Deloitte whitepaper explores new digital frontier for midstream oil and gas companies

Published: 7 May 2019

Midstream oil and gas companies recognize the importance of adopting digital technology, yet often struggle to visualize how it can add value to their businesses. Deloitte's Whitepaper—The new frontier - Bringing the digital revolution to midstream oil and gas—sets out the rationale for digitalization, and how midstream oil and gas companies can best plan, implement and benefit from it.

According to the Whitepaper—the second in Deloitte's series on oil and gas digitalization—only 50 percent of midstream companies regard data management as a high priority despite the role it can play in reducing annual downtime and capital intensity.

Taking the US as an example, the paper says many fuel types have strong growth prospects, in part because faster technological innovation has reduced costs, but companies still face technical challenges amid heightened competition. Moreover, in China with the privatization of this sector and the entrance of new investors, cost reduction and agility will be a key success driver.

"Infrastructure in midstream oil and gas is geographically dispersed and aging," explains Deloitte China Oil and Gas Sector Managing Partner Chris Roberge. "It is also vulnerable to theft and cyberattacks, which could lead to production outages and operators having to pay out health, safety and environment-related damages."

The new frontier - Bringing the digital revolution to midstream oil and gas, suggests operators ask themselves three questions:

• How do you ensure sustainable growth and create business value in a dynamic and competitive business environment?
• How can you optimize the operating and business model of an industry with a huge legacy asset base?
• How do you protect this value and growth from the potential risks?

"The paper looks at the whole process from resources gathering and processing to storage," Roberge says. "Overall, storage operations seem to be more digitally advanced, in large part due to their focus on safety and efficiency, whereas other operations tend to be hindered by legacy asset bases and upstream volatility."

China is a technology leader in many areas and the mid-stream sector could be the next marketplace to adopt this.  In particular, with the anticipated spin out of the pipelines to a new company and the expansive growth in LNG to reduce carbon emissions from coal, the timing for midstream 2.0 could be right around the corner. This may be propelled by the automation we are seeing in the downstream fuel retail sector and smart energy systems.

"This not only provides bare minimum functions like leak detection, but also can predict the optimal operating conditions and indicate which upstream zones could have problems," adds Roberge. "This type of network digitalization can not only ensure operational excellence, but also enhance capacity utilization and give midstream firms a competitive advantage."