Oil companies have long embraced computer technology, but the pace of digital change in the industry has recently been accelerated by the slump in crude prices. Field engineers and geologists - once amongst the most valued employees in the arsenals of producers - could soon be replaced by data by scientists, futurists and robots.
Most of the digital advances in the upstream sector since the late 1970s have been focused around using computers to analyse and help unlock hard-to-get crude deposits. But the emphasis is starting to shift; cloud computing, augmented reality and blockchain codes are the new innovations which could transform the way crude is produced and also traded. Just don’t expect the revolution to take place overnight.
Investment into digital technology by oil companies has picked up since the crash in prices in 2014 forced operators to find deep savings. The use of drones, strength boosting “exo-skeletons,” and in some cases fully automated well heads, has helped operators to reduce expenditure by employing fewer workers, while continuing to boost production. According to the International Energy Agency, the use of widespread digital technologies in the sector could cut production costs by up to 20 per cent, and the take-up of new innovations has the potential to boost recoverable resources by a further 5 per cent globally.
Using smarter computer technology and data to squeeze more profit out of every last barrel will be equally important for the Arabian Gulf's national oil companies. Blessed with around 45 per cent of the world's reserves, producers in the region may have previously had less incentive to maximize their returns from every barrel compared with their international peers. Low onshore production costs in some areas of around $10 per barrel may have also slowed the uptake of big data and other smart technologies in the region. This is now starting to change, however; for example, Saudi Aramco started using drones to help reduce the cost of exploration in remote areas of the kingdom earlier this year.
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But running oil facilities and expensive exploration activities with fewer workers won’t just be a brief outcome of the current industry investment slump. The search for greater efficiencies will be everlasting, as the outlook for demand continues to change with changes in transportation such as electric vehicles. Oil prices falling below $50 per barrel were estimated by industry body Oil & Gas UK to have eliminated 120,000 jobs in the North Sea. Although the basin is recovering slowly, a greater focus by many operators on automation may see the region’s peak headcount of around 450,000 workers never return.
Running oil rigs with fewer health and safety risks, or human errors, could become more enticing as remote technologies improve. Last month, Statoil opened its first onshore remote control room in Bergen to operate the company’s offshore Valemon platform, which produces around 60,000 barrels per day condensate and gas. The company said it may apply the technology to other fields.
The transition to more remotely operated oil and gas fields will also require a major shift towards cloud computing to handle the vast amount of data which could be produced. According to research from HSBC, the lack of large-scale computing infrastructure across the industry has previously been a barrier to the mass uptake of cloud storage, and with it more efficient analysis. The bank argues that oil companies can become more efficient by analyzing all of the vast quantities of data they already collect. “Making use of all this unused data is ‘the’ key opportunity for predictive maintenance, and most operators see the real upside as increased production, not simply lower downtime,” HSBC wrote in a research note published last month.
The data revolution could also eventually turn oil trading on its head. The market for buying and selling cargoes of crude has changed little since the legendary trader Marc Rich - known as the king of oil - created the spot market in the late 1960s just before the Arab oil embargo. Trades are still enshrined with paper format contracts, along with most of the processes involved in loading crude onto a tanker and delivering it to customers like they were during the last century. Transactions must be cleared and regulatory checks completed creating a time consuming often opaque paper trail.
All of these stages in the process could soon be completed through the use of blockchain. Instead of individual bills of lading and underwriting, all transactions involved in a trade could be recorded via blockchain technology, utilising a distributed ledger technology. Cutting the vast paper trail could help speed up the process of trading and free up liquidity, while helping also to supply my accurate real-time information on the balance between supply and demand.
Energy giants BP and Shell have formed a consortium with other market participants to develop a new blockchain-based trading platform, which may be running by the end of 2018. It’s another sign that big oil is taking big data seriously.
