Executive Summary: ISG Provider Lens™ Oil and Gas Industry - Services and Solutions - North America 2023
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The oil and gas industry’s digital evolution aims for enhanced efficiency
Geopolitical tensions, fluctuating energy demands, environmental concerns and the increase in renewable energy sources have posed multiple challenges for the traditional fossil fuel sector. Despite the shift toward sustainable energy sources, investments are ongoing, especially in the upstream segment, to meet the expected peak oil and gas demand in the 2030s. North America records the highest investments, accounting for more than one-third of the global investments. Despite price volatility and environmental nd production concerns, the region’s shale oil and gas production has transformed it into a major energy exporter.
Oil and gas innovation in North America has undergone transformative changes over the past few decades, driven by technological advancements, evolving market dynamics, and increasing environmental concerns.
The industry is witnessing innovation across the value chain, including exploration, production, transportation, and sustainability.
Energy transition at the center of all technology implementation: Changing consumer preferences and global efforts to mitigate climate change while achieving net zero have driven energy transition to be the center of all technology implementations in the oil and gas industry. The energy transition has made oil and gas companies reconsider their existing business models and invest in decarbonizing efforts to categorize themselves as energy companies, not just oil and gas companies. Policies and regulations significantly shape these transitions; therefore, oil and gas producers engage with policymakers to advocate for supportive regulations and align their strategies with national and international goals.
ISG, as an advisor, has helped several of the world’s leading oil and gas companies to navigate their digital journeys. It believes that building a successful, competitive and future-proof energy company requires strengthening its technical and digital foundation, transforming operations, continuously improving cybersecurity, digitally enabling the workforce and improving CX through digital channels.
ISG notes the following trends in the North American oil and gas industry:
Optimizing operations: Oil and gas companies continually invest in optimizing operations to enhance efficiency while reducing costs. They invest in deploying advanced technologies such as AI, IoT and data analytics to monitor equipment, predict maintenance needs and minimize unplanned outages or downtime. These technological solutions help monitor production processes in real time, enabling timely adjustments for optimal output. Automation also streamlines routine tasks, improving safety and freeing up skilled personnel for more complex tasks, especially given the talent shortage in the industry. Data-driven insights enable better decision-making in areas such as reservoir management, drilling operations and supply chain logistics. Companies also leverage digital twin technology to accurately simulate and optimize various scenarios before implementing changes, mitigating risks and maximizing performance.
Streamlining capital strategy: Oil and gas companies use advanced technologies to streamline their capital strategy across project evaluation, portfolio diversification, risk management, financing options, emissions control and sustainability goals. These technologies also help companies become agile in response to market conditions and enhance the transparency of stakeholder communication. With the industry facing uncertainty for more than a decade, streamlining capital strategy has become a prime focus in sustaining operations while moving toward cleaner energy sources. Most capital investments in 2022 were directed at brownfield projects to enhance the existing oil fields and make them more sustainable, moving a step closer toward environmental and sustainability goals. By adopting a comprehensive and strategic approach to capital allocation, the oil and gas industry can evade challenges, capture opportunities and contribute to a more sustainable energy future while delivering value to shareholders and stakeholders.
A shift in investment portfolios: With increasing maturity and complexity, the oil and gas industry is gauging its investments carefully now more than ever. Legacy oil and gas companies prioritize efficient investments to remain competitive as the market shifts away from hydrocarbon energy over the long term. The high oil prices have created financial opportunities for portfolio optimization, paving the way for sustainable energy sources and decarbonization initiatives in line with the 2030 and 2050 goals. Oil and gas companies are also increasingly investing in green technologies such as carbon capture, usage and storage (CCUS), green hydrogen and renewable fuels to diversify their portfolio and evade risks related to existing fossil fuels operations.
The energy trilemma: Oil and gas companies are currently experiencing the energy trilemma, an endeavor to balance energy transition, security and diversification. Achieving progress in one dimension often presents difficulties in the other aspects. While companies must optimize their investments in transitioning to low-carbon energy amid evolving lowcarbon technologies (currently in nascent infrastructure and low returns), they must also invest in energy security, given the strong and resilient demand due to lower oil prices. Oil and gas companies deal with a third aspect energy diversification, which focuses on the demand, production, supply or trade of energy resources and limited energy choices for consumers. Balancing these three aspects requires thoughtful policies, technological innovations and international cooperation.
Energy workforce: The energy workforce in North America is diverse and evolving, influenced by technological advancements, market dynamics, regulatory changes and environmental concerns. The ongoing shift toward sustainable practices and the imperative to reduce carbon emissions are transforming this sector. Professionals increasingly engage in R&D, seeking innovative solutions for energy security and environmental concerns. As the North American energy landscape evolves, this dynamic workforce will be pivotal in shaping the region’s future. Whether it is managing aging infrastructure, embracing disruptive technologies or reaching for ambitious sustainability goals, the professionals in the energy workforce remain at the forefront of these endeavors, driving innovation and progress.
Uncertainty regulatory environment: Historically, the oil and gas industry operated within a complex regulatory landscape. Shifts in government administrations at the federal, state and provincial levels have led to changes in regulatory priorities. Environmental concerns have played a major role in shaping regulations along with activism by the public, social movements and the global trend toward decarbonization. Technological advancements have also introduced new complexities where techniques such as hydraulic fracturing and deepwater drilling have raised environmental and safety concerns, prompting regulators to continuously assess their oversights and adapt accordingly. In this evolving landscape, oil and gas companies will face uncertain regulatory changes in the future.
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