Without wanting to use the phrase “unprecedented times”, it is difficult to start this piece without acknowledging the remarkable changes resulting from the confluence of the fourth industrial revolution, the climate crisis and the global pandemic, through which we are all living. Already experiencing the need for an energy transition, and in many instances having started to make the shift to more sustainable operations and products, the pressure on the oil & gas industry has only been accelerated by the pandemic; when reporting BP’s first full year loss in a decade on 2nd February, Bernard Looney, BP’s CEO, acknowledged the impact of Covid 19, saying:
“We have had the worst recession, I guess, in the world since the ’40s. It was a brutal year, I think, for the oil business — negative prices, fuel demand down 14%, aviation down 50%, and of course we had adjustments to our planning prices which resulted in impairments and write-offs.”[1]
This impact is unlikely to end with the pandemic. Many governments are looking at “green” initiatives to rebuild the economy for example, the UK Build Back Better campaign intends to “create[s] a shockproof economy which can fight the climate crisis.” It is no great insight to acknowledge that the industry is in an adapt-or-die phase; while hydrocarbon products have a role to play for a long time to come, the industry is in a transition and those who cannot transform their business and reduce their dependence on oil & gas revenue will not survive. This transition is not as simple as shifting to renewable power. Renewable projects tend to be capital intensive and low margin; the oil & gas industry cannot approach renewable projects as they have higher margin hydrocarbon developments and expect to maintain shareholder returns. It is not only the product that has to adapt but the means of production too.
In this article we consider the role one of the great disrupters of the industry, the fourth industrial revolution, offers as a means of easing the transition for the oil & gas companies. We will look at the role of digital technology for reducing the emissions from new and legacy hydrocarbon developments; and we will look at the role of digital execution for maximising value from new energies.
new facilities
Last year, io collaborated with McDermott and Schneider Electric to develop a concept and methodology for the design of Net Zero Upstream Facilities (you can read more about this here). This work emphasised the importance of starting with the end in mind, that is, starting with the primary objective of achieving net zero; and it revealed the cascade of positive consequences associated with digital technologies.
Simplifying processes to reduce energy consumption reduces both the emission volume and intensity. This simplification also reduces embedded carbon, removes sources of emissions, and minimises operation and maintenance activities, which when combined with digital technology for remote operations, allows facilities to be unattended/not normally attended. This allows the reduction of logistic-related emissions and removal of structures like the helideck and living quarters, reducing the need for associated utilities and embedded carbon. Furthermore, by using cutting edge remote operations technology in conjunction with predictive event notification, we reduce the likelihood and impact of non-routine events that may result in emissions.
The key to being able to achieve effective deployment of these digital technologies is designing with this as the end aim. We have to design facilities to encompass sensors, robotics and even edge computing. Even then, the value can only be truly maximised if there is a Digital Twin of the facility that can be used to support the technology, the creation of which has to start in the earliest engineering and is a product of digital project execution.
When we prioritise reducing emissions over expenditure, we take different design decisions; when we combine this with designing for digital operations by starting with the end in mind, we create cost-competitive solutions with significant reductions in emissions. These decisions must be made in the concept phase and digital project execution deployed throughout all engineering, procurement and construction phases to not only reduce the cost of project development but ensure facilities are delivered with an operational Digital Twin that is required for more efficient operations and reduced attendance.
net zero brownfield
With a significant number of operating assets having more than a decade of life left, if energy companies are to achieve their net zero targets and, more importantly, if society is to achieve the requirements of the Paris agreement, then the emissions from these facilities must be reduced. Drawing on the insights from our Net Zero Upstream Facilities initiative and leveraging the deep domain expertise in our team and the teams of our parents, we have developed an approach to reduce the emissions associated with operating assets.
This ranges from electrification feasibility studies to the incorporation of digital technology to significantly reduce emissions over the life of field. io has experience deploying advanced simulations to improve asset operating efficiencies and reduce routine and non-routine flaring; digital technologies available for maintenance / process practice changes; and recommending advanced methane detection techniques, such as methane quantifying satellites, drone mounted sensors and stationary, continuous monitors. Such real time methane monitoring programmes have the potential to provide a better understanding of where leaks occur and at what magnitude, prompting a direct and more effective maintenance regime.
By bringing direct insight from our parents’ technology stack, we estimate that we can achieve up to a 30% reduction in Greenhouse Gas (GHG) emissions from oil & gas operations. Tackling venting and flaring offers some of the lowest-cost options but reductions in combustion, carbon intensity and fugitives as well as Carbon Capture and Storage (CCS) form part of a broader GHG emissions reduction strategy that can help operating companies achieve net zero emissions.
energy transition projects
Like traditional hydrocarbon projects, energy transition projects will benefit from starting with the end in mind to maximise the value of digital technology, digital execution and the production of a Digital Twin. io is uniquely positioned to leverage systems thinking to create and protect value in this arena. As a nascent industry, often using new technology or a novel use of existing technology, the holistic interdependencies of energy transition projects are often not well understood. By deploying io’s systems modelling approach we can dynamically model these interdependencies and optimise the conceptual design to maximise value. A systems approach has been used by io to successfully optimise energy storage, green hydrogen and CO2 transportation projects; you can read about an energy storage example here
The advantages of systems modelling do not stop with the optimised concept. By representing the interdependencies digitally and establishing the relationships to individual equipment specifications in the form of digital requirements, it facilitates value protection throughout the subsequent design phases. This is achieved as the impact of any change to any requirements can be assessed in near real time by applying the change virtually and assessing the ripple effect of the change through the interdependencies. This protects the value of the concept and ensures projects do not suffer from the cumulative effects of small erosions of value.
Using advanced systems engineering in conjunction with digital project execution ensures the value of new projects is maximised and protected throughout the lifecycle. It is critical to ensuring capital intensive, low margin projects yield the return required by companies and their shareholders; and ensures the economic viability of the energy transition.
conclusion
It is clear the digital transformation and energy transition go hand in hand. Shell’s website quotes the Smarter 2030 report produced by Global E Sustainability Initiative stating:
“it is estimated that digital technologies across all industries have the potential to enable a 20% reduction of global mtCO2 emissions by 2030, holding emissions at 2015 levels.”[2]
As an industry, we have to change the way we work to realise this digital value. It is often said that technology is no longer the barrier to change, it is the culture of “this is the way we have always done it.” Yet the way we have always done things is founded in analogue processes for an analogue age; we have to take the opportunity of new societal expectations, new clients, new technologies and new projects to define a new way of working. There is no “way we have always done it”, the new projects are borne of a digital age, they are digital native, and we need to execute them as such.
At io we collaborate with our clients in a creative and innovative way, we aspire to be their trusted advisor. By working together with our clients, we will always start with the end in mind to maximise and then protect project value and deliver the project that meets your key drivers and goals, ensuring the value we help identify can be delivered. This involves the application of new technologies and leveraging the digital transformation through digital project execution, Digital Twins, dynamic systems modelling, asset performance management and Industrial Internet of Things (IIOT).
To find out how we will leverage the digital transformation to bring greater certainty and higher decision quality to your energy transition, contact us at hello@ioconsulting.com