Globuc spoke to Simon Rogers – Vice President, Advanced Solutions Business at Yokogawa on the digital transformation of the hydrocarbon value chain.
What are the direct benefits of digital transformation of the value chain?
The hydrocarbon business, like many other businesses, is becoming increasingly volatile, uncertain, complex and ambiguous (VUCA). The tools used to manage and optimize the value chain and the associated assets have not changed significantly for decades and are not fit for purpose in the new VUCA world. This is resulting in a significant loss of value, higher risk and higher impact on the environment. Recent developments in technology support the digital transformation of the hydrocarbon value chain by enabling new business models, better optimization, more agility and better execution of plans. This ensures the industry is safer, more sustainable and providing a higher return on capital employed. The financial benefits depend on the details and particular circumstances of each value chain but can be in excess of $1 per barrel of oil equivalent. These are primarily generated by increasing production, reducing inventory, increasing gross margins, reducing transportation costs, reducing energy and reducing inventory. The companies that take the greatest and fastest advantage of the opportunity for transformation will have a strategic competitive advantage over their competitors resulting in significantly higher returns to stakeholders. This transformation is also critical to the transition to a sustainable energy supply.
What are the key technologies enabling digital transformation of the hydrocarbon supply chain?
The key technologies enabling this transformation include cloud, big data, AI, mobile, AR, IIoT, autonomous vehicles and operations and blockchain. These technologies can be combined with the traditional solutions such as linear programming, process simulation and event based simulation to form a digital twin of the value chain and digital twins of the associated assets. Digital transformation of the value chain enables new ways of working with supply chain partners and new ways of managing and optimising supply chain and asset operations. This transformation allows real-time optimisation of the entire supply chain.
Some example use cases are:
- Using cloud technologies to visualise the current status of the value chain and exchange information with suppliers and customers
- Using AI to predict demand and prices
- Using AI to predict and respond to value chain disruptions
- Using AI to identify opportunities to improve the optimisation of the value chain
- Using AI to use operating data to create and maintain accurate models of the individual assets and value chain
- Using AI to improve the scheduling of logistics and operations
- Using blockchain to share commercial information
How to apply the latest technologies to value chain optimization?
The digital transformation of the value chain is a subset of the digital transformation of the whole organisation and the same approach can be applied. Typically an agile approach is used. This may involve an assessment of the current:
- technology including data, applications and integration
- work processes
- organisation and people
Opportunities for improvement can be identified and prioritised based on the value and ease of implementation. Proofs of concept or lighthouse projects may be implemented. Where successful these should be quickly scaled up across the value chain. The projects should focus on:
- Readiness of data, infrastructure, consumption, people using cloud, big data, mobile and IIoT
- Situational awareness including hindsight, insight, foresight and oversight using descriptive and diagnostic analytics
- Decision making including forecasting, prediction (modelling) and optimization using predictive and prescriptive analytics
- Execution including scheduling of logistics and operations, best practices, automation and ultimately autonomous operations
- Value sustainment including using AI such as natural language processing to manage knowledge and change