Big Data Essential for Oil & Gas Industry to Become Cleaner and More Efficient
The historic challenges facing the oil and natural gas industry will lead to consolidations and transformation. The race is on for companies to lower their operating costs and significantly reduce carbon and other emissions. This is necessary to stay profitable, meet increasingly stringent international environmental regulations, and attract capital from sustainable and other investors. Big data is essential to achieving all those goals.
A January 2020 report from Barclays said it plainly, “With Oil & Gas under pressure as never before, Digital provides a lifeline to improved efficiency, better free cash flow profiles, and higher ESG (Environmental, Social and Governance) ratings. Digital not only makes hydrocarbons more competitive with other energy sources, it makes them safer, cleaner, and less wasteful.”
Major energy producers have recognized these trends for some time.
BP has pledged to be carbon neutral by 2050. ExxonMobil explicitly endorses the Paris climate accord. Chairman and Chief Executive Officer Darren Woods says ExxonMobil is “stepping up efforts to research potential breakthroughs to reduce emissions through collaborations with governments, more than 80 universities, civil society groups and other industry partners.”
Formidable Environmental Challenges Amid Record of Major Progress
McKinsey & Company found that the oil and gas industry’s operations account for 9 percent of all human-made greenhouse-gas (GHG) emissions. In addition, it produces the fuels that create another 33 percent of global emissions. Thus, directly and indirectly, the oil and natural gas industry produces 42 percent of human-made global emissions.
The industry has a track record of making major environmental improvements which augurs well for its pursuit of major reductions in greenhouse gas emissions.
Public health concerns and warnings resulted in the elimination of lead in fuel for on-road vehicles in the United States in 1996. It was phased down significantly before then. Lead was once a central component of gasoline and critical to engine performance. Now, it is irrelevant.
Refinery operations have also become dramatically cleaner.
A 2012 analysis for the American Institute of Chemical Engineers found “Refinery emissions of criteria air pollutants have decreased as much as 80% from 1990 to 2010. Emissions of hazardous air pollutants and their associated toxicity hazard potential have decreased nearly 70%.” The reductions are for pollutants that are far more immediately dangerous than carbon dioxide, including sulfur dioxide, nitrogen oxides, and volatile organic compounds. Significant progress can continue to be made here.
The users of oil products have also sharply reduced emissions. Today, new passenger vehicles are 98-99% cleaner for most tailpipe pollutants compared to the 1960’s.
While some environmental activists want to be punitive to the oil and gas industry with the aim of driving it out of business, this path is impractical and likely to cause significantly economic and environmental harm. In 2019, for example, electric cars accounted for just 1% of the global car stock according to the International Energy Agency. And more than 60 percent of the world’s electricity still comes from fossil fuels. The sudden loss of oil and natural gas would create calamity.
The key question is: how can the prior environmental achievements in the oil and gas industry be best replicated and accelerated to reduce greenhouse gas emissions? The answer: by unleashing information technology, data analytics and related cloud storage throughout energy operations. As in other industries, small companies have already taken advantage of technology to gain a foothold in the energy industry.
Here are some of the major ways the oil and gas industry can obtain economic and environmental benefits from expanded use of information technology and data management.
More targeted and accurate drilling. Using large volumes of geographic and other information, exploration companies can better determine where to drill successfully. The vast amount of energy that goes into unsuccessful efforts, as well as the environmental footprint, are eliminated.
Quicker spotting of leaks and other potential problems. Through the expanded use of sensors, drones and other monitoring technology, companies with sprawling operations can more quickly spot problems and identify preventive actions that should be taken. Whether this involves vast international operations or pipelines over thousands of miles, the scale and potential of big data and data analytics leads to operational efficiencies and prevents planned and accidental discharges, thus strengthening the bottom line while reducing the emissions footprint.
Enhanced cybersecurity protection. For years, national security and other experts have warned that the energy sector is a top target for cyberattacks from hostile nation states. Now and in the future, it will be more important than ever for energy producers to look for trends and perform analysis across a large pool of historical data, in many locations. Preventing cyberattacks means keeping operations up and running, while preventing catastrophes such as spills, leaks, and explosions.
Better procurement. With large, diverse, and sprawling operations, many energy producers can significantly reduce costs and improve procurement processes by sharing information company-wide and buying in bulk.
More efficient use of people. There are many dangerous jobs in energy production. The opportunities to both monitor sites remotely and deploy robots will help to decrease risks to human safety, while increasing productivity.
For energy companies, the time to act on these changes is now. ExxonMobil recognizes this, saying in its 2019 10-K, “To remain competitive we must also continuously adapt and capture the benefits of new and emerging technologies, including successfully applying advances in the ability to process very large amounts of data to our businesses.”
A vibrant oil and gas industry intent on substantial change through the widespread application of data analytics and information technology means that the world can sustain prosperity while transitioning to major reductions in emissions.
Paul Steidler is a Senior Fellow with the Lexington Institute, a public policy think tank based in Arlington, Virginia.