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Summary

The ongoing slump in crude oil prices is likely to last for some time. Enterprises in the upstream oil & gas industry must switch from short-term tactics such as layoffs and project postponements to long-term "digital first" strategies. Only digital tools – information and operations technologies – can deliver the visibility and control required to compete in the new environment.

Digital technologies can address a range of endemic challenges in oil & gas

The oil industry has always been subject to wide swings in the price of crude. Despite the frequent lessons of history, when prices are high, the industry tends strongly to believe the boom will last forever. And when crude prices begin to slide, it has an equally strong tendency to believe the slump will be short-lived. The result is that many producers take short-term measures and do not consider, much less address, many long-standing issues that are endemic in the industry.

Among the many challenges that producers must address are inefficient manual processes; heterogeneous, unconnected systems; implementations that result in disparate systems that do not easily interoperate; and data silos that make it difficult to identify root causes.

As we discuss in a new report, Long-Term Slump in Crude Oil and the Need for Digital Transformation, the first step toward addressing these issues is to map an end state in which the business runs on data, analytics, and process automation. These elements must be part of a closed-loop system built on a foundation of converged information and operations technologies. In such a system, observation leads to fine-tuning and back to more observation, creating a loop that results in process optimization. Both operations and information technologies are critical to such a system because they complement each other: The visibility that operations technologies provide isn't useful without some means of control. And controls, to be effective, must be based on an accurate view of operations. Every technology investment must be made with a view toward enabling these two complementary elements of a closed-loop system.

Appendix

Further reading

Long-Term Slump in Crude Oil and the Need for Digital Transformation, IT0023-000021 (September 2015)

"Deepwater Horizon: Smarter IT could have prevented the disaster," IT0023-000019 (July 2015)

"Oil & gas producers should seize the IoT opportunity now," IT0023-000020 (July 2015)

Author

Warren Wilson, Lead Analyst, Oil & Gas Technology

warren.wilson@ovum.com

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