Project 3 - O&G (Downstream) (EPC, O&M) Technology Adoption
Oil & Gas Sector, Mostly for Refineries of Petrochemicals
Intro:
This was a project in the oil&gas industry, mainly focusing on the downstream sector (petrochemicals & refineries). Since the price of crude oil has been continuing to decrease over the years, many O&G companies are looking to cut costs throughout their plant operations by optimizing plant efficiency, and minimizing maintenance costs. For our client, who is a global top 5 player in chemical plant engineering, we were asked to analyze the advanced technological trends in plant construction (EPC) and maintenance (O&M), to see which to adopt to gain a competitive advantage.
Duration/Members/W&L Balance:
It was a 3-week project, (quite a short project), and unluckily for me, we were very understaffed. It was a 1+1 project, meaning that there was one project/engagement manager, and an analyst (me). For consolation, the firm allowed me to hire 2 interns to help out, but as expected, due to the lack of people, and the general truth that PM’s don’t really proactively make ppt slides, work-life balance was expected to be bad. As is with every consulting project, there is no such thing as a ‘bad’ project; there only exist “good projects”, and “learning opportunities” (lol). Nonetheless, I managed to keep my life quite sane, as I was able to receive a lot of help from the interns (way more than expected - one of them actually got into Bain later on). Generally went home around 1 am-ish, and at least got 1 weekend of the 3 off.
We were dispatched at the client site, and worked with a counterpart on a daily basis, basically having a mini-report every day about each day’s work and progress. Daily reporting is quite a daunting feat, as the big directional points are quite difficult to demonstrate progress on a linear basis, so I was expecting quite a lot of stress on this part, but the client was actually very reasonable and understood that the requested deliverables were not things that simply be churned out. On the contrary, it helped that we could sense the areas that client was actually interested in, and fine-tune our research and storyline to match their principles, along with their line of thinking.
Thoughts on Industry:
There were two types of players that we focused on, and two types of O&G projects that helped categorize the modules moving onward throughout the project. International Oil Companies (IOCs: Think Shell, BP, Chevron, etc.) and National Oil Companies (NOCs: Aramco, ADNOC, PTT, etc.) greatly differed in their technological maturity, and their reluctance in adopting new methods to improve efficiency in their plants. Of course, this carried on to the type of projects that these companies carried out, as IOCs tended to focus on Greenfield operations (new oil fields/refineries), whilst NOCs were more complacent, and happy to stay with their Brownfield operations (existing oil sources).
Generally, IOCs had a greater urge to innovate, due to the fact that their oil reserves are not as rich as those of the NOCs, and the pressure in regards to reaching cost-saving goals were much higher. It took at least 2x the cost to produce 1 barrel of oil, and having their margins squeezed tightly, they looked for more ways to streamline operations and automated most of their plants. NOCs, on the other hand, had the luxury of waiting until these new technologies were proven to yield results, upon which, despite being late to the party, would then move to reap the benefits. NOCs did not have the burden to explore new possibilities, as the potential risks/costs of investing in new technologies that did not bring results proved greater than simply sticking to the status-quo.
Nonetheless, as a whole, as expected, the O&G industry is a very slow industry. Because the method of refining, the plant infrastructure, including its OT/IT systems, have existed and been fine-tuned throughout a long period of time, it is very difficult to introduce change to its legacy systems and the way in which these companies conduct their operations. The organizational structure also varies widely in terms of the required permission from stakeholders in order to secure sufficient budget to pilot a new technology, or deviate from the original vendors and solution providers that they’ve been working with for a long period. Of course, this is not to say that the existing IT vendors or equipment suppliers are barred from innovation, but rather that they do have a propensity to become complacent with their best practices, making it harder for engineering companies to try out new things, as naturally any new form of technology would require a huge investment, and with it a huge risk. However, despite a surge in new vendors and startups developing new solutions for industrial usage, they have had limited success in securing contracts with EPC players who generally have the say in choosing their technology of choice.
Project Details:
Basically, we conducted expert interviews day in and day out throughout the duration of the 3 weeks to supplement our desk research, along with the client’s pre-amassed data for improving technologies in the sector. We benchmarked any new kind of technology adopted by the leading players in the field, and the new solutions that were launched into the market anew by existing solution providers. As with any benchmarking/research heavy project, we aimed to categorize the research content, in this case, technological solutions, into a framework that would ultimately aid in us crafting a viable message for the client. There were, of course, many different kinds of solutions with a variety of functions and on a wide spectrum of technological maturity. For clarity’s sake, we just separated these into 1. Software, 2. Hardware, 3. Hybrid solutions, and the maturity levels could be placed on a scale by function: some were used for simple monitoring purposes, whilst others were more integrative, and allowed for actual data analysis and automated control. Plotting these technologies allowed us to get a simpler idea of the trajectory of technological development in the industry, and get a feel for the ‘type’ of players most likely to adopt such systems. For example, IOCs would be more keen to try out robotics, geospatial analytics, and more “unproven’ types of technologies that had the element of control, whereas NOCs would be more geared towards adopting the simpler forms of AI/IoT solutions aimed at automating simple tasks, mostly trying to maximize data collection across their multiple plants.
Personal thoughts:
This in very was a project with a very narrow scope, and was very research heavy. I conducted over 20 expert interviews, mostly with people in positions of the digital transformation teams from a variety of IOC/NOC’s. It did seem that these people had a converged sense about which company was the most innovative in adopting new technologies, and ones that were lagging in the digital space.
Overall, though, we could see that the level of technological innovation in the O&G industry was still quite limited, as somewhat expected. In projects like these, sometimes the answer to the client could as simple as that: that there is nothing worthwhile looking into at the time being. Of course, this is a tough sell, as the management definitely does expect some ‘fun factor’ to come out of a consulting project (which we did bring), but it was difficult in trying to mine enough detail to convince the client of the value or worth of some particular technologies, and the expected paths of the more developed corporations in this field.
Not the most ‘fun’ of projects, but was grateful that I got the opportunity to get experience into the O&G sector, which is definitely an area you need to be cognizant about, if you have any interest in the heavy industries.
"Consulting" type work:
Engineering Process Industries
Technology Benchmarking (Categorization, Data cleansing, Shortlisting)
Customer VoC Research