Pressure to decarbonise, demand for energy, key challenges for oil and gas says Gartner

Simon Cushing, Senior Director Analyst, Gartner

Oil and gas CIOs must be aware of these trends – including accelerating digital innovation, rethinking vendor partnerships, and reacting to climate change – to ensure that their organisations are agile and resilient in an increasingly complex future.

Global oil and gas markets are poised between two competing drivers – rising pressure to decarbonise energy provision and increasing demand for energy in developing economies. Executives must find new ways to maintain competitiveness and growth.

The unique stresses of 2020 have elevated three business imperatives for 2021: optimising business performance, creating new capabilities and strengthening technology foundations. The 10 key trends in this report, individually and in combination, reflect the reformation of the industry in the face of complex growing challenges.

CIOs who understand these trends can enable breakout performance that will differentiate them and their organisations in the months ahead.

Trend No. 1: Enterprise capabilities diverge as new business strategies emerge

As individual business strategies become more nuanced and differentiated, companies will need novel enterprise capabilities to facilitate implementation. For example, refining companies are exploring biofuel and bioplastics production and deepening their presence in regional petrochemicals products. Oil and gas CIOs will need to facilitate these business innovations by incorporating composable architecture principles in the design of the new enterprise architecture.

Trend No. 2: Accelerating digital innovation is now table stakes for CIOs

An increase in discretionary cash flows and strong balance sheets in 2021 are accelerating digital innovation in the oil and gas industry. According to the Gartner 2021 CIO Survey, 87% of CIOs expect their digital programs to increase or stay the same in 2021. This commitment to digital innovation is a relatively new priority for oil and gas companies. In 2019, it was ranked the third-highest priority for CIOs, and in 2014, there was no specific funding allocated to it.

According to Gartner, 85% of CIOs in the oil and gas industry have assumed responsibility for creating a change-enabling technical platform and 79% are working to build a stronger change leadership culture in IT. CIOs will need to reorient themselves toward value delivery by introducing service delivery models that replace cost-based IT siloes with value-based IT products.

Trend No. 3: Digital twins drive transparency and automation

Digital twins can deliver value across the business via the increased integration of internal systems, human activity and external ecosystems. A digital twin is a virtual representation that serves as the real-time digital counterpart of a physical object or process.

Digital twins are trending because of their capacity to improve the performance of business assets. Digital twins improve operational efficiency, prevent downtime, reduce maintenance and maintenance costs, and allow for more effective collaboration between experts and operators.

Trend No 4: Comprehensive engineering creates intelligent assets

To improve outcomes, such as production efficiency, uptime and yield, oil and gas companies are supplementing traditional monitoring and control systems with additional sensors, cloud-based data aggregation platforms, advanced analytics and artificial intelligence. According to the Gartner 2021 CIO Survey, as many as 50% of oil and gas companies plan to increase investments in analytics, artificial intelligence, machine learning, automation, IoT and cloud this year. CIOs are responsible for creating intelligent asset capabilities using the increased budgets.

Trend No. 5: Key vendor partnerships define enterprise platforms

Traditionally, oil and gas companies have separate owners for managing IT vendors versus the engineers with whom vendors partner. However, Covid-19 pushed CIOs of oil and gas organisations to reconsider traditional vendor engagement. While oil and gas CIOs continue to take a lead in their relationship with large IT vendors, they are also developing more open partnerships with a small number of key vendors in areas such as engineering. The distinguishing characteristic of these vendors is their ability to offer an integrated suite of technologies strong enough to serve as a sub-platform for one domain hub within their emerging enterprise platform.

Trend No. 6: Reliance on artificial intelligence becomes more widespread and less visible

Artificial intelligence or machine learning is quickly gaining acceptance in the oil and gas industry. Gartner survey data suggests that oil and gas CIOs list artificial intelligence or machine learning or analytics and the industrial IoT as the top game-changing technologies in 2021. Several trends in artificial intelligence technology and approaches promise to increase artificial intelligence accuracy and deployment speed and reduce data science effort. As more decisions involve artificial intelligence input, the reliance on artificial intelligence will become more widespread. CIOs will need to stay on top of artificial intelligence developments and evaluate and roadmap the development of artificial intelligence capabilities.

Trend No. 7: Connected field workers drive efficiency and reliability

Many oil and gas companies have sold assets, reduced capital and operating expenditure and shed workers after the events of 2020. The financial and human resource scarcity has compelled organisations to explore opportunities to harness digital technologies in better ways as well as manage risk and improve productivity in difficult conditions.

While remote operations are now well established, oil and gas CIOs must focus on increasing the adoption of technologies like augmented reality and machine vision, cost-effective wearable location devices and increased connectivity on sites.

Trend No. 8: Establish a roadmap to avoid carbon management chaos

In the next decade, oil and gas companies will increase their focus on reducing greenhouse gas emissions as the conversation around climate change become more intense globally. Many oil and gas companies are committing to reducing GHG emissions to net-zero between 2030 and 2050. In order to make this vision a reality, they have started investing in clean energy solutions such as wind and solar power. CIOs need to provide appropriate IT infrastructure, services and talent to meet emerging carbon requirements. They must also start due diligence early because the market for these solutions is immature and implementations will be complicated.

Trend No. 9: Face the challenge of attracting fresh talent

Post-2020, talent retention has become a struggle for many industries, and the oil and gas sector is no different. Along with the health and safety challenges that have emerged during the pandemic, the industry is challenged with negative perceptions related to climate change. This makes retention of top talent difficult. CIOs can play an active role in creating an attractive and rewarding place to work in a changing societal and economic context.

Oversupply of crude and decreased demand during 2020 hit the global oil and gas industry hard, and the result was mass layoffs across the US as cash flows reduced. The need for digital workers is a fairly new phenomenon for this sector and finding appropriately skilled talent is even more challenging. CIOs will need to reengineer the IT operating model to offer tangible career development based on premium digital skill sets, thereby attracting the right talent to the industry.

Trend No. 10: Multiple disruptions yield hybrid reformation of IT operating model

Disruptive forces such as the cost reductions due to demand-supply challenges since 2020, growing demand for new systems and more IT agility are driving significant changes to IT operating models. While oil and gas CIOs do not expect another year like 2020, they know disruptions will continue in the sector. Oil and gas CIOs are facing a sustained period of constant flux.

These organisations need to provide a hybrid IT operating model that balances new and traditional capabilities against a continuously evolving set of business priorities. This will include reskilling the IT workforce, accelerating digital transformation, improving cybersecurity performance and establishing a composable computing landscape for agility.