This panel recap and review was contributed by Jesus Bouzada, Beyond Limits’ Product Manager, Refinery, from his own expertise, perspective, and point-of-view.
Last September, Hydrocarbon Processing hosted the IRPC Americas conference. On the second day of the conference, there was a panel discussion on digitalization. The purpose of this review is to assess the state of digitalization in the energy industry, covering the panelists’ observations and my own views, as Beyond Limits’ Refinery Product Manager, on some of the topics. Throughout the review, you will learn how Beyond Limits can help you in your digitalization journey.
Lee Nichols, Hydrocarbon Processing Editor-in-Chief, facilitated the panel. Panelists included Ron Beck, Aspen Technology Market Strategy Director, Joe McMullen, AVEVA Value Chain Optimization Marketing, and Marty Gonzalez, bp Discipline Leader – Intelligent Operations. I have the pleasure of working with Marty on regular basis as part of the implementation of Beyond Limits technology in bp. I regard Marty as a true innovation leader in the energy industry. So, I am really pleased to write about this topic.
First and foremost, let us agree on what digitalization means in this context. Digitalization is a loaded word that has been used with different meanings. Gartner describes it well for the purpose of this panel: “Digitalization is the use of digital technologies to change a business model and provide new revenue and value-producing opportunities.”
During the panel, the impact that the current environment is having on the industry, with COVID-19 and its consequences on the economy, was discussed at different times. Joe also warned of other challenges the industry will undoubtedly face going forward including another pandemic, regulations, disruptive innovation, and renewable energies.
Joe quoted Leon Megginson, a 20th-century economist. Mr. Megginson wrote that “It’s not the strongest of the species that survives but the most adaptable.” Panelists agreed that the ability to be agile will set apart the companies that survive.
In Joe’s opinion, improving collaboration leads to agility. He said that what’s important to a successful digital transformation is understanding where your silos are and where you can improve collaboration. I agree that collaboration is critical, and I would add transparency as another important factor. However, I believe that agile is a mindset (based on agile principles). It is a different way to do business, so organizations that want to become agile need to go through a culture shift.
Whether we want it or not, things are changing. The key to agility is to embrace change. This takes us back to the definition of digitalization: “… the use of digital technologies to change… “ Digitalization is not about technology, but about how technology enables change in the business. Digitalization is a transformational tool for agile organizations, especially during a rapidly changing, ambiguous, turbulent environment like the one we live in today.
Tech is part of our everyday lives, and the new generations coming into the workforce have been raised surrounded by technologies. Embracing technology becomes not only a matter of running a more profitable business, but it becomes a matter of tapping into the talent pool of the new generations and, in essence, staying in business.
Challenges to Digitalization
In other disciplines such as software development, which I know very well, or even car manufacturing, embracing change is in their DNA.
As an example, Toyota paved the way for the car manufacturing industry with its Toyota Way mindset. Other car manufacturers followed suit and the Lean movement was born. Lean heavily influenced the Agile methodologies of today that are widely spread when it comes to software development.
Many other industries, including Oil and Gas, have tried to embrace the Lean way of thinking. However, the way of thinking “if ain’t broke, don’t fix it” is ingrained in more risk-averse industries like Oil and Gas. Nevertheless, things are changing. The recent crises, first the 2015 downturn, and now COVID-19, have served as a wake-up call. Crises can also be seen as opportunities.
Beyond the overall industry attitude towards technology and innovation, the panelists discussed more specific challenges when it comes to adopting technology in the industry.
On the one hand, Joe listed three key adoption hurdles and how to overcome them. These included:
As a Product Manager, I relate very much to what Joe said. I see everything as a product (e.g.: technology implementation, a professional service, the software development process…), but that is another conversation. He touched on things that are critical to product success. The problem statement is the very first thing I identify when working on products or features. Identifying users comes close after. In B2B, the person buying the product is typically not the same as the person using the product. You need the buy-in from both. Something that Joe did not mention is the success criteria. You need to know both the problem and whether or not you are solving it. Finally, our customers’ problems are our problems at Beyond Limits. We are with them in every step of the digital transformation journey. We do not believe there is any other way to do business.
