The energy industry is here to stay but needs to operate more efficiently.

Kongsberg enables digitalisation of assets to facilitate automated and remote work.

“The oil and gas industry is finished” I was instructed recently in a casual conversation during my summer holidays. I held my counsel but my general response in such a situation is to suggest they look towards the financial markets, which we are frequently reminded are forward looking. Taking this on board, despite the recent publicity of Exxon dropping out of the S&P 500, Saudi Aramco has recently been reinstated as the most valuable company in the world, a sure nod to the fact that the oil and gas industry is certainly not finished.

  • Brian Carey
    Strategic Growth Director, Kongsberg Digital

Despite the growing concern over the contribution of hydrocarbon-based emissions to a changing climate and a strong push towards lower emission generating sources of energy, the reality is we are still in a hydrocarbon energy resourced world (making up a total share of 84% in 2019.)

Is this continued reliance on oil and gas a bad thing?  Without oil and gas, the demand and supply of basics (food, water, shelter, clothes) and consumables (phone, cars, toys, etc) would be dramatically different. Communities would be unrecognisable with global stability likely to be at greater risk. For over 100 years, oil and gas has come out of the ground reasonably safely and has fuelled exponential global growth resulting in extraordinary financial wealth across the Industry.

However, as someone who has had to wear a mask while travelling in Beijing (pre-Coronavirus) and cycled on smog drenched roads in London, I can attest to the growing awareness of the impact of emissions. This is not only limited to its well-publicised influence on rising temperatures but also the health impacts from urban air pollution from transport and power generation, and the effect on plants, animals and other living organisms we share the environment with. Unless we change and develop a solution to reduce harmful emissions, even the sceptics would have to admit that we have a difficult road ahead of us.

Despite this, if the recent Shell and BP scenarios are anything to go by the energy industry is still where the immediate future will look to for fuelling growth.

The two well regarded forecasting publications (former UK minister Vince Cable was a prominent former Shell scenario planner) share 3 key messages:

1. Oil demand is slowing in its growth and depending on the scenario may have reached peak demand.

2. Gas demand is likely to grow across all scenarios in a 10-year timeframe.

3. Total demand for energy is likely to continue to rise in all scenarios.

Not such bad news for the future of the energy Industry.

A bit of historical context - the energy industry has been often resistant to change. This is because the associated risks from its operations (to people, environment and equipment) and what it has traditionally done has generally delivered results. Referencing his quote that “The definition of insanity is doing the same thing and expecting different results”, Albert Einstein would agree with the conservatism.

There is developing change across the energy industry however, which is largely based on environmental concerns:

·         The large CO2 emitting countries are more proactive with managing emissions, driven by the public health and environmental concerns of their populations.

·         There is a drive to move away from fossil fuelled automobiles to other modes of transport, helping reduce urban pollution.

·         There has been a dramatic shift in new developments from higher emission fuels (coal, oil, etc) to lower emission level sources of energy (gas, solar, wind)

·         Wind and solar’s share of the energy supply mix are forecast to have compounded high single digit or double-digit yearly growth

Recognising the above, along with most energy companies, both BP and Shell have been steadily shifting their business to low carbon solutions such as wind and solar.

In addition to the challenge of adapting to the renewables revolution, current and likely future issues for oil and gas companies include low oil prices, perceived outdated technology, carbon taxes, ESG requirements and negative stakeholder perception.

The need for change is clear.

Recognising the energy industry’s current appetite for transformation, at Kongsberg Digital we stand at the forefront of this evolution. The potential to optimise the operation of energy assets through our digital twin service platform is considerable, including enabling a shift towards a remote and automated way of working.

A digital twin can be described as a virtual representation of a physical asset – think Google Maps for an asset – with static, dynamic real time and modelled information presented to the user.

Our digital twin service platform Kognitwin® Energy allows asset owners, operators, contractors and regulators to interact with their virtualised assets. Kognitwin® Energy is built on data that is assured, integrated and linked through our custom-made contextualization engine.

As a 200-year-old company, we at KONGSBERG are excited to deliver our vision of “Digitalising the World’s Industries”, enabling the energy industry to embrace Industry 4.0.

Sources:

Bloomberg:Oil Giant Aramco Regains Top Spot From Apple as Tech Rally Fades

BP: Statistical Review of World Energy 2020

BP: Energy Outlook

Shell: Energy and innovation

CNBC: BP enters offshore wind with $1.1 billion Equinor deal

IEA: Global Energy Review 2020

Brian Carey is a Strategic Growth Director with Kongsberg Digital, with past roles in engineering, technology, projects and finance. Brian is currently based in Europe and has previously worked on projects in Brunei, Japan, Kazakhstan, Nigeria, Qatar and Canada.