How ready are your
assets to perform in the
digital world?
IIOT and the Future of Digital in
Oil & Gas
The better the question. The better the answer.
The better the world works.
Returns in Oil and Gas are low
Average Annual Return on Operational Assets by Industry 2010–2014
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Oil & Gas
Aerospace
and defense
Airlines
Automotive
manufacturing
Cable
and Satellite
Diversified Mining
and metals
Companies in Quartiles by Asset Intensity
1st
2nd
3rd
4th
Source: public data and EY analysis
ROA calculated as: Net Income/Total Assets,
Asset Intensity calculated as: Operating Assets/Total Sales
Page 2
How ready are your assets to perform in the digital world?
Hotels
Tech —
Semiconductor
Telecom Service
Lack of digital penetration is one driver of low returns
10%
15%
20%
Digital
Digital
Digital
Rest of NOCs
and independents
40% of output
IOCs
9 companies
20% of output
Top NOCs 16
companies
40% of output
9 to 18
(MM BOE/day)
Digital
Total: 93 (MM BOE/day)
Historically, digital in Oil & Gas focused on improved time to first oil and improved effectiveness of hydrocarbon extraction:
►
Engineering visualization and collaboration centers
►
Intelligent wells
►
Real-time drilling
►
Real-time operation centers
Source: EY Research and analysis
Page 3
How ready are your assets to perform in the digital world?
Now is the time to accelerate investment in the Industrial IoT
2000
160
Tech Cost Index
1600
Era 1:
Era 2:
Efficiency Mattered, technology
Cost to High
Focus on Output, technology costs decline
1400
Era 3:
IPv6 Major
Adoption
US cell phone
adoption exceeds
50%
1200
120
100
80
Cloud and
managed
services goes
mainstream
Myspace and
Linkedin
launch
600
Big data goes
mainstream
BYOD goes
mainstream
1000
800
140
60
40
400
20
200
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Cushing, OK WTI Spot Price FOB (Dollars per Barrel)
2010
2011
Technology Costs
WTI Price Source: U.S. Energy Information Administration Independent Statistics & Analysis
Technology Cost Source: Publicly available data from leading technology researchers, the Federal Reserve Board, and U.S. Bureau of Labor Statistics
Page 4
2012
How ready are your assets to perform in the digital world?
2013
2014
2015
0
2016
($) WTI Price
1800
IIOT can integrate the O&G value chain
Quickly reducing the cost of operations
Digital in
Oil and Gas
7.5%
Average Return on O&G
Operating Assets
Immediate Benefits
Improvement in production
volumes
Driven through OEE improvements and
overall productive capacity
$5 — $10
10–20%
5–10%
Cost of Computing Power and
Bandwidth
World’s Oil Fields that are
Digitally Enabled
Variable cost reductions
Today’s cost to make a mechanical and/or
electrical device “smart.”
Page 5
2–3%
Parking-up over-capitalised fleet and
improving labour productivity
45
60%
15–25%
Average number of outside
service providers it takes to run
an O&G business
% of oil consumed outside the
country of origin
Reduction in primary
preventative maintenance costs
by driving from calendar to
condition-based maintenance
How ready are your assets to perform in the digital world?
Harnessing the value from the IIoT requires more than
adding sensors to machines and assets
By 2020
50
Optimized Processes
Smart Assets
Coordinated Resources
Process orchestration &
process choreography for
faster, integrated decisions.
Internet of Things to make
devices & assets smart and
connected.
Mobility to synchronize
internal and external
resources through a single
business process.
Billion assets will
connect and Send
data through the
Internet1
Today
?
101101010101
001010101010100
01101010
00101010
<3%
Of data Is
tagged or used
in meaningful
way2
1. IDC report: December 2012 — THE DIGITAL UNIVERSE IN 2020: Big Data, Bigger Digital Shadows, and Biggest Growth in the Far East — https://www.emc. com/collateral/analyst-reports/idc-the-digital-universe-in-2020.pdf
2. Cisco report: The Internet of Things. How the Next Evolution of the Internet Is Changing Everything — http://www.cisco.com/web/about/ac79/docs/innov/ IoT_IBSG_0411FINAL.pdf
Page 6
How ready are your assets to perform in the digital world?
