Published: May 5, 2016 |

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The impact of volatile oil prices in the global market have forced oil and gas companies to optimize lifting costs, maximize operational efficiencies and leverage new business models to drive profitability. As the ‘low for long’ scenario continues, it has become strategically imperative for operators to adopt outcome-based solution offerings (Machine learning, neural networks and digital assistants) and alternative business model approaches. Technology and new business model aspects are analytically poised to disrupt, collapse and transform the future of oilfields.

New analysis from Frost & Sullivan, Convergence Impact on Oilfield Services — Disrupting a $250 Billion Market, finds that traditional business models will transform into service/performance-centric and outcomes-based models, as convergence takes over the market, with enhanced focus required to drive sustainable profit margins. A case in point is the emergence of cognitive virtual assistants revolutionizing the market. Solutions such as Amelia, IBM Watson are poised to prevent write-off’s that have plagued the industry earlier.

Despite the benefits of digital transformation in oil and gas, operators are skeptical to implement solutions due to lack of corporate support, weak awareness, unclear ROI benefits and lack of visible technology roadmaps. As solution providers continue to expand and offer a diverse portfolio of value-offerings, changes in customer procurement models will create a challenging situation. Furthermore, the convergence of IT and OT is creating an interesting paradigm of opportunities, but knowing ‘where to grow, whom to partner with, how to position and who to position with’ are key attributes to engineer lasting success.

“Digital transformation, as much as it comes with benefits, comes with strong headwinds such as cyber-security, data loss and safety issues. In addition, while overall efficiency improvement in the short-term is important, the need to adopt a digital vision and an integrated security model will stoke innovation in the long-term,” said Ram Ramasamy, research manager, visionary innovation - convergence at Frost & Sullivan.

High operational expenditure outlook is steering the industry to adopt new and alternative business models. Applications such as predicting asset failure, machinery performance centers, remote diagnostics and prescriptive actions will become mainstream as operators look to arrive at smarter and digital management of production operations. Advancements such as these are why the oil and gas industry is poised to become the next hi-tech industry.

“Consequently, the fragmented oilfield services ecosystem (OFSE) is consolidating to create better synergies through mergers and partnerships. OEMs are evolving by selling performance in addition to equipment, while automation companies have realized the need to add analytics and digital services to their portfolios. For companies to remain relevant in the near future despite low oil prices, the digitalization of the OFSE industry must be embraced and applied throughout the sector,” said Ashay Abbhi, senior analyst at Frost & Sullivan.

About Frost & Sullivan
Frost & Sullivan, the growth partnership company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today’s market participants.

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