Digital maturity assessment for upstream oil and gas operators has been saved
Perspectives
Digital maturity assessment for upstream oil and gas operators
Organizations are leaning in for the future of oil and gas
Since 2017, Deloitte’s digital maturity assessment has gauged how upstream oil and gas operators are adopting and innovating with digital technologies. The results of this year’s survey indicate overwhelming recognizance of digital promise, though most organizations agree there’s still work to be done.
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- Opportunities remain upstream
- Five key upstream O&G themes emerge
- The journey has just begun
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Opportunities remain upstream
Upstream oil and gas (O&G) operators are collectively eyeing new opportunities and tackling the challenges of digital transformation, but where they stand along the digital maturity spectrum—and what they plan to do next—can vary tremendously.
Deloitte recently surveyed and interviewed leaders in core operational, digital, and IT roles across a set of O&G exploration and production (E&P) majors and independents. Our aim was to conduct a broader digital maturity assessment, identify leading practices, benchmark where each one stands, and highlight opportunities to advance digital value realization for the future of oil and gas.
Our digital maturity assessment reflects the positions of leading E&P operators with US and international assets that include both conventional and unconventional holdings. Our survey included more than 40 in-person interviews, captured 1,700 data points, and featured input from IT/digital and operations leaders. The findings reveal both commonalities and divergences in upstream O&G digital trends.
Digital maturity assessment for upstream oil and gas operators
Deloitte's Tom Bonny and Nate Clark share their insights on the challenges and value of digital in oil and gas on the Industrial Talk podcast with Scott MacKenzie.
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Five key upstream O&G themes emerge
Through our interviews and survey results, participants indicated five general themes.
Since we began conducting this digital maturity assessment in 2017, we’ve seen divergent views across participants on the importance of digital. For the first time, 100% of survey participants agree digital is critical to the future of O&G. Operators now consider digital programs as table stakes for any viable O&G business. They also see adopting digital as essential to remaining competitive in any macro environment. Upstream O&G operators unanimously recognize digital as an opportunity for growth and a differentiator for talent, capabilities, and margins. Importantly, the O&G employee mindset has evolved in a favorable direction as digital has started delivering value across organizations. As operators shift their focus to net-zero emissions and decarbonization, they see significant potential for digital to help monitor, measure, and track greenhouse gas emissions; reduce flaring; and support environmental, social, and governance (ESG) efforts.
While all participants were onboard with digital as an imperative, few had taken the next step of aligning on an enterprise strategy that set clear digital priorities. All had an overarching enterprise vision, but only one had a strategy that made clear what areas would make a difference. This disparity is key, as all operators discussed the increasing competition for time and resources, along with the importance of leadership focus and commitment. Instead, operators have a mix of either functional-centric strategies (e.g., drilling, production) or business unit (BU)-centric strategies (e.g., an asset that wants to implement digital across various functions) for digital growth and adoption. This is likely associated with some operators’ legacy approach to digital, which consisted of implementing digital spot solutions before developing a cohesive enterprise strategy, as well as varying degrees of buy-in across organizations (especially senior management). While we see grassroots efforts as an important step on the digital journey, a cohesive enterprise digital strategy is associated with implementing a full transformation.
Generally, the direction of digital in organizations was not significantly affected by the pandemic. While some upstream O&G operators struggled to keep their digital programs on track in the face of historically low oil prices, the pandemic strengthened the need and urgency for digital. In general, what operators wanted to work on and the order they wanted to work on it didn’t materially change. That said, one priority continued to crop up: capabilities focused on remote work, collaboration, and data accessibility. Some of this focus was attributed to work-from home expectations during the pandemic and how to enable improved productivity and collaboration in offices. Another more interesting part of the conversation centered on reimagining the role of remote operations centers (ROCs) in supporting D&C and production operations. Over the past 20 years, operators have looked to move activities and decisions away from the field and into a centrally located ROC. For example, why have a lease operator go to a pad to change a setpoint on a rod pump if we can just as easily have a production engineer in the ROC address every pump in the field? The change that occurred during COVID was the next step of asking, “Why do I even need to do some of these activities in a ROC? Can I have engineers perform more activities from wherever they call home?”
Every participating operator agreed that measuring the value and impact of digital is difficult. Increasing the accuracy of measuring digital’s impacts, including in safety and emissions, is a shared value proposition. However, the majority of interviewees concurred that the approach to capturing and measuring through scorecards or other means is lagging. One observed challenge was a failure to define upfront what the value was and how this could be tracked from day one through the life of the effort. Operators have primarily relied on financial lagging indicators and are yet to adopt agile leading indicators that might help track value. Doing a lookback is hard when one has to find all the data to support the analysis and no reliable baseline exists. Another challenge was tracking value down to the profit and loss (P&L) level and focusing on “hard dollars”—meaning dollars that show leadership how a digital initiative is affecting the bottom line and driving measurable change to cost and revenue line items. This is difficult to do when multiple initiatives may be occurring at once and neutralizing the value from one can be difficult to tease out at the P&L level.
Culture remains one of the main impediments to digital success. Improving culture usually involves embedding change management earlier and ensuring business-focused individuals, even down to the field, are part of solution development and are eventual change champions. The positive impact of visible digital adoption by leadership stood out as a key driver of organizational culture change, with multiple examples of culture and fluency being correlated to leadership behavior. While some of the organizations have made significant changes to adapt to digital, lack of change management has been causing lower morale among staff and affecting the overall impact of digital transformation. Structured, leadership-led change management programs across all levels of the organization are critical for embedding the digital culture.
The journey has just begun
Overall, our digital maturity assessment indicates that everyone is working on digital. Some organizations have embraced it better than others and can point to success stories. However, the results also indicate that no single operator is clearly dominating in digital. There are “pockets of goodness” across operators but also room for improvement. While benefits from digital are being realized, all operators we interviewed agree more upside remains. Over the long run, organizations that clearly define areas of differentiation and then diligently build digital advantages and capabilities will see the most return from their investments in people, tools, and technology.
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