Bao Le explores how digital transformation helps the oil and gas industry grow sustainably.
Pre-Covid, the world was entering a fierce battle against climate change: promoting a circular economy, fighting to reduce plastic and searching for alternative, biodegradable packaging. A lot of this faded into the background when the pandemic started to dominate the news headlines. But as the world is gradually returning to the “new normal”, environmental concerns are once again in the spotlight. Among the industries with the biggest environmental impact, what does this means for the oil and gas industry? And how can digital transformation help the sector become greener?
An accelerating focus
Global leaders are showing an increased determination to tackle climate change. The 2021 United Nations Climate Change Conference (COP26) saw some ambitious pledges being made. India vows to achieve net-zero emissions by 2070. More than 100 countries have agreed to end deforestation by 2030, while 40+ governments have promised to phase out coal-powered energy. Most noticeably, world leaders signed the Global Methane Pledge to reduce methane emissions by 30% by 2030. The USA even goes a step further, aiming to curb 41 million tons of methane emissions during 2023 to 2025 with proposals to require methane emitters to reduce its discharge level by 70% compared to 2005.
Going Green Is A Must
Going green is no longer a choice for oil and gas companies; it has become a must. According to McKinsey, the oil and gas sector is, directly and indirectly, responsible for 42% of global emissions, and governments are rushing to reduce the level of carbon discharge. There are currently 40 countries imposing carbon pricing – a policy aimed at reducing carbon emissions through either a carbon tax or an emission trading scheme (ETS). In the EU, the carbon price rose to an all-time high of €66 a ton in November 2021 with new proposals to include previously exempted sectors from paying the price, such as aviation and maritime. China has recently launched its national ETS as part of its attempt to reach the net-zero emissions target by 2060. Singapore became the first South-East Asian country to impose a carbon tax at S$5 per ton.
With regulations tightening, oil and gas companies are hedging to lower their risks by taking pro-climate actions. Shell, the world’s fourth-largest oil company by revenue, announced its ambition to reach net-zero emissions by 2050 and diversify into renewable energy. Saudi Aramco, BP and Exxon have set themselves net-zero targets, and other companies, including those in the top 10 biggest oil firms, are making similar efforts to reduce their investment in upstream production. But ambitious decarbonisation announcements aside, doubts persist that oil and gas companies are actually succeeding.
Artificial Intelligence (AI) To The Rescue
Next-gen technology proves to have tremendous benefits in tackling climate change. According to a report by PwC and Microsoft, the application of artificial intelligence (AI) can reduce global greenhouse gas emissions by up to 4%, with the energy sector potentially seeing the highest impact. The following are some examples of how technology can help the oil and gas sector drive forward its green initiatives.
Methane Leak Detection And Prevention
Methane leaks are invisible to the naked eye, and detection requires special equipment, including surveillance cameras, sensors, drones and even less cost-effective methods such as aircraft and satellites. AI can study the characteristics of oil wells and develop algorithms to detect variables that expose wells to high risks of leakage. A study of 38,391 wells conducted by the University of Vermont used machine learning to identify three key vulnerabilities of oil wells: wells that deviate from a vertical line drill, wells that use old drilling practices, and wells with larger circumferences. The study shows a high accuracy rate of up to 87%. Such AI applications can help companies better inspect and monitor wells with higher risks and shed light on how future oil wells should be designed for the lowest risk of methane leakage.
Oil Well Maximisation
Maximising well production means fewer wells need to be drilled and less carbon emissions are produced. The availability of data provided by National Data Repositories (NDR) means that oil and gas companies can reduce effort, cost and business risks associated with the exploration and production phase. However, these NDRs contain a large amount of data in different formats. The UK’s NDR, for instance, is 130 terabytes large, which is equivalent to eight years’ worth of HD movies. Analysing this huge amount of data would simply be impossible for a human, and this is where AI comes in.
AI can help oil and gas companies predict future carbon emissions based on past data in relation to other variables, such as business operation and market demand and allow them to make adjustments accordingly.
The oil and gas sector has realised the potential of next-gen technology in helping them reduce their carbon footprint, with some of the world’s largest oil companies investing in technology start-ups to stay ahead of the game. But there is still a lot of work to be done. Technology maturity is not the only factor in successful digitalisation. In fact, it is the least pressing concern of many oil and gas company executives, who are citing digital transformation obstacles such as overcoming issues related to legacy systems, shortage of digital talent, lack of agile culture, and the inability to identify business priorities. Digitalisation will open up significant opportunities – but the oil and gas industry is only at the beginning of this process.