For the oil sector, digitization and risk management processes are top areas of focus in today’s world.
Digitization is the process of converting information into a digital (i.e. computer-readable) format. The result is the representation of an object, image, sound, document or signal (usually an analog signal) by generating a series of numbers that describe a discrete set of points or samples.
While risk management is the process of identifying, assessing and controlling threats to an organization’s capital and earnings. These threats, or risks, could stem from a wide variety of sources, including financial uncertainty, legal liabilities, strategic management errors, accidents and natural disasters.
Recently, the Group Managing Director, Aiteo Eastern E&P, Victor Okoronkwo stated that financial leadership and risk management will remain the key areas of focus for upstream oil and gas companies.
Okoronkwo said this in a Wrap-Up Address he presented at the Society of Petroleum Engineers Oloibiri Lectore Series and Energy Forum (SPEOLEF) recently.
In the Wrap-up address, the Aiteo Group Managing Director observed that the oil and gas industry is still grappling with the aftermath of the crash in global oil price and collapse in demand which were triggered by the COVID 19 pandemic.
He stated: “This phenomenon has accelerated new paradigms in Portfolio Optimisation and Supply Chain balance in the industry. With the price volatility, geo-political tussle between Russia and Saudi Arabia experienced during the first wave of global covid lock down, financial leadership and liquidity risk management will remain major areas of focus for upstream oil and gas companies. Digitization and Big Data have also become key tools for success in the industry and will gain even more prominence in a post COVID era.”
According to him, the industry is not yet out of the woods, despite promising trends in price as influenced by OPEC+ production cuts.
He said: “The unprecedented discovery, approvals and now application of the COVID 19 vaccines, hopefully the pandemic would be contained and economies will start opening again.”
In his opinion, the lock down has demonstrated that, with increasing speed and capacity in connectivity (like 5G), digital tools are no longer just enabling communication.
“They are providing and indeed accelerating opportunities for value creation and value capture through enterprise integration, communication across multiple social media, remote monitoring, task automation, all to enhance operational efficiency, integrity, and process safety. So today, digitization is no longer an option but a fundamental requirement for companies to go leaner and to remain competitive particularly in this era of energy transition.”
The address emphasized that successful implementation of digitization will require collaboration across multiple industry stakeholders including investors, leaders and even policy makers”.
He added that digitisation will bring benefits like improved efficiency, cost reduction, improved quality management, transparency in decision making and so on.
He warned that digitisation also comes with some challenges such as data privacy and security, upscaling of existing regulations, standardization across platforms and the need for reskilling by the aging workforce.
Competitive positioning in the Upstream Oil and Gas sector, according to him, is hinged on the delicate tripod of cost, production, and price and that leveraging digital technologies in the post Covid world help embed a ‘value-for-money’ mindset, that companies will therefore remain agile and keep innovating and reinventing their strategies.