NEWS + BLOG
Does the North Sea industry have the right tech ecosystem to support digital transformation?
My days at MIT in Ford Professor Patera’s Mechanical Engineering lab solidified in me a lifelong passion for frontier technology. I’ve been the guy in the lab trying to complete my piece of a truly groundbreaking puzzle, an angel investor in deep tech startups, the lead in setting up the Emerging Ventures Mentoring Program at EPFL, and now I’m the CEO of what MIT believes to be one of the most exciting commercial endeavours to come out of the world-renowned technology institution in recent years.
I can say without doubt that the most important thing I’ve learned from my 15 years on the frontline of driving new tech, is that no matter how inspired your idea is, it’s important that the ecosystem that surrounds it is equally as inspired. That means timing is crucial, and many of my fellow angel investors will take this into account when making investment decisions (my criteria as an investor is more focused on the team’s level of grit and low cash burn). They understand that as a young company you can’t do everything yourself – you need an environment that’s every bit as brilliant as you. You need a commercial ecosystem.
This year I’ve been spending quite a lot of time in Aberdeen and all over the UK, working with Shell, the ITF and the OGTC as well as meeting many of the key people who are working to build industry 4.0, and it’s something that comes up time and time again. Does the North Sea oil and gas industry have the right ecosystem to support digital transformation?
My view? Not yet – but it’s under construction in a huge way.
Akselos’ success has been reliant upon such an ecosystem. Our technology is a General Purpose Technology (like steam or electricity) and can be applied to any industry. It was born out of MIT, then nurtured at both MIT and EPFL, so we’ve had the luxury of two of the best ecosystems in existence. We’ve had access to the right funding, world-class tech mentors, and an unrivaled industrial liaison programme. We also know that the technology that supports our game-changing proposition exists in the supply chain – sensors for example – without which our next generation Digital Guardians would simply be super-fast Digital Twins.
In September’s issue of Energy, I spoke to Rita Brown about the level of pain in the North Sea industry being unbearable, and that’s usually where you find the most willing technology adopters. Back in 2013 when Akselos was still in the startup stage, we began presenting regularly with the MIT industrial liaison programme. By 2015 we had been pulled into the oil and gas industry as a result. The technology scouts from oil and gas supermajors, faced with ageing assets in almost every basin in the world, had been sent out to look for solutions to lower CAPEX and strengthen late life operating models. At the time, the value at stake was already staggering – and that was before the commodity price issues turned the industry upside down.
There are clearly a number of operators who are early adopters and are transforming their businesses on the digital front. But the reality is that they are in the minority. I’ve spoken to many senior executives this year at various events, and have been frustrated to see operators fit digital transformation into their current silos. Digital is not a technology upgrade – it’s a complete change to the operating model. And I’m not alone in my belief that we’re very much in an ‘adapt or die’ environment.
The OGTC’s Digital Solution Centre gets straight to the point:
“What we can see is that there is clearly an urgent need for digital transformation in the oil and gas industry. In many ways, this is our last chance to act. The exploration cycle is potentially longer than the time remaining to develop resources. Decommissioning is upon us in a big way. And we can’t wait for the oil price to recover. We need to deploy the most advanced and most integrated digital solutions now.”
The centre is already doing great work and I was delighted recently to see the newly launched Innovation Hub, which is brilliantly engineered to support high tech collaboration. The OGTC gets the ecosystem issue and they are addressing it in a smart and structured way. By offering everything from funding, mentoring and trials through TechX, to connecting early stage companies with other parts of the supply chain and the operators in the solution centres, you can see an important piece of the ecosystem getting exponentially stronger.
It’s clear through the solution centres’ business model that they also get that the operators need to lead the way when it comes to adapting their own operating models, and subsequently their suppliers’ business models too. Facilitating digital transformation from the top down is crucial to remain profitable in a lower for longer world. Only then will meaningful transformation start to take place across the board.
The ITF is another important part of the puzzle and an example of how a part of the ecosystem has been under construction since 1999. Unlike the other technology organisations that have emerged in recent years, the ITF is not just focused on the UKCS. It has a global remit and a network of around 2500 technology providers to call upon to help tackle its member’s challenges. The facilitator has also recently launched an industry landscaping study on the potential for digital technologies to significantly improve the production efficiency of offshore platforms. With support from the OGA we can hope that this will materialise into action sooner rather than later.
In early October I attended the Energy Institute’s Asset Integrity conference, and despite Asset Life Extension being one of the biggest issues the North Sea is facing today, I saw only scant evidence that the forum was considering the role digital had to play in addressing the problem. In fact in one of the EPC’s presentations, tech solutions were presented as an afterthought. For many operators and service providers, the maintenance departments do not seem ready to change the way they work. It was a stark contrast to the conversations I’d been having with the operators who are applying resources to digital transformation, organisations like the ITF, OGTC and ONE, and the many interesting tech companies I met at Offshore Europe.
The following week however saw the Data Driven Production event bring together a small (100 people or so) group of professionals already bought into the power of things like data analytics, machine learning and predictive maintenance. Here we had great examples of assets like Engie’s Cygnus going digital and reaping the rewards. It was another sign that the ball is rolling and a great case study for digital.
I share the OGTC’s sense of urgency. The industry has to transform, before it’s disrupted. As an operator, if you are committed to the North Sea and its remaining years, then you have to be committed to frontier technology adoption and to aligning incentives throughout the supply chain to enable the ecosystem to thrive.
It’s a daunting task, but one that has to happen for the operators to be profitable in the 20-30$ per barrel range that was flagged as the necessary target by DNV GL’s CEO during Offshore Europe.
I’d be really interested to hear about initiatives that are happening to align incentives throughout the supply chain. It would be great to hear from people who have examples, or indeed from those who think I’ve got it wrong.