Digital Oil & Gas Company of Future
IIOT enables integration and intelligent enterprise
Gas
Production
Access
Control
Processing
Finance &
Accounting
Data
Services
Transportation
Contractors
CRM
Functions
of ERP
Production
Sourcing
Maintenance
Order to
cash
Invoicing
Scenario
planning
Business
strategy
Portfolio
planning
Engineering
Purchasing
Oil
Capital
planning
Human
Resources
Gateway
Project
Management
Logistics
Storage and
handling
Connected Assets & Resources
IT Environment
Cloud Integration & Process
Choreography
The cloud integration layer can coordinate all these entities through a single business process to optimize the end-to-end value chain to drive a
specific financial result
Page 7
How ready are your assets to perform in the digital world?
35,000 engines monitored via Predix
100MM flight records per year
Fidelity
Detection
Accuracy
 30%
 25%
 12 pts
8
Amazon’s latest digital transformation
Integrated Value Chain
Amazon Integrated Value Chain
“Enable Delivery to a customers doorstep in 60 minutes or less”
Global delivery network that controls the flow of
goods from factories in China and India to customer
doorsteps in Atlanta, New York and London.
Supplier
Supplier
Customer
Production
Distribution
Supplier
Logistics is a
material
expense and
continues to
escalate
Vertical
integration can
transform the
customer
experience
Turn cost
center into a
profit center
Amazon Web
Services (AWS)
31% Market Share
Customer
63% Year-on-Year
Growth
http://www.businessfinancenews.com/27258-amazon-plans-for-a-vertical-integration-to-take-on-rivals/
http://www.nurun.com/en/our-thinking/future-of-retail/moving-into-the-3rd-dimension-of-vertical-integration/
Page 9
Customer
How ready are your assets to perform in the digital world?
High Growth
Revenue
22% CAGR
Tesla Motors – Art of the Possible
Synchronized supply chain through digital
Tesla’s successful entry into a highly competitive car
market has been enabled by a technology driven
flexible platform.
Connected Car
50% reduction in 1st year repair costs
by Integrating sensors to reduce
maintenance and downtime.
Scalable Orders and
Purchasing
Capacity to handle 500k/year through
online ordering process connecting to
a real-time supply chain.
Vertical Integration of
Strategic Assets
+30% cost reduction in first full year of
production by building scalable
“Gigabit” battery factory.
Tesla Motor’s Inc.
Best Selling US
Luxury Sedan,
2015
Page 10
+50% Increase in
Year-on-Year
Sales to Date
Achieved Highest
NHTSA Safety
Rating Recorded
How ready are your assets to perform in the digital world?
Digital Oil & Gas Company Of the Future
Roadmap to a Digitally Enabled Integrated Value Chain & Higher ROCE
ROA | ROCE
Industrial Internet of Things
Portfolio Performance
Set up the
operating
platform for IIoT
Connect critical
assets and add
cyber security
coverage
Expand IIoT
enablement across
assets in an
operational platform
Enable Process
Automation |
Orchestration & Field
Mobility
Extend IIoT to
transportation,
terminal | depots,
warehouse assets
Connected
Resources
Connected
Operations
Connected
Value Chain
Connected
Assets
Today
7.5% Average
Return on
Operating Assets
% of Integrated Value Chain that is Digital
Today | 20% O&G is Digitized
Page 11
How ready are your assets to perform in the digital world?
Add External
Market Data &
external resource
networks
Connect assets
across an
portfolio | enterprise
Connected
Enterprise
Organizations can take the first step on the IIoT journey by
organizing around three activities
Get connected
Start by connecting critical assets and machines.
Connecting operational data to each other and
the people who need it are crucial to begin your
journey.
Get insights
Use intuitive methods to analyze data to determine
true root cause and opportunities to improve or
resolve. You have enhanced ability to quickly
evaluate anomalies and take the correct action.
Get optimized
Leverage digital to optimize the total lifetime
performance of your assets to increase availability,
minimize costs, and reduce operational risks.
Page 12
How ready are your assets to perform in the digital world?
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All Rights Reserved.
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intended to be relied upon as accounting, tax, or other professional advice. Please
refer to your advisors for specific advice.
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