Resource Industry Digital Transformation

Part
01
of two
Part
01

Resources Industry: Digital Transformation Trends

Expected digital transformation trends in the resource industry include Artificial Intelligence (AI) and Cybersecurity. Drivers of AI include the need to obtain and interpret the massive and complex data available in the industry for effective production, solve the problem of an aging workforce, and reduce the threat to life for miners working in risky mine slots. The adoption of AI will also help to increase productivity as it will enable industries to optimize operations in more sites as opposed to using manual systems. Drivers of cybersecurity include digitization, which makes companies more vulnerable to security threats, and the surge of ICS-focused adversaries.

Trend 1: Artificial Intelligence

  • According to a PwC survey of CEOs of oil and gas companies globally, 80% of the CEOs agree that AI will transform the way companies do business in the coming five years. About 65% of these companies have either implemented or are planning to implement AI in their operations.
  • A report on the latest trends in the oil and gas market projects that by 2022, oil and gas companies in North America will provide the biggest market for AI. These companies will invest in AI to reduce their cost of production and increase production efficiency.
  • To get the benefits of AI technology fully, however, companies should access whether the data in their possession is adequate; that is clean, available digitally, right, and most importantly if its frequency and resolution go hand in hand with the variability of processes.

AI Trend Drivers

  • A January 2020 interview of JohnPaul Portelli, one of the Lead Technology and Innovation personnel at Canadian Natural, shed light on the value and drivers of AI. Canadian Natural is Canada's largest oil and gas producer.
  • According to JohnPaul, AI is driving the digital transformation trend because it enables companies to tackle large and complex data, which would be impossible to do using traditional methods.
  • According to the PwC survey, "Today, technologies centered around data are making an especially big impact. The industry produces a lot of data, and advanced analytics like machine learning and artificial intelligence (AI) give new ways of interpreting this and creating previously unknowable insights."
  • The need for a higher level of productivity is also driving AI technology. In the past, as JohnPaul says, "subject matter experts have only looked at their plant or specific area of responsibility, so you have people optimizing for their field. AI gives us some opportunity to optimize across a larger operation or collection of plants..."
  • Barrick Gold, the largest gold mine in the world, is also increasing the use of AI. The company is using AI to curb the issues of an aging workforce and the threat to the life of miners working in risky mine spots.

Examples of the Use of AI in North American Resource Companies

  • More than 30 oil and gas companies in Canada have used site-inspection AI to help them monitor their sites remotely. Such a system creates alerts and generates reports based on data from field devices. The result is a reduction in site visits by 50%.
  • A top Canadian company launched a 3-month pilot, where they installed sensors on 60 wells, all of which had connections to a remote optimization system. The result was a CA$1.50-per-barrel saving in operation costs.

Trend 2: Cybersecurity

  • While in the past, companies have focused their cybersecurity efforts on Internal IT systems, they are now increasing focus on operations technology (OT). OT includes software and hardware used in industrial processes. Any attack on OT can cause problems such as outages, safety concerns, and financial losses.
  • Nyrstar, a mining company that deals with metal mining and processing and has four operations in North America among other countries, reported being hit by a ransomware attack that targeted its servers.
  • "According to a survey, 68% of respondents have stated that their company had suffered at least one security compromise involving information loss or operational disruption in the past year (2017)."
  • According to a report on global AI and gas, the challenges that companies could encounter in implementing cybersecurity are "lack of awareness about oil and gas security solutions, difficulties in implementation for complicated operational technology, and the vulnerabilities associated with cloud technologies."

Cybersecurity Trend Drivers

  • The "growing trend of bringing your own device (BYOD) in the industry poses further challenges for the security infrastructure," is pushing companies to up their security efforts.
  • According to the PwC survey of CEOs, "59% of global oil and gas CEOs see cybersecurity breaches as a threat to their growth prospects. As assets become increasingly connected to the network, it’s important to protect critical digital infrastructure against cybersecurity attacks by monitoring threats, pinpointing vulnerabilities, building reliable controls, and promoting a culture of security awareness."
  • The increase in digitization of the oil and gas industry opens it up to cyberattacks, heightening the need to implement effective cybersecurity solutions. Such attacks include misuse by insiders, attack of web apps, and loss of property.
  • Oilprice.com reported a growing cyber threat to North American countries stating that "The complete “energy infrastructure sector” (e.g., electric, oil and gas, etc.) of all countries are at risk as companies and utilities face multiple well-resourced ICS-focused adversaries..."

Examples of the Use of Cybersecurity in North American Resource Companies

  • Chevron Corporation, which produces on and offshore oil crude oil and natural gas, has seen an increase in its productivity thanks to Microsoft's security-enhancing cloud services, including OneDrive and Office 365.
  • "Apache Corporation, a Houston-based oil, and gas company, with around three billion barrels’ equivalent of oil and natural gas reserves uses Microsoft’s customized and modified security framework that considers everything from physical to logical access to application security to data protection to data continuity needed in the industry."
You can find more information about digital transformation trends in the North American resource industry here.


