technologies. Digital investments will lead to increased production, reduced downtime, reduced costs, improved asset utilisation, and lower risks. Overall, a 7 per cent increase in base production, a 20 per cent reduction in opex and capex, and a 20 per cent increase in ultimate recovery can be achieved. AI has the capacity to improve productivity by 40 per cent. Internal data leverage can increase from less than 5 per cent to more than 90 per cent with data lakes and data architecture. Public cloud and IT automation can save 15-30 per cent of infrastructure costs. New operating models from cost-driven IT to new business IT needs to be adopted. Businesses will reap the benefits by accelerating digital transformation and innovation, increasing business-IT focused capability, and employing business entrepreneurs and talent managers.
Based on a presentation by Manu Puri, Director, Accenture, at a recent India Infrastructure conference