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Oil Service Firms Focus on Digitization to Drive Returns

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For energy investors, the year 2020 was arguably the worst in recent history. It turned out to be one of pain, intense volatility and unprecedented turmoil caused by the COVID-19 pandemic. The deadly outbreak wreaked havoc on the energy industry by decimating demand and engineering an epic commodity crash. However, all that is in the rear-view mirror now, with oil and natural gas prices making stunning rebounds to reach multi-year highs.

While there has been a sea change in the Oil/Energy industry one year after the precipitous crash, one thing the crisis has fast-tracked is the sector’s remote transformation to ensure business continuity.

The adoption of digital technologies in energy had started to show significant growth even before the outbreak of the contagion. Yet clearly, the pandemic has acted as a catalyst in shifting from the traditional drilling and fracking system, and changing the way of exploring for oil and gas.  

The oilfield service providers, for example, have been at the forefront of this technological revolution.

Growth in Oilfield Digital Technologies

Let’s start with Halliburton HAL, which is undergoing rapid digital transformation. the company has signed a five-year strategic agreement with Microsoft MSFT and Accenture ACN to boost its digital prowess in the Microsoft Azure cloud platform. The pact will help Halliburton improve its client services by strengthening real-time monitoring of operations, augmenting AI-driven analytics capability, and speeding up the deployment of new technology and applications.

Halliburton has also collaborated with fellow operator TechnipFMC FTI to launch Odassea, the first distributed acoustic sensing solution for subsea wells. This technology is believed to improve seismic imaging and reservoir diagnostics while reducing costs and improving the data gathered for oil and natural reservoirs below the sea floor. One of its latest offerings, the SmartFleet intelligent fracturing system, lets operators control fracture outcomes while pumping. Halliburton has also tasted success with its DecisionSpace 365, with more and more upstream operators availing the cloud-based subscription service to automate the working method. As it is, the company’s Halliburton 4.0 framework continues to accelerate digital deployment and integration across the value chain. Besides, more than three-fourths of the company’s iCruise drilling platform runs are entirely automated now, with a target to achieve 100% mechanization by the end of this year.

Smaller rival Baker Hughes BKR is also executing on its digital solutions. The company now supports most of its drilling activity by remote work compared to roughly 50% in 2019. As part of its digital capabilities, Baker Hughes successfully implemented the remote operations model to support Equinor’s EQNR drilling and well construction activities in the Norwegian Continental shelf. More recently, the company got a gig from Petrobras, per which it will supply a suite of digital solutions across the Brazilian oil major’s sites. Earlier this year, in a project of massive scale, Baker Hughes mobilized its remote-controlled digital technology across Saudi Aramco’s entire drilling fleet spread over more than 200 locations.

Meanwhile, the world's largest oilfield services company, Schlumberger SLB, has experienced a solid increase in drilling remote operations since last year. Currently, more than two-thirds of Schlumberger’s drilling operations utilize remote capabilities. Last year, when oilfield demand collapsed due to the COVID-19 pandemic, the company’s digital business held up well and is now on growth track. In fact, the company is looking to double the quantum of its digital business in the foreseeable future with the primary focus on remote operations and digital inspections.

Remote Expansion Helps Reduce Costs, Improve Margins

The successful and expanded use of digital technologies has helped the companies to enhance performance and lower operational risk — especially amid the COVID-19 pandemic. Simply put, it allows them to remove equipment and/or crew from site, substituting with software solutions. With fewer personnel on location, jobs being monitored offsite using remote data center management tools, and the replacement of expensive hardware by software solutions, the operators are able to reduce costs and capital investment. In other words, the increasing cloud-based data flow between site and the back office translates into expanded margins for oilfield service providers.

Final Words

Last year’s slump in oil prices and the coronavirus-induced demand shock have pushed drilling activity lower by introducing tremendous uncertainty around the exploration and production spending outlook. Obviously, this translates into lesser work for the companies that make it possible for upstream players to drill for oil and gas.

To survive, the oilfield firms had to reduce costs, improve efficiency and boost profits. That required a change in the existing business model to switch to extensive use of automation. With most operators embracing digital technology, they have been able to slash operating expenditure and drive better returns. In fact, most firms claim that the digital push has helped them get more with less.


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