Uganda can create a digital advantage in oil industry

July 22, 2016

Uganda’s oil and gas industry has faced challenges since the discovery of commercially viable deposits were made public ten years ago this year. Since then, not only have crude prices been volatile, but there have also been dramatic changes in the regulatory landscape. Despite the increase of prices in the last few months and several new incentives for the private sector, upstream oil companies are looking for ways to better manage their operations in Albertine region in Western Uganda. Digital technologies provide them the opportunity not only to cut costs but also to redesign their businesses to thrive in volatile market conditions. However, time and money are short, so the pressure to act decisively is growing as the current downturn lingers.Most oil companies have already taken dramatic cost-cutting measures and canceled or delayed capital projects with most notable one being UK’s Tullow Oil company. Yet many still feel the weight of managing their businesses under the constraints of their current organisational structure, a legacy technology footprint and traditional ways of working. Upstream companies like Total are now realising that traditional cost-cutting levers will not be enough and most, if not all, understand they cannot simply cut their way to future growth. That’s where digital technologies can help. In the recent research whose copy I have, cost reduction was identified as the most important business challenge that digital tools can help address and those already doing so, were already getting value from their digital initiatives.

More than half of the professionals surveyed said this value was high to significant. In Uganda, the greatest short-term cost reduction opportunities oil companies are implementing are in areas including IT, where cloud models are reducing IT infrastructure costs, field operations where mobility is reducing costs while increasing worker productivity and field assets where basic Internet of Things technology and analytics are helping optimise asset operations and reduce costs. The survey shows that up to the next six years oil and gas professionals believe the focus will shift to areas that deliver greater long-term value while helping them make better and faster decisions. In Uganda, the emphasis will be on technologies like big data, analytics, IoT and in maturing technologies such as robotics, wearables and artificial intelligence.These digital technologies will help oil companies in Uganda deliver greater long-term value in areas including asset operation centers where advanced IoT and analytics will enable assets to be managed in single integrated systems, field operations in Lake Albert region where workers will become even more efficient using wearable and connected technologies; and the assets themselves where autonomous operations using automation, robotics and artificial intelligence will change how work is done. These areas still are only the beginning of the value opportunity. Upstream companies have the chance to create even more value by redesigning their businesses to operate at a completely different cost base and with greatly increased agility. They can transform traditional operating models and long held assumptions about organisation structures, workforce deployment, asset strategies and their positions in the upstream value chain. Across all major upstream functions including drilling and completion, engineering and construction and operations and maintenance, upstream companies can achieve significant efficiency gains and cost savings with digital technologies. On the drill floor, the evolution of automation will continue.

In the field, workers armed with digital work orders on tablets and wearable devices can make digital inspections of equipment and assets much faster than traditional manual inspections, saving time and money without sacrificing safety. By redesigning these workflows and the decision points within them, upstream companies like Total can make these functions more efficient and agile with lower cost. In asset operations, digital tools provide the opportunity to manage every well with the same data intensity and focus with which the largest oil and gas platforms are managed today and to do so at negligible cost. Advances in low cost sensors, network communications and hyper-scale cloud platforms means that over time every well can be digitally instrumented and managed.Uganda’s oil companies can reduce back office costs by redesigning these functions and leveraging digital technologies and design thinking models. These functions will become customer-centric and service the business at the lowest possible cost. Also, across value chains, digital tools are redefining traditional boundaries and players. This is no less true for upstream companies like Total. They have more options today regarding what parts of the value chain they want to own versus leveraging other ecosystem players, such as oilfield services companies, or new digital services companies in areas including advanced data sciences. For instance, several American oil companies have adopted digital tools rapidly to make analytics pervasive in decision making, establishing models specifically to drive proactive maintenance strategies and support decisions to enhance production, safety and risk management capabilities. Through statistical modelling, data management and visualisation software, the huge amounts of production data are combined to deliver business insights. Upstream companies like Total have long been pioneers by innovating and pushing boundaries using technology. Digital tools provide new opportunities to simultaneously innovate and position themselves to thrive in the new volatile market conditions and with the pace of technological change faster than ever, acting now to create a digital advantage through digital technologies is an imperative, not an option.With such an implementation, the plan to route the pipeline through Tanzania instead of Kenya, will pay off handsomely.

Contador Harrison