The oil and gas industry is undergoing a transformation, driven by various business trends. These include changing consumer preferences towards integrated and convenient services, a revolution in mobility marked by the increasing adoption of electric and gas-based transportation, and the rise of the sharing economy and aggregation platforms. Geopolitical dynamics surrounding crude oil prices and upcoming refinery capacities are also playing a pivotal role in shaping the industry.
Growth trends
India has a total of 23 oil refineries. In 2022-23, crude oil production reached approximately 28.2 million tonnes (mt). The total refining capacity stood at roughly 25 million tonnes per annum (mtpa) while the consumption of petroleum products was around 222 mt.
The oil and gas industry has witnessed a surge in demand and this trend is expected to continue. It is projected that the demand for oil in India will double, reaching 11 million barrels by 2045. Diesel demand is also anticipated to double, reaching up to 163 mt by 2029-30. Further, the consumption of natural gas is expected to grow by 25 billion cubic metres (bcm), registering an average annual growth of 9 per cent until 2024.
There is a growing emphasis on the supply side as well. To generate revenue and mitigate the soaring oil prices, India plans to commercialise 50 per cent of its strategic petroleum reserves (SPRs) and use the proceeds to construct supplementary storage tanks. In addition, the bidding rounds under the Open Acreage Licensing Programme and the National Data Repository present investment opportunities in the fields of exploration and production (E&P).
In July 2021, the Department for Promotion of Industry and Internal Trade approved an order allowing 100 per cent foreign direct investment (FDI) under the automatic route for oil and gas PSUs. The government has also allowed 100 per cent FDI in upstream and private sector refining projects.
Evolving technology
The oil and gas industry is witnessing significant technological advancements. These include customer relationship management and loyalty programmes, digital marketing and the automation of retail outlets. The implementation of robotics has been observed in automated material handling, where robots are employed to transport boxes and pallets, and facilitate the loading and unloading of trucks. Further, robotic arms have been developed to efficiently handle sorting and packaging tasks.
Artificial intelligence (AI) has played a key role in providing timely intelligence and recommendations across the supply chain. These include economic contribution, cost-to-serve models and root cause analysis. The adoption of internet of things (IoT) technology, such as radio frequency identification/Bluetooth tags, scales, sensors, telematics and smart refrigeration containers, enables the monitoring of various parameters including identity, location, state, temperature and weight.
Augmented reality (AR), particularly smart glasses, has gained traction in various industrial applications such as vision picking, product assembly and item repair. Further, AR windshield displays, a promising technology for automated driving, have been implemented in delivery vehicles and distribution centres to enhance operational efficiency.
Additive manufacturing and 3D printing techniques have proven to be viable solutions for printing low-demand items, customised items, spare parts and prototypes. Data analytics is widely utilised, particularly for the collection of real-time data from various sources. This facilitates the provision of integrated analytics for planning, sourcing, manufacturing, distribution and return.
Indian digital practices
Indian PSUs such as Bharat Petroleum Corporation Limited, Hindustan Petroleum Gas Limited (HP Gas) and Indian Oil Corporation Limited have implemented specific initiatives related to refineries.
These initiatives include monitoring of enterprise assets, including equipment exceeding a quantity of 1 million, implementation of industrial IoT-based assets and spare tracking for complete asset life cycle management. The primary aim is to enhance the health and availability of assets while optimising maintenance costs, mitigating operational risks and reducing the total cost of ownership.
The implementation of an AI/machine learning-driven predictive analytics maintenance system for essential refinery assets is a prime example of the use of predictive analytics-based management. Predictive analytics enables enterprises to enhance their equipment inventory management by ensuring its adequacy, pre-emptively detecting equipment maintenance concerns and anticipating the requirement for replacement parts.
Some refineries have also implemented AR/virtual reality-based training techniques, which involve the establishment of specialised training centres. The training programmes facilitate the creation of tailored courses to promote skill development among employees and also provide stakeholders with valuable insights into new features, operating procedures, etc.
The adoption of an integrated planning tool for supply chain and production planning is another effective approach. It establishes a connection between supply chain planning and refinery production. The primary objective of the proposed solution is to optimise the intake of crude oil and refinery yield. This leads to increased revenues and reduced costs associated with sourcing, production and supply chain management, thereby augmenting the gross refining margin.
Global practices
Royal Dutch Shell has partnered with SmartChain International LLP to implement a demand-driven methodology. The implementation of simulation techniques across various segments of the supply network has resulted in an estimated 30 per cent reduction in inventory. This has also led to stable and consistent supply requirements, improved contractual pricing and strengthened relationships with suppliers. The shift from conventional to demand-oriented planning has resulted in reduced inventory expenses and administration, leading to a significant decrease of 20-30 per cent in working capital.
BP Gas has implemented unmanned aerial vehicles and light detection and ranging technology to replace manual pipeline inspection. This innovative approach allows for highly accurate data collection from a distance of 7-9 metres, eliminating the need for shutdowns and addressing safety concerns. It utilises high resolution photography and video cameras, which are augmented by remote sensors to collect 3D images. Furthermore, it integrates high resolution topographical mapping and 3D surface modelling to anticipate future issues. It is a cost-effective method for conducting thorough scans of the pipeline network to identify any areas requiring repair due to damage or corrosion, prioritising safety throughout the process.
ExxonMobile has implemented an integrated procurement platform that combines big data, blockchain and AI (specifically SmartChain) within a unified framework. This framework connects the activities of buyers and suppliers, finance and procurement, enabling the optimisation of past sourcing patterns and real-time demands. The adoption of this approach has resulted in a significant reduction of 20-30 per cent in inventory expenses and working capital management.
Key challenges
Despite the introduction of various technologies, a number of challenges must be addressed to achieve a successful digital transformation. These challenges include the absence of well-defined digital strategies, difficulties with process integration, inadequate cyber governance and data security measures, and the need for seamless integration with pre-existing systems, as well as business agility.
In the context of the convergence of information technology and operational technology, it is crucial for the oil and gas sector to prioritise the development of sustainable solutions to mitigate its environmental impact. A strong commitment to investing in robotics and IoT is also essential to derive benefits related to monitoring and performance computations.
With inputs from a presentation by Aman Sethi, Senior Director, KPMG, at a recent India Infrastructure conference