December 2022, Vol. 249, No. 12


Digital Transformation in Midstream Oil and Gas

By Peter Bernard, Datagration   

(P&GJ) — A lack of up-to-date digital capabilities has stymied American industries for years. Midstream oil and gas is no exception and has repeatedly shown that it needs accelerated change to succeed.

Oil and gas is considered one of the nation’s least digitally mature industry, but midstream companies are realizing the value of going digital. Still, many assets remain dominated by legacy systems, leaving countless challenges for companies to overcome. To succeed in the new digital world, executives must do away with traditional methods in the highly dynamic midstream industry and fully embrace digital transformation.   

The inefficient legacy systems on which pipelines, fleets and storage facilities operate have created workflow nightmares, slowed decision-making and left valuable data reservoirs untapped. With drilling set to hit an all-time high in the Permian Basin, midstream oil and gas companies will need the proper digital solutions to keep pace with the growing production levels. The traditional mindset of executives must fall by the wayside to maximize returns.   

Transforming Data   

The possibilities for an organization’s digital transformation are endless. So many digital offerings have recently entered the industry, leaving many executives overwhelmed amidst the digital deluge. There is no defined starting or end point for an organization’s digital journey but overhauling its data strategy is a great place to begin.   

More than 2.6 million miles (4.2 million km) of pipelines deliver tons of natural gas and liquid petroleum product across the United States, generating massive amounts of precious data daily. The issue is that there is a gap between data and insights and an even further gap in action. Those data do not come perfectly generated in an easily digestible form; it requires countless hours of manual input to derive value from just a single set of pipeline data.   

Extracting value from data has always been a painstaking process for midstream oil and gas companies, but by adopting digital tools like a unified data model (UDM), organizations can begin to transform their data with a fraction of the time and effort.   

Addressing what a data-driven business is not a great place to start understanding data’s value. In the most basic of definitions, a non-data-driven business relies on gut decisions. On the other hand, a data-driven business uses the interpretations and analysis of data to best guide operational and business decisions. Many data-driven companies start with a gut reaction but turn to data for explanation and validation. By switching to a data-driven business, midstream companies can improve decision-making while boosting operational efficiency.   

No business can become data-driven if its data isn’t actionable. Adopting and integrating a UDM into midstream operations enables companies to use the information generated in real time. Created to alleviate worries that arise from a mixed data landscape, a UDM can overcome nearly all data challenges.   

With actionable data and the right solutions, oil and gas companies can track and analyze operational and financial information, detect and predict mechanical failures, and precisely monitor performance levels. Companies can improve market understanding, promote customer satisfaction and increase productivity.   

Unified Data Model  

Without the power of a UDM, midstream companies will have a tough time organizing and centralizing all their data for analysis. With such a wide array of sources to pull data from – gathering systems, transmission systems, distribution systems, etc. – it is nearly impossible for a single human to compute all this raw information. Instead, a UDM enables businesses to manage all their data, any type, on any cloud, from anywhere.   

A midstream company empowered by a UDM can seamlessly connect, cleanse, and characterize its data across entire operations using advanced automation tools.   

Access to a UDM can be widespread through an organization. The goal is to create a unified, standard view of an entire operation from top to bottom. A view that is easily accessible and simple enough for members across an organization, technical and non-technical, to understand. Enhanced visibility is attainable only with a UDM. By enabling companies to access advanced and consolidated data analytics, members from top to bottom in an organization can visualize data sets to improve decision-making.   

Applying AI/ML  

Accompanying any UDM is always a set of artificial intelligence (AI) and machine learning (ML) tools and models. Both ML and AI have crucial roles in the delivery and analysis of a UDM. AI/ML models and tools have been created and trained to predict various outcomes quickly and accurately across networks of pipelines.   

This combination of multiple AI/ML solutions can recognize patterns in large data sets faster and more accurately, enabling organizations to predict outcomes. Instead of spending countless hours computing various data sets, applying ML and AI to perform data cleansing, anomaly detection and advanced calculations will increase efficiency while reducing costs.   

ESG Reporting   

Midstream companies have come under pressure because they are viewed by many as “enablers” for fossil fuel consumption. Oil and gas companies must work twice as hard to overcome ESG scrutiny and secure further investment. In fact, according to a PwC survey, 80% of investors now report that ESG considerations significantly influence their investment decisions, with 50% indicating they would withdraw from investments that did not take appropriate action.   

One would infer that ESG’s rise to prominence would be coupled with incredibly accurate reporting technology. Far from it. Many midstream companies have struggled to provide the ESG information necessary for investors to calculate ESG scores correctly. The PwC survey noted that many investors had expressed worries about the quality of information accessible when considering ESG goals, specifically the company in question’s carbon footprint.   

The incredibly complex transportation, transmission, and distribution infrastructure required for midstream oil and gas companies have made it difficult for operators and executives to track meaningful data for ESG reporting. A UDM will enable pipelines to track and accurately calculate waste gas levels and carbon emissions. It can help track leaks and compute the gases emitted into the surrounding area. A UDM doesn’t just stop at pipelines; an integrated model can track gathering system’s, rail’s, and fleet’s carbon footprints.  

Leading through Change  

More important than anything else during a company’s digital journey is that effective leadership must be displayed for an organization to continue moving forward. Executives who remain committed to their digital transformation will witness the greatest returns. Investments cannot be made frivolously; each piece of technology integrated into an operation must serve a clear purpose, solving a defined problem.   

Leaders must remain adaptable to implement new opportunities. On the flip side, many employees or key stakeholders may be naturally resistant to change. An organization’s leaders must be prepared for pushback from any angle and consider all groups when implementing change.  

For any company’s digital journey to succeed, leadership needs to be fully committed to their decisions while effectively communicating with impacted stakeholders. 

Author: Peter Bernard serves as chairman and CEO at Houston-based Datagration. He is a multidecade veteran of the oil and gas industry, having served in various executive roles prior to joining Datagration in 2020. Peter earned his bachelor’s degree in petroleum engineering from the University of Louisiana at Lafayette.  

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