Gazprom Neft – paving the way to a digital future

Forbes

Forbes

Russian oil major Gazprom Neft is committed to following current trends in evolving digital technologies. The company operates in all of Russia’s main oil and gas regions, selling its products throughout the Russian Federation and to more than 50 countries abroad.

Alexei Vashkevich, Director of Geological Exploration and Resource Base Development, Gazprom Neft, is convinced that oil companies have to develop strategy by identifying opportunities for adding value, and selecting solutions to be used in digital transformation. "When we first began work in this area, we had about 200 ideas for implementing digital technologies. We then decided to rank these in terms of maximum potential for adding value, but quickly understood that we couldn’t do that, because of the complexity and the high level of concomitant uncertainty. Added to which, we didn’t have any experience in that kind of work.

“So, accordingly, we changed our approach, starting from the point of choosing opportunities for adding value in geological exploration projects through digital technologies. And only then did we start developing concrete, specific solutions. Many companies have a go at investing in developing their own basic digital solutions — which says something about their lack of understanding as to what the promising areas of development in terms of adding value actually are. If you understand what, precisely, you need digital technologies for, and how, exactly, they’re going to help add value, you can use ready-made solutions.”

The digital vortex

According to Alexei Vashkevich, today’s business environment is consumed by digital fever and is, to a great extent, under the influence of tech giants like Google and Alibaba, which are preaching a new approach to doing business, with everyone else having to take this as a universal recipe, apply it — and success is guaranteed. But Alexei points to the need for a critical assessment of examples like these. "We call this the digital vortex — which all such companies, one way or another, get sucked into. Digital transformation is vital to their survival. So today you can’t call yourself a decent bank without mobile apps, instant money transfers and a high level of security.

"But it’s important to understand that digitisation is still an opportunity- and not a survival-strategy. We have a vision for the next 10 years, and that’s not part of it. From the point of view of any company’s finance division or business development department, the strategic objective for the next 20 years lies in taking business performance to a certain level — and digital technology isn’t part of their plans.

“We have plans in place regarding digitisation, but our survival will be possible without digital technologies — that’s just a further plus. From that point of view, it’s extremely important to understand that our approach to digital transformation, to organisational change, and to motivating staff, has to differ from those in other industries.”

The classic triangle

This has to be the answer to the ever-increasing challenges companies face. Resources at the largest onshore field discovered in Russia last year totalled 210 million barrels. As recently as 15 years ago an average three fields, with volumes of around a billion barrels, would be discovered every year. “Technical limitations have to be addressed, but the question is — what efficiency improvements can be delivered at the limits of technology?” explains Vashkevich. “When it comes to technology, we constantly come up against the classic triangle of “price — quality — and time”, whereby, of these three criteria, you can only choose two. If you choose speed and quality, you can’t do things cheaply, but if you choose speed and cheapness you’re probably going to have to compromise on quality.

Many industries have successfully overcome this problem. In consumer electronics, for example, devices are getting cheaper and cheaper, and, at the same time, more reliable, and the production cycle is getting shorter. “They’ve found a solution, somehow, and not just them — there’s an entire mass of examples in various industries” adds Alexei. "I think digital technologies will, ultimately, provide the key to the problem of improving efficiency.

A focus on exploration

“After meeting with representatives from companies successfully using digital technologies in operational processes, as well as with consultants and software developers, it became clear that existing technologies could be of greater benefit if they were used in the later stages of field development. In-depth analytics and digital twins are, as a rule, used in development and production, but the most expensive and challenging stage — is exploration.

“If anything, exploration is associated with the highest costs” remarks Alexei Vashkevich. “In fact, this is the point at which we get the bulk of the data and add most value — about 80 percent from the minute we stop work. So we all, one way or another, understand that there’s a disconnect here, and that the potential of digital technologies remains untapped.”

The way to simplification

Exploration is a lengthy process: from starting seismic works to completing a geological model takes, on average, about 18 months. “We want to cut that time by two or three months” continues Alexei. "There’s a multitude of digital apps, but most work on these is undertaken by people, with the results obtained being passed from stage to stage.

"These data need to be simplified. At the end of the exploration cycle we have about 10 percent of the data remaining, to be transferred to the next stage of development — drilling and production. Our main job has always been in obtaining the maximum amount data at the very beginning of the work, and simplifying this, while holding on the majority of information obtained.

"We need to start thinking the other way round. As we all know, you don’t need a fully-fledged geological model to start drilling — it’s enough to set certain parameters. Can you get those parameters from basic data? Can you manage interpretation of seismic data in such a way as to make the data available online — without geological modelling as an unavoidable midway stage?

“Then you have to ask — if that’s the case, if there’s genuinely potential here, who’s going to change the situation for the industry? Will it be the service companies? I don’t think so. Software developers, maybe, who are already presenting efficiency improvements in the order of three, four or five percent as an achievement? Also unlikely. Exploration teams at oil companies or regulatory agencies? Probably, because that’s where change needs to start. There is potential, and it’s huge. We have the tools to make it happen. The main question now is how to initiate all these changes. And here, in my view, cooperation comes to the fore”.

Source — Forbes.