Part
02
of two
Part
02

Digital Transformation Journey

The journey of the digital transformation of a company, especially in the resource industry, is not an easy process. The crucial steps to achieve it are to determine which challenges the company is going to face during this transformation, to elaborate an action plan, to make partnerships with expertise in digital transformation and lastly, to prepare the company's workforce to face the transformation.

Starting the Digital Transformation

  • According to data from Jabil, the first (and very crucial) step to begin a digital transformation for any company is to "determine what digital means to your company". Once that has been figured out, the company can make plans to determine which digital solutions need to be prioritized in the digital transformation.
  • In the resource industry, mining for example, digital transformation is a priority being applied at the chain production level. According to Accenture; "digitizing the whole mining value chain from mine to market allows for mining operations to reach outstanding levels of performance".

Two Important Steps to Achieve Digital Transformation

  • The next steps into the digital transformation of a company are to determine which new directions the company will take to achieve the digitization objective. It is also imperative to "make executive buy-in a priority". The executives' approval is crucial to assure a successful digital transformation of any company.

Making Partnerships with External Expertise

  • The fourth step and a big challenge for companies (because they often lack internal expertise on digital tools) is to search for people who specialized in digital transitions. 88% of survey respondents agree that business partners have a crucial role to play in the digital jump. This is according to a survey done by Jabil in 2018.
  • According to Accenture, mining companies need to broaden their ecosystem and recruit new personnel to achieve this digital transformation. An example of these providers of digital technology in the resource sector is precisely the Accenture company itself.
  • Accenture states the following about the resource industry and digital transformation: "Some are using crowdsourcing with outside parties to uncover new ideas about digital themes, others are forging strategic partnerships to develop technology roadmaps or improve operational efficiency in applying digital tools".

Preparing the Company's Workforce for the Transformation

  • In the previously mentioned 2018 Jabil survey, 37% of respondents consider employees pushing back against digital changes as a challenging factor in digital transitions. Preparing the company's workforce to the digital jump is among the most challenging steps into this transformational journey.
  • Generally, the employees are not comfortable with the transition to digital. However, it is important to "communicate the value of the transformation, remove individual doubts and provide adequate training".
  • According to Accenture, to achieve this goal, mining companies should "make strategic partnerships with companies in other industries to educate the workforce about computer technologies".

Achieving Digital Transformation is a Long Journey

  • The last step into the beginning of a digital transformation is to simply initiate the transition. According to the Jabil survey, only 8% of respondents reported having a fully digitized company, while 30% have a plan of transformation that is being executed and 31% are still working on the plan.

Research Strategy

Your research team searched on trusted and official websites like Jail and Accenture. Jabil is a company specialized in providing digital technologies with a huge presence in states like California, North Carolina and Georgia. Accenture is a company specialized in digital transformation focused in the resource industry like mining. It is important to mention that some sources are more than two years old. However, the information is not affected since it is reliable and the insights corroborate information provided in recent sources.

Sources
Sources

From Part 01
Quotes
  • "Today, technologies centred around data are making an especially big impact. The industry produces a lot of data, and advanced analytics like machine learning and artificial intelligence (AI) give new ways of interpreting this and creating previously unknowable insights."
  • "Leading up to the commodity price decline in late 2014, technology investment focused on growing production and reserves. Since then, the focus has shifted. Cost containment, operational efficiency and improving environmental performance have taken precedence. These have let Canadian resources maintain compliance with stricter regulatory requirements and compete in global markets."
  • "The way industry leaders view their organizations has also shifted. No longer just considered an energy business, they’re now in the manufacturing business. Margins and return on capital have become important metrics of success, and technology is seen as an opportunity to lower unit costs as production has increased"
  • "CEOs have named technological advances as the top global trend that has transformed their business the most within the last five years, a trend likely to continue."
  • "59% of global oil and gas CEOs see cybersecurity breaches as a threat to their growth prospects. As assets become increasingly connected to the network, it’s important to protect critical digital infrastructure against cybersecurity attacks by monitoring threats, pinpointing vulnerabilities, building reliable controls and promoting a culture of security awareness."
Quotes
  • "subject matter experts have only looked at their plant or specific area of responsibility, so you have people optimizing for their field. AI gives us some opportunity to optimize across a larger operation or collection of plants..."
Quotes
  • "The complete “energy infrastructure sector” (e.g., electric, oil and gas, etc.) of all countries are at risk as companies and utilities face multiple well-resourced ICS-focused adversaries..."
Quotes
  • "According to a survey, 68% of respondents have stated that their company had suffered at least one security compromise involving information loss or operational disruption in the past year (2017)."
  • "Increase in the expenditure by oil and gas companies on the network and operational technology security and increased trend of security and vulnerability management have bolstered the growth of the oil and gas security market. Moreover, the growing trend of bringing your own device (BYOD) in the industry poses further challenges for the security infrastructure. "
  • "Apache Corporation, a Houston-based oil, and gas company, with around three billion barrels’ equivalent of oil and natural gas reserves uses Microsoft’s customized and modified security framework that considers everything from physical to logical access to application security to data protection to data continuity needed in the industry."