Digital oilfield vision for energy service and equipment rentals

The Digital Oilfield and Oil and Gas 4.0 became the buzz words. There is a long list of cutting-edge technologies, which are used or can be used in the oil and gas industry: Cloud Computing, Mobile Devices, Internet of Things, Blockchain, Artificial Intelligence, 3D Printing, Big Data, and others. All these technologies require visionary leadership, significant investments, industrial adaptation, business applications, and in-field testing. 

Industry 4.0 includes digitalization and integration of vertical and horizontal value chains, product and service offerings, adjustable business models, and digital customer access.

The futuristic oilfield picture is conflicting with current paper-based reality, unprepared organization culture, and low digital maturity. Based on McKinsey’s research, the oil and gas industry is one of the lowest digitalization sectors. It means that there is a huge room for digital transformation and great opportunities for new tech implementations.

Future digital oilfield technologies require a solid foundation of current tech: cloud computing, mobile, etc. Another big problem is organizational behavior and business culture.

Industrial digital transformation can last 5-15 years. We can see that the process will not be homogeneous: big and midsize companies will start earlier, different regions will act differently, speed of digitalization will be defined by communication infrastructure, etc.

This year crisis events, like COVID-19, oil price crash, etc., worked as a catalysator and increased the speed of oil and gas digital transformation.

Level 0: Zero Digital: All Whiteboards and Paper Tickets
Level 1:Basic Software: Simple Desktop Software with Filed Tickets and Equipment Tracking
Level 2: Cloud Oilfield: SaaS, IaaS, PaaS
Level 3: Mobile Oilfield: Mobile Apps and Devices, Connecting Data sooner and more Accurately
Level 4: Business Intelligence: Telemetry, Smart Devices, IoT, Business Analytics
Level 5: Digital Oilfield 4.0: Blockchain, Smart Contracts, Digital Twins, Predictive Maintenance, Machine Learning, Artificial Intelligence

A few years ago, most companies were at 0 or 1 on the Roadmap, but now more and more have advanced to round three. While it can take up to a few years to get from 0 to 5, most companies move incrementally, seeing significant bottom-line savings and efficiencies at each step. This moves them toward operational excellence.

Getting level one, which involves adding a desktop database, is indeed an improvement over just paper, but spreadsheets offer little in the way of operational analysis. Advancing to at least level four provides analytics that is the path to locating operational bottlenecks that cause billing or cash flow issues. Level four also provides extensive data options that are not available with manually entered spreadsheets. These options include real-time data availability, instant upload of field data as opposed to tedious and mistake-riddled data entry, and the ability to create reports by week, month, or quarter. Level four creates reports automatically instead of requiring them to be manually created then merged and analyzed in multiple dimensions.

On the Operations side, higher levels, unlike level one, allow tracking of clients served, equipment deployed/returned, schedules for maintenance/repairs, profit/loss margins for individual pieces of equipment, the status of jobs, payments, and any knowledge management needs for operational excellence.

Large integrated companies may have the resources to create their own ticketing, tracking, and billing software in house. But even in this case, a system requires ongoing investments in upgrades to stay current and useful.

Smaller companies may buy off-the-shelf software that requires the user to adapt to the software instead of the software being tailored to the user’s needs. This is still inefficient.

Many oilfield service companies are finding cost efficiencies by using leading-edge solutions that bring them as close to level five as possible. This way, they can rely on professional system providers to take their existing base product and tailor it to the client’s requirement. Therefore a service company can get the operational and reporting functions it needs without building an in-house system or bending its own operations to the unyielding requirements of a one-size-fits-all product.

Properly tailored software brings Sales, Accounting, and Operations together by supplying both the need for fast-paced information in Operations and the requirements in Accounting for cumulative data less often. All ticket data from operations is stored in a common database from which both departments draw what they need, in real-time.

Searches sorted by client, equipment status (rented, returned, rental/service history, maintenance costs) job status, and more allow either department to discover and remedy revenue bottlenecks. The company can identify its most and least profitable assets and decide whether to expand its best assets and to minimize or eliminate its lowest-performing items.

As equipment ages out, it may become more cost-effective to replace it than to continue to repair, especially when adding together the cost of parts with lost revenue from time spent in the shop. When data is immediately available across departments, it creates ultimate transparency. No longer can a single manager tailor a report to boost a single department’s numbers. Nor is knowledge concentrated in the mind of one person who could depart suddenly and leave behind a crippling information gap.

Current market instability is the right time for companies to advance their automation levels because survival may depend on becoming more efficient. Each move to up the map brings more savings, better diagnostics, and more operational excellence.

While stepping up the ladder pays off in many ways, it is important to remember internal human factors during the change. It is understandable that any kind of change encounters some resistance and temporary pain during the learning process, so it is important to change gradually, at a speed acceptable to staff.

More AI and IoT are indeed the foundation of operational excellence, but even the best system depends on buy-in from the people running it. Moving too quickly can invite pushback that slows the process as people fall back to older methods without seeing the benefits.

Done properly, systems upgrading elicits praise like the following from a riger.us client: “We speeded up field ticket processing time and now we invoice our client within 24 hours after (the) job (is) done. Sales and operations processes were improved and streamlined, which allows us to get more jobs from our clients.”

The crash in commodity prices has also put downward pressure on pricing and payment schedules for service companies. Moving up the automation scale to any extent that is enough to speed the invoicing process can improve cash flow on the front end. And in the back office, its real-time and extensive database’s reporting functions can quickly reveal areas of greatest profit as opposed to areas of negative cash flow. This information lets companies focus on their strongest areas and adjust or eliminate the worst ones.

All of this improves the bottom line in ways that can be the difference in staying in business or shutting the doors and putting more people out of work.