Operational Efficiency and the Digital Performance Model: Achieving Sustainable, Long-term Growth in APAC

Operational Efficiency and the Digital Performance Model: Achieving Sustainable, Long-term Growth in APAC

May 31, 2024
Time to read: 8 minutes
Haavard Oestensen

Catch Haavard at the Asia Pacific Energy Assembly on 5 June at Raffles City Convention Centre, Singapore:

  • 09:55 local time CCUS Panel: Creating a Value Chain for CCUS – Strategies for Implementation and Utilisation
  • 11:05 local time Technology Keynote: How companies can enhance performance and resilience by applying a Digital Performance Model & an Industrial Work Surface

Now more than ever, the upstream industry is under pressure to manage regulatory and stakeholder decarbonisation expectations in tandem with a lack of regulation, high volatility risk and free cash flow requirements. This squeeze is especially felt in the Asia-Pacific (APAC) region where plans (and incentives) to decarbonise are lacking and O&G firms are taking a reactive stance toward new energy.  

The APAC region supplies just 10-15% of global oil and gas needs, yet according to a McKinsey scenario holds the potential to account for 55% of global CCUS by 2050. At the same time, a heavy reliance on fossil fuels means that APAC operators are lagging behind in diversifying towards cleaner energy sources.

APAC trailing behind in setting net-zero targets

Most O&G companies in the region are still in the early stages of setting net-zero targets, and an investment landscape marked by uncertainty for upstream APAC activities has resulted in state-owned producers stepping in to boost domestic production – in turn encouraging planned expansion of even more O&G capacity across the region, exacerbating the net-zero and financing challenges already present as lenders, investors and finance facilitators adjust their policies to adhere with looming net-zero regulations.

Can divestment help?

While divestment is an option, for onstream assets this strategy passes the decarbonisation problem down the line. Scope 1 and 2 emissions from upstream installations generate around 3.4% of global emissions, with high CO2 projects in Asia driving this up to nearly 20% of total emissions due to venting.

And although O&G upstream operators in most countries are not yet subject to carbon prices, evolving regulations (like the recent UK Emissions Trading Scheme reform package) increase requirements for emission monitoring and associated monetary obligations.

Operational excellence as a solution

The most promising strategy for operators to address these challenges? Scale operational excellence through the consolidation of resources by acquisition and increasing reserves, powered by digitally enabled performance models infused with Artificial Intelligence.

How operators can benefit from digital technologies:

  • Leverage the multiplying factor of scaling best practices, with a focus on digital by design and digital performance models that centre on repeatable, scalable activities.
  • Increase access to open ecosystems that cultivate industry-level best practices in digital and de-risk and lower the cost of R&D.
  • Balance increased energy demand with the need for stable, reliable energy production
  • Scale operational excellence during consolidations by applying standardised and streamlined digital ways of working to any asset.
  • Introduce CCS/CCUS technology to offset/minimise the impact of emerging fiscal policies.
  • Make long-term investments in digitally powered energy transition initiatives for stable long-term returns.
  • Benefit from opportunities to implement AI for increased operational resiliency, efficiency, and sustainability with accelerated availability of free cash flow.
  • Leverage digital technology to alleviate a present-day challenging reliance on talent in a region that struggles to secure skilled technical and engineering expertise for operations by augmenting human decision-making with AI and machine learning models.

This is an opportunity to harness digital technologies such as digital performance model-enabling digital twins with ubiquitous analytics such as simulation, virtual sensors, Generative AI and machine learning. In doing so, challenged APAC operators may leapfrog competing regions by taking a bold digital stance.

For the APAC region, digitalisation is the dragon’s dance

In addition to addressing operational challenges as outlined above, digitalisation offers operators improved data-driven cash flow predictions for new capital projects, especially in the form of assets designed to be digital from the design basis. With many planning-stage projects positioned to expand energy production capacity (new build projects constitute 77% of the total projects planned for the energy value chain), operators may now grasp the opportunity to achieve world-class performance through building the digital asset first, connect data across the lifecycle of the asset as it is built and implement a digital performance model – whether for O&G or renewable projects.

At a glance: Key planned APAC developments

Between now and 2026, the Asia-Pacific region expects to have over 2000 projects begin operations. The breakdown:

  • Upstream: 249
  • Midstream: 506
  • Refineries: 209
  • Petrochemicals: 1066

Source

By constructing an investment model that accounts for the gains of a digitalised asset from the FEED and design phases, cash flow can be unlocked, resources managed more realistically and the pressure for on-site skilled workers lowered. The ultimate result? Higher asset valuations, better lifecycle NPVs and more sustainable long-term operations.

Learn more about the benefits of a digital-first approach to LNG facility construction.

Building a digital hedge against volatility

While technology can’t change or lobby regulators, it can build a safety net against regulatory, fiscal and geopolitical disruptions by enabling a digital performance model that accelerates projects and lowers operating cost requirements.

We’re not talking about technology as an add-on with shiny dashboards and graphs. Nor are we advocating “data and AI” as a silver bullet – in fact, we tend to experience great frustration amongst operators when applying a “data first” strategy, which tends to become a “data-only, value last and often, too late and too little” story. Time and again, digital transformation efforts have struggled to meaningfully scale and deliver the promised impact. Many companies struggle by taking a waterfall linear bottom-up approach with a focus on broad data transformation.

We are talking about a complete restructuring of how companies work, creating a digital delivery framework infused with AI and other high-performant emerging technologies that enable closed-loop, scalable end-to-end services ripe for automation.

A focus on value-driven decision-making

According to a recent article by Pascal Bornet in Forbes, quality decision making is 95% correlated to financial performance. In a nutshell, operational decision-making coordination takes place between the strategic management and tactical execution layers, and it is here that scalable operational events – like shift handovers, pump maintenance and filter changeouts – can be digitalised to link insights to actions and outcomes.

And with a digital performance model in place to coordinate workflows and tie business goals to asset management and on-the-ground execution, a business becomes increasingly autonomous and predictively managed. High-level metrics and value can be correlated directly to reduced downtime, improved energy efficiency, higher performance, and lower costs.

See our free executive webinar about the digital performance model (DPM) concept here.

Place this architecture within an Industrial Work Surface – a digital twin environment that mirrors real world assets, whether brownfield or greenfield – to equip workers with an intuitive, interesting way to execute work, augmented by AI and machine learning. The benefits: optimal decision-making, an attractive workplace for new talent and the ability to scale quality decision-making (horizontally and vertically) across portfolios of assets.

A real-world example

For one major operator in a remote location, introducing a digital performance model at a multi-billion-dollar LNG facility – with a focus on remote digital services and AI-supported service automation – led to a significant increase in efficiencies and enabled on-site staff to focus on higher complexity challenges, with a multiplier effect on comparisons of equipment performance, preventative maintenance and operational optimisations. As the construction phase draws to a close, the digital twin continues to support workers in preparation for handover to business operations and will serve as the key enabler for the company’s digital performance model.

A promising path ahead

The upstream industry in APAC faces significant challenges, but not ones that can’t be overcome. Setting net-zero targets, improving production (for NOCs, IOCs, brownfields and greenfields) and keeping up with industry shifts become possible with digital technologies that promote sustainable operational excellence through a digital performance model.

About the author

Operational Efficiency and the Digital Performance Model: Achieving Sustainable, Long-term Growth in APAC

Haavard Oestensen

Chief Commercial Officer at Kongsberg Digital

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