Andy Critchlow is the head of energy news, EMEA at S&P Global Platts
North Pole stats
Distance covered: 160km
Temperature: -40°C
Weight of equipment: 45kg
Altitude (metres above sea level): 0
Terrain: Ice rock
South Pole stats
Distance covered: 130km
Temperature: -50°C
Weight of equipment: 50kg
Altitude (metres above sea level): 3,300
Terrain: Flat ice
The specs
AT4 Ultimate, as tested
Engine: 6.2-litre V8
Power: 420hp
Torque: 623Nm
Transmission: 10-speed automatic
Price: From Dh330,800 (Elevation: Dh236,400; AT4: Dh286,800; Denali: Dh345,800)
On sale: Now
UAE currency: the story behind the money in your pockets
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
The End of Loneliness
Benedict Wells
Translated from the German by Charlotte Collins
Sceptre
Race card:
6.30pm: Baniyas (PA) Group 2 Dh195,000 1,400m.
7.05pm: Maiden (TB) Dh165,000 1,400m.
7.40pm: Handicap (TB) Dh190,000 1,200m.
8.15pm: Maiden (TB) Dh165,000 1,200m.
8.50pm: Rated Conditions (TB) Dh240,000 1,600m.
9.20pm: Handicap (TB) Dh165,000 1,400m.
10pm: Handicap (TB) Dh175,000 2,000m.
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
THE SPECS
Engine: 6.75-litre twin-turbocharged V12 petrol engine
Power: 420kW
Torque: 780Nm
Transmission: 8-speed automatic
Price: From Dh1,350,000
On sale: Available for preorder now
If you go
Flying
Despite the extreme distance, flying to Fairbanks is relatively simple, requiring just one transfer in Seattle, which can be reached directly from Dubai with Emirates for Dh6,800 return.
Touring
Gondwana Ecotours’ seven-day Polar Bear Adventure starts in Fairbanks in central Alaska before visiting Kaktovik and Utqiarvik on the North Slope. Polar bear viewing is highly likely in Kaktovik, with up to five two-hour boat tours included. Prices start from Dh11,500 per person, with all local flights, meals and accommodation included; gondwanaecotours.com
COMPANY PROFILE
Name: Kumulus Water
Started: 2021
Founders: Iheb Triki and Mohamed Ali Abid
Based: Tunisia
Sector: Water technology
Number of staff: 22
Investment raised: $4 million
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The specs
Engine: 4.0-litre flat-six
Torque: 450Nm at 6,100rpm
Transmission: 7-speed PDK auto or 6-speed manual
Fuel economy, combined: 13.8L/100km
On sale: Available to order now
A MINECRAFT MOVIE
Director: Jared Hess
Starring: Jack Black, Jennifer Coolidge, Jason Momoa
Rating: 3/5
The specs: 2018 BMW R nineT Scrambler
Price, base / as tested Dh57,000
Engine 1,170cc air/oil-cooled flat twin four-stroke engine
Transmission Six-speed gearbox
Power 110hp) @ 7,750rpm
Torque 116Nm @ 6,000rpm
Fuel economy, combined 5.3L / 100km
WORLD CUP SQUAD
Dimuth Karunaratne (Captain), Angelo Mathews, Avishka Fernando, Lahiru Thirimanne, Kusal Mendis (wk), Kusal Perera (wk), Dhananjaya de Silva, Thisara Perera, Isuru Udana, Jeffrey Vandersay, Jeevan Mendis, Milinda Siriwardana, Lasith Malinga, Suranga Lakmal, Nuwan Pradeep
Second Test
In Dubai
Pakistan 418-5 (declared)
New Zealand 90 and 131-2 (follow on)
Day 3: New Zealand trail by 197 runs with 8 wickets remaining
Singham Again
Director: Rohit Shetty
Stars: Ajay Devgn, Kareena Kapoor Khan, Ranveer Singh, Akshay Kumar, Tiger Shroff, Deepika Padukone
Rating: 3/5
Company%20Profile
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