The oil and gas industry is evolving rapidly, urged on by a number of macroeconomic factors that are converging to create challenges – and potential opportunities. A significant labor shortage, rising costs and a decarbonizing world are among the issues rearranging the landscape. Companies are under pressure from governments and consumers to reduce their carbon footprints, and at the same time, they’re being asked to do more with less. Uncertainty abounds, and companies must not only wrestle with the pressing issues of today, but plan for the future.
Digitalization is both a journey of transformation and a vehicle to help oil and gas companies meet the challenges of today head on while future-proofing operations for whatever comes next. Modernizing processes and procedures by bringing connectivity to facilities, assets and people, can improve safety, reduce costs and drive efficiencies.
There is a comprehensive platform for the technology that will help companies handle all these rising challenges. Connectivity is the key to digital transformation, and private 5G cellular networks provide a unified platform that can lead oil and gas operations to solutions for the challenges of today and tomorrow.
The business case for digitalization has become critical
Of course, many of these macroeconomic factors are not new to the industry. But there are a few important developments converging that make this the perfect opportunity for oil and gas companies to digitalize.
First is the improvement in available technology, driven by two main things: 5G and the cloud. The increasing cloudification of services means that companies have an opportunity to create always-on sensor networks, with the ability to backhaul that data so you can act on it quickly. Those sensors are really the foundation upon which modern operations will be built.
5G, the latest generation of cellular technology, has the speed, high throughput and low latency needed to enable the really exciting use cases, things that have been proposed for years from an operations standpoint but limited to pilot programs (or the drawing board) due to the IT limitations of legacy connectivity platforms. Things like drones for remote maintenance, digital twinning, and augmented reality (AR) applications that let onsite workers connect to outside experts are now possible – and will quickly become necessary, given other factors like labor shortages and efficiency pressures. 5G will be an inflection point for industry the way 4G was for consumers, serving as a platform for things like Uber and on-demand video.
The second key development is that the business case for digitalization has become critical. The push to decarbonize means that financing for net new oil and gas projects has been difficult to obtain, and there is not a lot in the pipeline after 2023. Federal funding like the Inflation Reduction Act (IRA) is helping push investment towards new energy fields like solar, hydrothermal, and carbon capture tech. So, it follows that current oil and gas operations need to become as efficient as possible as companies look to maximize the value of existing assets in the face of rising costs.
An evolving workforce requires technology solutions
One of the biggest macroeconomic pressures facing the industry is labor. To put it more precisely, there are two concurrent issues: a short-term labor shortage, finding workers to fill current job openings – and a longer-term talent shortage, where younger workers are gravitating away from the industry, looking for jobs in renewable energy or other sectors entirely.
For example, the undergraduate oil and gas engineering program at the University of Calgary, located in the heart of Canada’s oil country, shut down due to lack of interest.
“We’re running this industry on a set of 40-year-old assumptions,” said Geoffrey Cann, Principal at MadCann Alberta Inc. “Connected worker technologies will not only help companies be more efficient with their workforce, but they are also attractive to the next generation of digitally native workers.”
While renewable energy is the future, demand for oil and gas remains strong – so companies are turning to automation. Digitalization can also improve safety by removing human workers from dangerous situations and can help improve skill sets by granting access to information and training materials online.
An Ericsson and Arthur D. Little study found that a digitally enabled workforce:
- Is 8.5% more productive
- Experiences 48% less loss from health and safety incidents
- Could see an 8% reduction in operational spend due to increased worker effectiveness
Rising sustainability expectations require always-on asset monitoring
Although some countries are not yet delivering on ambitious climate targets, the broad need to reduce carbon emissions is unavoidable. Oil and gas operators are under scrutiny regarding environmental issues, such as air and water quality and offshore regulations, and leak detection and repair (LDAR) rules.
Meeting the new expectations around sustainability requires, among other things, monitoring emissions on a continuous basis.
“Environmental regulations are becoming more stringent, and to be compliant companies need to move away from the manual inspections of the past and toward always-on monitoring capabilities,” said Viren Parikh, Director of Business Development for Energy at Ericsson. “This requires new technology solutions and constant connectivity.”
Connected cameras are extremely important for this kind of monitoring. They can keep an electronic eye on operations 24-7. They can detect things like small leaks, or a change in color in gas flares at a natural gas facility, before it would be noticed by human eyes. For oil companies tasked with keeping tabs on capped wells, a network of cameras linked by cellular internet is really the only way to manage the task.
Beyond environmental and personnel issues, cellular’s enhanced connectivity allows for the real-time monitoring of the condition and performance of critical assets. Operators can detect when equipment is at risk of damage or malfunction, reducing downtime and increasing productivity.
Additionally, private networks provide outstanding security for these newly digitalized operations. As more operations in oil and gas facilities become connected, the threat surface naturally increases. Private networks create a closed system, with data stored locally, hardening infrastructure against malicious actors.
Macro-economic factors converging to make digitalization through private cellular a must
All these factors add up to a clear conclusion: an industry that needs to adapt – fast.
“The winner in the long run is the oil and gas company that figures out how to change, quickly,” said Ammar Sabbagh, VP of Industry and Partnership for Energy at Ericsson.
Private cellular networks can provide the connectivity needed to solve the many challenges facing the industry while providing the communication infrastructure for breakthrough use cases that are only a few years down the road.
Ericsson’s market-leading 4G and 5G private network solutions are based on 3GPP (industry standards) that aligns with large ecosystem players and device manufacturers. Additionally, if adopted at the 4G/LTE level, the evolution to 5G is seamless, requiring only a software upgrade rather than costly and disruptive hardware retrofits.
That evolution path matters because, despite the converging macroeconomic factors making digital transformation so critical, every company is at a different stage on the journey. Things like digital twinning, remote operation and AI-powered automation are the end goals. But for an industry that has been slow to adopt digital transformation, there is still much great value to be found in early steps, like connected worker applications and real-time asset monitoring.
Oil and gas firms need a mechanism to understand where they are in the process and how to accelerate digital transformation in a manner that supports existing processes and the current workforce. Private 5G networks is the platform that will bring this industry into the future.
