Gulf oil sector lags in using digital tech to raise productivity

Although the oil and gas industry in the Gulf is analyzing new digital methods to improve efficiency and implement reforms in the era of low oil prices, the region is still lagging.

Oil companies, such as Saudi Aramco, Abu Dhabi’s ADNOC, and Qatar Petroleum have been adopting “production optimization” and other technologies, but they continue to face challenges.

“Fields of the Future and others, have become buzzwords, which have been put in the world by Shell, Exxon, BP first, and than taken over by Saudi Aramco, QP, KP and ADNOC,” Cyril Widdershoven, director of Netherlands-based consultancy Verocy told Argaam.

While Saudi Aramco has taken the lead and is currently the largest implementer, the overall impact is still not really impressive, he added.

“Based on higher costs of oil and gas production (and) an increasingly difficult production operation, the need to have a much better insight available is clear,” Widdershoven said.

One of the main challenges is the cost of digital technology, which is usually very high. It also requires serious reform in management and the organization’s perspectives, and sometimes temporary shutdowns of oil fields and wells— all of which can be time consuming and could further impact the producer.

Since mid-2014, crude oil prices went into a tailspin as global stockpiles continued to increase. The international benchmark Brent crude fell from above $100 per barrel (bbl) in June 2014 to below $30/bbl by January last year.

The sharp decline in commodity prices hit earnings of most oil-related companies, especially those in the Gulf.

Abu Dhabi National Energy Co, known as TAQA, which had dipped to net loss on a year-on-year basis in the second quarter of 2015, launched a two-year transformation program to help the state-run company resurface.

“The initiative resulted in cumulative savings of $3.6 billion and a more cost-efficient and accountable culture with greater focused on safe and reliable operations,” Awad Al Ketbi, acting executive vice-president (business support) at TAQA, told Argaam.

“IT played a key role in the company’s transformation globally, with technology savings in the millions of dollars,” Ketbi added.

TAQA swung to net profit in Q1 2017 – its first positive report in two years – as oil prices stabilized above $50/bbl and the company’s cost efficiency practices began to pay off.

“The transformative cost reduction initiatives are now sustainably embedded across the organization,” Saeed Al Dhaheri, acting chief operating officer at TAQA, had said in a media statement announcing the financial results.

Going forward, TAQA plans to achieve further efficiencies by exploring the areas where additional cloud solutions can be introduced in order to reduce the internal investments in terms of technology and operations.

Meanwhile, a recent survey by Sweden-based software solutions provider, IFS, found that 87 percent of the firms surveyed in the Middle East have “adequate” or “advantageous” funding for digital transformation, indicating a strong willingness to invest and an appetite to evolve their business in order to stay competitive and grow.

“In the Middle East, we are seeing a heightened awareness for digital transformation in the GCC especially UAE, Saudi Arabia, and Qatar,” Luis Ortega, managing director (Middle East, Africa and South Asia) at IFS said in the report.

Write to Reem Abdellatif at reem.a@argaam.com and

Nadeshda Zareen at nadeshda.zareen@argaamplus.com