ASEAN region poised to lead digital transformation
The slump in energy prices of the last two years has faced the oil and gas industry with tough challenges. Yet this will prove to be a turning point, accelerating the adoption of new digital technologies that are a game-changer for the industry.
The world needs more energy. Today global growth feels slow, but many countries are still growing at a fast pace. This is especially evident in Asia, the fastest growing region in the world economy: emerging Asian markets as a whole are growing at a pace of well over 6% per year.
More energy will be needed to provide power and transportation to this growing population, and to fuel the industrial growth that will raise living standards, lifting millions more people out of poverty. In ASEAN, recent projections indicate that to meet the region’s targets of 6% annual growth, energy consumption will have to increase by close to three times over the next 20 years.
To meet this energy challenge, it is important to optimise the fuel mix and raise efficiency and productivity across the energy value chain. Fossil fuels will continue to play an important role to ensure the required growth of energy production. Today, fossil fuels account for approximately 80% of total energy supply in ASEAN, with half of it oil; gas provides 44% of power generation. The role of renewables will increase, but fossil fuels remain a key part of the energy equation.
Australia, already the second largest coal exporter in the world, is set for an important increase in natural gas production, which by some estimates could reach more than double the 2013 levels by 2020. This in turn will drive a strong increase in intra-regional LNG trade. Coal bed methane (CBM), plentiful in Australia, will be an essential element of this growth.
This investment, however, has gone hand-in-hand with an increase in costs, partly because of the need to operate in remote and difficult environments. The need for greater efficiency is now overwhelming.
The energy industry has always moved forward thanks to ingenuity and technological innovation. Once again, innovation is set to be the game-changer.
The new wave of innovation is digital. We are witnessing the coming together of digital and mechanical technologies, triggering a new digital-industrial revolution, driven by the industrial internet. Through electronic sensors and controls, cloud-based analytics and intuitive user interfaces, this new wave of innovations is turning traditional industrial assets into interconnected devices with much greater performance and functionality. In the oil and gas industry, this is enabling substantial improvements in asset performance management. A shift to condition-based maintenance prevents unplanned downtime for critical assets such as subsea wells and blowout preventers. Today, the average mid-size LNG facility loses approximately US$150 million a year due to unplanned downtime — the savings now within reach as sizable.
This is happening already in Australia. The QGC Queensland Curtis LNG plant is one of the country’s largest infrastructure projects and the first in the world to turn CBM into LNG. It will adopt a new GE industrial internet technology, called Reliability Max, that employs sensors and diagnostics to guarantee uptime of up to 99.9%.
These solutions are especially powerful because they can be applied to a wide range of industrial assets from different original equipment manufacturers (OEMs). In Indonesia, the PT Donggi Senoro LNG plant will adopt a GE platform for monitoring and diagnostics across the plant’s equipment regardless of manufacturer.
Industrial internet solutions can bring even greater value in operations optimisation, enabling closer coordination across upstream, midstream and downstream workflows by bringing together management and monitoring systems that currently operate in silos. This will help optimise the deployment of crews across onshore wells, and provide better visibility across pipeline networks, allowing to mitigate risks in the most targeted and cost-effective manner. New digital solutions can also help companies store and share know-how across their workforce, facilitating the transfer of knowledge from more experienced workers to new recruits, and enhancing the efficiency and safety of the entire workforce.
Industrial internet solutions can also enable enterprise optimisation: real time knowledge of the operational status of physical assets and of market dynamics can help companies make constraint-based decisions on whether to increase production at an offshore hub to capitalise on a surge in the spot price, and on how to increase reliability over an entire fleet of assets.
The emergence of digital and physical technologies is a game-changer for the oil and gas industry, helping to manage wider networks of assets in a holistic way through data-driven insights and digital tools. It will enable secure efficiency and productivity gains, from eliminating unplanned downtime to optimising network operations, to enhancing the productivity and safety of the workforce.
These efficiency gains, in turn, will help the industry to meet the growing energy needs of its markets and populations in a cost-effective and environmentally sustainable way. Australia and the Asia region overall are ideally positioned to lead this transformation.
This piece first appeared in Energy Global, June 16, 2016.