It has been an unquestionably turbulent decade for oil and gas, with startling price swings, changing government policy and shifting political landscapes in major producing nations. So how do operators react to an environment where volatility may be the only constant?

In Boston Consulting Group’s (BCG) recent report, Going Digital is Hard for Oil and Gas Companies – but the Payoff Is Worth It, we look at the role that the digital space can play. With the right tools, and the right company culture, digital opportunities are set to unlock a more resilient future for oil and gas, especially in the realm of the current Industry 4.0.

Converting to a future of digital oil and gas

Big data, advanced analytics and machine learning — the opportunities in the digital space are as abundant as they are complex. In this environment, oil and gas business leaders must be prepared to embrace a future built on digital transformation.

With a broad steadying of oil prices in recent years, digital transformations are finding increasingly fertile ground in Southeast Asian oil and gas companies, as well as energy operators across the globe. National oil companies (NOCs) in Southeast Asia are increasingly realizing that “delivering on the digital agenda” is a fundamental necessity to improve performance in the short term, and stay competitive in the long term considering the strong and persistent development of Industry 4.0
implementation.

Many of the NOCs in Southeast Asia have embraced digital transformation as a core part of their business. These transformations are already delivering significant value for organizations — in improving overall margins, reducing costs, acquiring new customers or developing new business. These initiatives have demonstrated typical payback periods of 12 to 24 months, with minimum capital investment, a step-change for an industry used to long-lead projects, big investments and long payback cycles.

The adoption of digital technologies is an essential element of any transformation. Yet our research shows that many companies still struggle to deliver a tangible impact at scale. So how should companies manage this transition? Here are seven key steps to focus your digital
transformation.

Seven steps to digital transformation:

A bold vision

A culture of change begins at the top. The transformation toward a digital future must be driven by leadership that is able to articulate and engage with its digital vision. Business leaders must go beyond tacit endorsement to design and deliver a bold, coherent and achievable strategy.

Digital road map

A bold vision must be accompanied by a balanced digital road map. Ensure focus on key initiatives, and avoid diluting transformation across numerous projects. Use cases should be designed to unlock real business value by tackling genuine issues. Begin by defining the core value opportunity, then strategize the data-driven insights that could enhance it.

It is important to embrace quick-win scenarios that have the potential to deliver significant value, have a high chance of success and can be easily communicated internally and externally. Success in these projects provides momentum to carry forward your digital transition.

Data and IT architecture

The sheer volume and diversity of data captured by oil and gas operators presents a daunting prospect. This is compounded by the range of legacy systems integrated across operations, and generally poor quality of data
governance.

These challenges can be overcome by developing bespoke solutions for your unique use cases. Adopt a flexible approach to data architecture that allows for modular improvements in order to avoid delays in a search for a perfect solution. This ability to adapt and move quickly is a key benefit to both the technological structure and the culture that enables digital transformation.

Business adjustment

Change management is a core part of a flexible culture that supports successful digital transformations. We find companies that deliver success in their transition dedicate roughly 10 to 20 percent of their efforts to developing the tools, 20 to 30 percent to building a data platform and 60 to 70 percent to people and change
management.

End-users must be an integral part of any process of transformation to ensure digital solutions are customer-centric and fit for purpose. Development teams should plan for changes to decision-making as a core part of any transition and identify key actors to help implement those changes, supported by focused training.

Digital culture

Cultural transformation is one of the greatest challenges for oil and gas operators when it comes to digital transition, yet it is one of the most vital steps for success. One BCG study, It’s Not a Digital Transformation Without a Digital Culture, found that the proportion of companies reporting breakthrough or strong financial performance was five times greater (90 percent) among those that focused on culture than among those that neglected it (17 percent).

Agility is the key to a true digital culture. Companies need to empower faster decision-making, a fail-fast mentality and the right to act with autonomy to deliver on-the-ground and business edge solutions. New behaviors should be incentivized with relevant key performance indicators (KPIs), supported by organization-wide training.

Digital capabilities

Companies must be prepared to adapt to new technologies on the horizon. That is why an agile culture is so integral to digital success.

Businesses must acquire capabilities in data science, analytics and AI, providing the framework to develop future use cases. This challenge is compounded by the aging workforce within the industry today, meaning attracting fresh digital talent is a key priority for the future.

A capability strategy should be adopted to identify gaps in digital talent, informing recruitment and supporting flagship
initiatives.

Value creation

Digital pilots require appropriate oversight, with a fully enabled execution team able to identify initiatives that fail to generate success. Appropriate KPIs provide a means to demonstrate value, but companies should be careful not to adopt cumbersome governance procedures that stifle agile culture.

Good governance begins with leadership, and should be steered by the road map that forms the core of your digital transformation. A strong digital culture builds the necessary foundation and mind-set to identify and eliminate weak projects that tie up digital transformation
resources.

Digital journey

The oil and gas sector is an increasingly digitized industry, and realizing the greatest value for your organization will require adapting to embrace these digital opportunities. Indonesia’s oil and gas sector has started the digital journey with several notable initiatives, such as the Open Access Inventory, the Subsurface Data Management System, the Upstream Oil and Gas Regulatory Special Task Force’s (SKKMigas) information management system and various ongoing and upcoming digital initiatives by Pertamina in marketing and trading, procurement, refining and in the upstream sector.

More steps like these are required — BCG analysis reveal that digital transformation can provide significant benefits across the entire value chain:

Upstream oil and gas:

• Exploration: 50 to 60 percent reduction in data interpretation, time and cost
• Field development: Up to 70 percent reduction in engineering hours plus higher value concepts
• Drilling: 20 to 30 percent faster well delivery and more productive wells
• Operations/production: 3 to 5 percent improved production and 20 to 40 percent reduced maintenance costs
• Procurement and supply chain: 7 to 15 percent value realization across value chain

Refining and Petrochemicals

• Operations: Real-time margin optimization improving refinery margin capture by 20 to 40 US cents per barrel
• Commercial: Advanced analytics and machine learning leading to better understanding of customer behavior and improving margin realization by 10 to 20 cents per barrel
• Supply chain and maintenance: Predictive maintenance analytics, rapid crude sourcing optimization and control tower uplifting plant reliability and optimizing crude sourcing delivering 20 to 30 cents per barrel

Gas and LNG

• Commercial: Pricing and optimizing cargoes for short-term arbitrage utilizing big data, advanced analytics, market intelligence and control tower optimization

There’s one thing that’s clear — digital transformation is an inevitable future, and nurturing that future toward success will require a digital culture that keeps pace. In an industry still nursing the wounds of recent global volatility and with the strong growth of Industry 4.0 development globally, digital transformation provides an important path toward resilience for the future.

Fadli Rahman is a project leader at Boston Consulting Group, Alex Dolya is a managing director and partner at Boston Consulting Group and Asheesh Sastry is a managing director and partner at Boston
Consulting Group.