Refining the oil and gas value chain amid uncertainty

As the world emerged from the pandemic and record low levels of fuel consumption, oil and gas levels have rapidly recovered, with 2021 prices their highest levels in six years.

However, in 2022, despite high prices at the petrol stations, wholesale oil and gas prices have started cooling.

Fundamentally, demand remains strong, with economies picking up and the removal of border restrictions, along with an emphasis on capital discipline and particularly fiscal health.

However, more countries – even those that have been reticent to commit earlier – are now moving towards more assertive sustainability goals, including net zero and decarbonization.

Indeed, the United Nations Climate Change Conference 2021 (known as COP26) saw a global commitment to accelerating action on climate. More than 130 countries set or said they were considering a target of reducing emissions to net zero by 2050, and as of 2021, eight countries had self-declared that they had already achieved a net zero state.

Clearly, oil and gas players will need to rethink their existing business models to thrive, and simply relying on growing demand and raising prices won’t be enough. Instead, profit growth will need to be centered driving digital initiatives and digital transformation.

Challenges for operators to stay relevant amid these trends

The biggest challenge for oil and gas operators in the Asia Pacific region is striking the fine balance between ensuring security of supply and fiscal health in the context of net zero targets.

Oil and gas supply in many geographies is often government controlled, which means vendors have limited options to use traditional business levers to remain competitive.

They may find that they are unable to move their pricing freely to respond to international oil prices, which adds financial pressure to their business and it may stifle their ability to remain price competitive.

In turn, this complicates the case for investing in new projects that are aimed towards net zero and/or value creation.

Tech as an enabler for leaner, greener business models

While most operators have either developed or in the process of developing a net zero roadmap, not many have the capability to execute it.

AVEVA, the global leader in industrial software, believes implementing a net zero roadmap requires three key elements: carbon-aware planning, digital-twin based energy, and process monitoring and production accounting, that is tightly coupled with emission accounting.

Operators who can achieve this will have a competitive advantage while being able to balance profitability drivers, gas emissions and sustainable energy drivers, says Naveen Kumar, Vice President for Value Chain Optimisation, AVEVA.

Achieving these elements requires technologies integrated at every step of the value chain, including data analytics for planning, Industrial Internet of Things (IIoT) and Artificial Intelligence (AI) for monitoring, automation and business intelligence for accounting.

Some of the world’s largest oil companies are recognising the value in AVEVA to connect the power of information and artificial intelligence (AI) with human insight, to enable faster and more precise decision making, helping the industry to boost operational delivery and sustainability.

Indian Oil Corporation Ltd (IOCL), India’s largest integrated energy major, recently selected AVEVA Unified Supply Chain to digitalize its refinery and naphtha cracker scheduling workflows, optimize blend scheduling to meet daily product dispatch plans and provide end-to-end visibility across its operations, to drive its digital transformation and sustainability goals. 

In Malaysia, Petroliam Nasional Berhad (PETRONAS), also partnered with AVEVA to provide a modern enterprise solution that promotes integration across the entire value chain, as it is the only industrial software company that offers unified design applications across all supply chain activities, to run complex planning models at speed using the latest cloud technology.

BP improved its margins across its global downstream business, cutting crude purchase decision time from two days to less than two hours using AVEVA technology, and in Japan, Idemitsu Kosan transformed its refining operations with AVEVA’s Value Chain Optimization.

AVEVA’s Value Chain Optimization helps oil and gas suppliers counter market volatility with increased planning, greater control over forecasting, planning and scheduling. Increase refining margins and flexibility to lower business risk and create opportunities.