Industry News for Business Leaders

OP-ED. Implementing More Sustainable Business Models in Oil&Gas

OP-ED. Implementing More Sustainable Business Models in Oil&Gas
(Credit: iStock)

By Sébastien Grau, Vice-president Middle East, Turkey and Africa, Rockwell Automation

The oil and gas industry has underpinned modern society for many decades, serving essential needs across areas such as energy, automotive and aviation as well as many everyday consumer goods. Given the events of the past year, we are at a pivotal point in defining the oil and gas industry’s role in today’s – and tomorrow’s – economy.

Emerging from the current challenges, we expect demand for oil and gas products to remain strong. However, it won’t be a return to ‘business as usual’ – even the biggest companies in the sector are recognizing the urgent need to reinvent operations, invest in more sustainable business models and focus on renewable sources of energy.

For example, the Oil and Gas Climate Initiative (OGCI), which includes BP, Chevron, ExxonMobil and Shell, announced in 2020 a target to reduce carbon emissions by 13% from member companies’ aggregated upstream oil and gas operations by 2025. This milestone shows that the issue is a broad industry priority and one that will be central to their strategies for growth post-global lockdown.

While a common goal, it requires every business to define how they’ll work towards reaching their net-zero emission targets and make sustainability core to how they operate. It will become increasingly apparent which companies are leading in this regard over the coming decade, as they’ll hold the advantage in emerging as the sector’s leaders.

With the deadlines of the Paris Agreement looming, and greater value being placed on environmental consciousness at a customer level, it’s imperative that oil and gas businesses see sustainability as an investment in their future success.

Balancing Priorities

As with everything in business, there are trade-offs involved. As such, oil and gas leaders need to balance short-term dependencies with their longer-term aspirations.

In the short term they are compelled to meet fluctuating market demand for oil and gas products, especially with the potential surge post-lockdown. Alongside these immediate priorities, there’s a growing requirement to consider what the world will look like in 2030 and aligning strategies and future investments in that direction.

The pressures for change are coming from various sources. Not only are there regulatory pressures to reduce carbon emissions, but there are also changing expectations from internal stakeholders and consumers for more sustainable practices. Satisfying those demands requires a change in the business model and a modernization in the technologies used to support the transformation. Digital technologies are foundational to this transition. More than two thirds (77.3%) of Chief Information Officers recognized digital transformation as their number one budget priority going forward, according to the CIO Outlook for 2021 Survey,

with 72.7% citing automation as the area where they anticipate the greatest returns.

The oil and gas industry recognizes this and is progressing towards digital maturity. Underpinned by digital technologies, companies are now looking to build strategies for more efficient business models in order to make better use of their current resources and decarbonize their future production.

Implementing Sustainable Models

There are three core pillars oil and gas leaders can leverage in order to elevate the role of sustainability, both in their current operations and in shaping future business models.

01. Invest in Efficiency

Efficiency remains a key objective for the sector. More efficiency means less waste and lower energy costs – it’s a business win as well as an environmental one. According to the Global Center on Adaptation (GCA), every dollar invested in building climate resilience could result in between $2-$10 in net economic benefits. Investing in digital tools to support less wasteful or energy-intensive processes is, therefore, a prudent choice.

The mutually beneficial relationship between efficiency and sustainability means that oil and gas leaders are incentivised to look across their current processes and operations to find areas and specific use cases where new efficiencies can be introduced.

02. Improve Measurement

Improving efficiency entails having greater visibility into operations. Having real-time insights into granular aspects of operations at every phase of the production process is critical to making the best decisions and maximizing value quickly.

To achieve this, oil and gas companies need to more easily analyze their data. The process of gaining comprehensive insights can be more difficult in oil and gas than in other industries due to the difficulties associated with placing sensors in remote or rugged locations. However, it’s from these sources that some of the greatest opportunities for improvement can be found.

There are several elements that can help to improve the visibility and measurability of processes. Firstly, there’s the need for standardization in measurement methods. By assigning a carbon value to every single energy product, operators can make relative and historical comparisons to identify opportunities to reduce waste in current processes. Secondly, there’s the need to capture data from disparate assets and bring the information together as reliable and meaningful insights. For example, Sensia, our joint venture with Schlumberger, offers this type of integrated insight through its ConnectedProduction IoT platform. Thirdly, data science capabilities and algorithms can be applied to the data in order to predict where there may be opportunities for greater efficiency in the future.

These technologies and approaches can contribute to better calculations and decision-making frameworks around energy consumption, not just in today’s energy usage, but also to look ahead to what their energy needs will be over the course of days, weeks and months.

03. Building towards a net-zero business model

While ‘doing better’ with current assets clearly presents an opportunity for improved green performance, it must be matched with an ambition to reinvent operations to set in motion a more sustainable, less carbon-intensive future business model.

This transition is twofold. On one hand, it involves accelerating the move towards more diverse energy sources,. On the other, it requires investment in innovation to shift towards cleaner operating models. The components of such models are wide-ranging, comprising the use of efficient and circular infrastructures, inventive solutions for fugitive emissions and unavoidable carbon products, leaner supply chain operations and more resourceful approaches to asset utilization and ownership.

As companies may lack expertise in all these varied aspects, the role of partnerships takes on vital importance.

Why partnering is key

To realize the full value of digital tools, there must be an innovative and collaborative environment. It is not enough for companies to simply spend more on technology, instead, they must find real business cases where carbon emissions can be reduced – this is where partnerships become valuable.

Our goal at Rockwell Automation, throughout our long experience in the oil and gas industry, has been to support producers at every step of the value chain. With a wide diversity of knowledge and capabilities required to assist end-to-end and identify cases where sustainability can support business outcomes, we have made it a strategic priority to assemble an extensive partner and solutions ecosystem for our oil and gas customers to tap into.

Through our work with Sensia, combined with our own sector-specific service offerings, we can bring the necessary set of expertise that helps producers optimize systems, improve process efficiency and maximize the productivity of assets. We also help customers to get ahead in terms of defining a future vision for their organization and then helping to invent and assemble the business models that will be resilient to ongoing market turbulence and regulatory requirements.

By taking control of their environment, producers can reap the opportunities to reconcile process efficiency with more sustainable practices today, and be ready to compete in the market of tomorrow.