Downstream Industries Embrace Digital Transformation

Overview

Delegates from companies operating in the petroleum and other process downstream industries met at ARC Advisory Group’s recent Fifteenth India Forum.  The theme, Industry in Transition: Realizing the Digital Enterprise, is relevant today as digitization is redefining business processes and models in a connected world.

The presentations focused on new technology trends and how process industry companies must be willing to embrace disruptive technologies and take the next step forward by adopting new business models and processes for operations, maintenance, and across the value chain. 

This Insight captures the key points of the presentations by Vikas Deshmukh, Vice President, Technology Center of Excellence, Reliance Industries Limited; and Himanshu Vyas, Senior Vice President, Aditya Birla Group. Mr. Deshmukh spoke about digitization in India’s downstream oil & gas sector and the challenges it faces; and Mr. Vyas spoke about the digital transformation of the chemicals/petrochemicals sector.

Impact of Digital Transformation on Innovation and Operational Excellence  

According to Mr. Deshmukh, the key operational metrics for process industries - upstream and downstream - include reducing operational and maintenance costs, mitigating risk, and optimizing production.  Upstream, maximizing ultimate recovery of booked reserves is an additional metric.

He observed a big “digital data gap” in oil & gas, since the sector is data intensive, but has an unconnected and disparate value chain.  He opined that technology-enabled disruptions such as Industrial Internet of Things (IIoT), data analytics and machine learning, virtualization, and automation will help close gaps over time and drive the industry toward what he referred to as “intelligent energy.”

Innovation requires knowledge, and a digital enterprise is an organization that uses technology as a competitive advantage and integrates information, processes, work, and people to bring about organizational change and drive efficiency and productivity, he said.  He cited Uber as an innovation that created a $60 billion market.  He said that digital technology is the main reason just over half of the Fortune 500 have disappeared since 2000. 

The Digital Journey for Process Downstream Industries

The journey of digitization for the downstream refining/petrochemicals sector began in the late ’70s, but is yet to reach its full potential.  The prerequisite connectivity and data model must be achieved in a safe and controlled manner.  Industrial communication protocols have been well-established in industry to help connect smart instrumentation, systems, and applications.  New approaches like the Industrial Internet of Things (IIoT) and Industrie 4.0 offer the potential to further improve operational efficiency and asset performance and availability.  From the business point of view, the focus is changing from “maintaining business” to “growing business.”  And models are rapidly moving toward consumption-based models in which technology users would rather pay for the capabilities they actually consume, rather than just buying technology that they must pay for upfront, implement, maintain, upgrade, and – ultimately – replace with newer technology.

Mr. Deshmukh provided an overview on how the challenging environment created by low oil prices makes this an ideal time for companies to consider investing in IIoT-enabled solutions such as advanced analytics and machine learning, cloud computing, and collaborative communications. As we proceed into the next phases, we are seeing exponential innovation with new technology surging past the status quo.

However, he cautioned the audience that most operating companies are in the extracting, producing, and/or refining business; not the complex system integration and analytics business.  As a result, he stressed the need to work with technology partners that possess both deep domain knowledge in oil & gas and expertise in analytics, engineering, and complex system integration.  

Driving Results with Analytics

Mr. Himanshu Vyas talked about how analytics helps drive results via intelligent operations by increasing uptime, improving productivity, making maintenance cost-effective, and enabling a viable digital operation.

According to Mr. Vyas, the industry is ripe for opportunity by leveraging analytics and developing the culture that fosters innovation and operational excellence, especially in this “lower for longer” oil price market.  He talked about how the digital world requires industry to change the way it will do business going forward.  The key is to think about the problems that need to be solved as well as apply analytics effectively to solve them.  He also spoke about how several oil & gas and process companies have been trying to develop and implement digital connectivity for operations for over a decade now, but only since the recent advances in analytics have they begun to make any real progress toward the goal of integrating their previously siloed operations.

He posed a question to the audience: “If the benefits truly are large and game-changing, why are the many technological implementations not delivering on their full potential?” Mr. Vyas highlighted the following technical pitfalls of data analytics and digital connectivity in process industries:

• Poor raw data quality
• Outdated measurement and control instrumentation
• Lack of industry and domain knowledge
• Underlying infrastructure limitation
• Lack of data system maturity to support future vision

• Difficulty transferring data from one system to another

Mr. Vyas said, “When disruption happens, it happens fast,” and that “the convergence of physical, digital, and virtual worlds will be the true realization of Industrie 4.0.” He believes business strategy and operational excellence should be “linked like Siamese Twins.”  Gauging from customer responses, the inhibitors to adopting advanced controls and other new technologies in the process industries include:

• It’s too complicated
• No one will understand
• No one else will be able to support it
• It will cost a lot and be hard to justify

• We've gone this long without needing advanced controls, so we don't need it

He believes these responses make it evident that what is needed now is a change of mindset and the willingness to embrace disruptive technologies.

Conclusions

ARC’s India forum provided delegates with useful information about how digitization, IIoT, and Industrie 4.0 are reshaping the business environment.  Digital transformation is starting to change the conventional business models to consumption-based models (such as software as a service or product as a service).  However, there is some reluctance for industrial organizations to adopt new ways of doing things, as most organizations prefer to maintain established practices.

The strategies discussed at this and other ARC Industry Forums are intended to promote thought leadership and embrace the underlying value proposition of incorporating digitization in process industries.  A change in corporate mindset, technological collaboration and agility is the way forward in a digital world.

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Keywords: IIoT, Analytics, Digital Transformation, Oil & Gas Downstream, Refining Operations, Process Industries, Aditya Birla Group, Reliance Industries Ltd., ARC Advisory Group.