Call for digital transformation of Oil & Gas industry

As the oil prices have been falling since June 2014 and worldwide oil production is outpacing demand there emerges an immediate need to transform for oil producing companies. In a recent study conducted by Cisco it revealed a $50 bn oil and gas (O&G) firm can increase profit by 11 % if they enhance IoE adoption. It said adopting digital technologies Internet of Everything (IoE) powered can generate $600 bn.

So far, companies emphasized on operational efficiency and maintenance of assets and infrastructure as their top two areas of increased investment. However, in Cisco’s 14 country survey intelligence from data was identified as the key area needed to improve efficiency, and data analytics as the IoE driver for faster, better decision-making.

Cisco said industry adoption of IoE could bolster global GDP by up to 0.8 % or $816 bn. Digital transformation will result into $538 mn annual profit increase for a $50 bn O&G company. Cisco estimates that this IoE-driven value will come from improvements in asset utilization, process or supply chain efficiency, employee productivity, Capex savings, and market innovations.

For a midsize oil and gas company with $50 bn in annual revenue, IoE can generate a $538 mn annual profit increase and an 11 % bottom-line (EBIT) improvement. 72 % of these benefits are derived from cost reduction, while the remaining 28 % are from increased revenues.

Responses regarding benefits of IoE varied from improvement in operational efficiencies primarily in the upstream segment of the value chain to 48 % of respondents agreeing with data as the area of IoE they need to improve most to make the most effective use of connected technologies (IoE) and faster problem resolution as most beneficial for business of connected technologies (IoE), while improved production efficiency was the top operational benefit.