When “digital transformation” first entered the Energy lexicon several years ago, it did not seem daunting – leverage tools to handle IT/OT interfaces, increase cybersecurity, and create a dashboard to present the analytics. Companies had years, sometimes decades, of data they could use.
Nevertheless, to this day, one of the significant challenges in Energy, and for the oil and gas industry, is determining how to best integrate and innovate newer digital technologies - while capitalizing on existing efficiencies and reducing risk and downtime to near zero.
When companies started integrating digital transformation and instituting changes within their operating environment, small, incremental steps yielded positive results. New challenges arose as energy companies took those steps to integrate innovative solutions. For instance, discovering that much of the data they counted on was either unusable in its existing form or far more incomplete than they had realized was one issue that plagued the industry early on. It stems from the fact that one of the consequences of being a mature industry is how much Information Technology (IT) has evolved over the past 40 or 50 years, including data formats, data silos, legacy systems, and deferring degrees of data availability and management with ineffective or non-existent data governance.
Digital transformation is not a one-and-done set of actions, and meeting one business challenge with a new tool does not mean a company’s market challenges are solved permanently. That is why when Radix talks about “digital transformation,” we put it in terms of interrelated frameworks for best-leveraging data through the proper integration of tool sets, which evolve every two or three years.
This approach empowers our clients with flexibility and scale relative to the integration of newer solutions, but more importantly, it improves their understanding and management of the data in a manner that improves their data maturity posture. This approach also boosts operational efficiency by integrating a robust data governance structure needed to integrate and extract value from solutions like digital twins, Artificial Intelligence (AI), machine learning, and containerization.
Solving the Energy Trilemma with Data- Driven Results
Establishing a data architecture and infrastructure helps set the stage for a long-term foundation of operational excellence in any industry - especially oil and gas, which deals with many IT and Operation Technology (OT) data levels. Addressing the challenges of old formats, incomplete data, and rules for introducing new data flows gets the decades-old problems out of the way, making it easier to revisit what has been done and look at new ways to apply data insights and analytics.
Doing so lays the groundwork to tackle challenges in the O&G industry that the market references as the Energy Trilemma.
The energy market today faces the macroeconomic challenge of balancing three competing needs:
Universal Access: Ensuring universal access to Energy for domestic, industrial, and commercial purposes.
Supply & Demand: Meeting current and future demand and being capable of accommodating and responding to potential system shocks.
Environmental Impact: Mitigating the impact of climate change.
These three dimensions are encapsulated by the “Energy Trilemma,” which aims to simultaneously ensure affordable, resilient, and sustainable energy. For Radix’s clients and the market at large, this translates into three significant challenges:
Cash Flow Generation: Transitioning to cleaner, more sustainable energy technologies requires significant investments. Companies must generate sufficient cash flow to sustain these investments, especially in technologies needing consolidation.
Portfolio Diversification: Faced with uncertainties and challenges associated with adopting renewable energy sources, many companies are diversifying their portfolios. It involves exploring various renewable energy source options to reduce risks and ensure resilience in the face of market changes.
Decarbonization of Existing Assets: Optimizing existing assets is crucial in reducing the carbon footprint. More efficient and sustainable production increases profitability and minimizes environmental impact.
It is important to note that balancing renewable and fossil energy sources is a global challenge. Even in more aggressive pro-renewable energy policies, fossil sources have become essential in the energy supply for some time. Therefore, the challenge in the coming years will be to find ways to ensure that this transition is made sustainably and in a balanced manner, addressing economic, environmental, and social needs.
The role of data, data management, data architecture, and data governance are more critical in solving these challenges. For instance, Radix has a solution currently being used by one of our customers where we developed a control tower that integrates the value chain from end to end. It is a replicable solution that can be applied in many parts of the industry and across industries. However, doing so requires a solid data architecture, the first step we now employ in a new engagement.
By building a foundation of data management and subsequent governance that can produce the architecture and infrastructure to manage data best, organizations within this industry are also better prepared for inevitable market and environmental changes that occur.
For example, in a recent podcast discussion with Michael Hotaling, Operations Excellence Digital Manager at ExxonMobil, Michael described the changes they are spearheading towards how they approach data regarding the integration of newer technologies.
Specifically, they are creating a “digital reality ecosystem” that ExxonMobil is putting together to visualize better how to work in oil and gas. This approach includes developing an open asset digital twin representing existing facilities, but in a manner that is not driven by solving an individual use case but instead built on an ecosystem where multiple use cases can be solved or worked on from a single Twin.
Leaving silos in place – or creating standalone islands that do not connect to the whole – hurts the scalability, the profitability of the whole enterprise – making solutions like ExxonMobil’s digital reality ecosystem more challenging to achieve.
Energy companies can take great strides toward demystifying digital transformation by starting with data, data management, and data architecture. An essential element of solving this challenge is partnering with a company like Radix that leverages a data-driven approach toward helping companies turn their challenges into opportunities through intelligent engineering – with scalability.