On the other hand, Ron talked about hurdles specific to AI readiness for refineries. These included:
I talk from experience when I say that transitioning Oil and Gas companies to the cloud is not easy. The key is trust; maintaining the close vendor-customer partnership that I mentioned above. At Beyond Limits, we have successfully helped a number of customers to adopt our AI technology on the cloud. Safety comes first in the refineries. Amplifying operators’ capabilities through AI can actually mitigate risk. Our mission is to create automated solutions with human-like powers of reasoning that amplify the talents and capabilities of people.
The State of Digitalization
Despite the challenges described in the previous section, the industry is moving towards digitalization. Marty gave us a good idea of where leading companies like bp are in terms of digitalization.
To begin with, bp diversifies its innovation strategy. The strategy consists of three different avenues. bp ventures spent $650 million on about 40 startups to nurture growth. This is a very common approach that corporations take (e.g.: Google Ventures, Intel Capital), referred to as corporate venture capital. This approach helps to minimize risks and to accelerate innovation since startups lack the overhead of big corporations. Another avenue for bp is a mechanism for internal development called Launchpad and its associated incubator. Lastly, bp has been innovating for a long time in little pockets.
bp fuels innovation with the aforementioned approaches. It is then critical to assess whether innovation is bringing value. Marty explained what bp is doing to show value to leadership. To any leadership, you have to address their specific needs and concerns, and try to connect to what value really means to them, Marty said. In refining, it is about time-to-value, and value is measured in terms of volume of fuels sold and the margin associated. He added that because feedstock is purchased well in advance, it is difficult to clearly show the value provided by digital implementations. What bp is doing to overcome this is to increase decision making by providing greater insight, more measurement, and increased transparency. This boost in confidence increases those decisions that lead to greater value.
Marty then talked more specifically about how bp is using AI in its refineries. He touched on a couple of drawbacks of process controls. One is how constraint management is handled in process controls. The constraints have to be prescribed. Instead, the machine could observe within the data when it has reached a constraint. Another drawback is that operators tend to turn it off because they may not trust what they are being told to do. In other words, they lack explainability. Marty then talked about how bp is using Beyond Limits’ technology to support operational decision making. Beyond Limits’ technology provides explainability, he added. Traditionally, operators need to dig through large volumes of data. Beyond Limits’ technology solves that by informing them of the next best action they can take in the moment. As a result, operators have an increased opportunity to iterate on decisions very quickly. Marty summarized the value provided by Beyond Limits saying that: “the way that expert did it, that can now live forever.”
In addition to Marty’s comments, Ron also introduced a couple of things that are currently being done to digitalize refineries.
Ron talked about the role that digitalization is playing for refinery maintenance and turnarounds. In his opinion, that is the area advancing the fastest. Predictive maintenance has led to a change of strategy in which routine inspections and maintenance have been minimized. Refineries went from reactive TAR to proactive ongoing maintenance.
He also built on Joe’s point about enabling collaboration to become more agile. One large refiner in the US put together cross-functional pods in their refineries so that different people from different disciplines – a planner, a process control engineer, an optimization engineer, an operator – could all work in one pod to address problems. Ron elucidated that these new ways of thinking are good paths for taking advantage of opportunities.
How to Enable Digitalization
Despite challenges, we have seen that the digitalization journey is indeed underway. Nevertheless, there is an ocean of opportunities to advance on that journey. The three panelists talked about what refineries should do to accelerate their digitalization initiatives.
Joe urged refineries to be strategic about adoption. He suggested refineries should adopt technology that helps to accelerate workflows; to first focus on technology that automates processes and gets plant personnel out of the plan. He talked about how cloud computing can enable accessibility beyond the plant and, more importantly, how it can scale running scenarios. By scaling, artificial intelligence and machine learning are also enabled. When it comes to real-time optimization, Joe mentioned that refineries prefer to keep new technologies in the open loop, as opposed to the closed loop in which machines have direct control of the operations. Joe said that “Doing closed loop didn’t necessarily always take because the culture wasn’t ready to buy in. They wanted to keep it open, be instructed about what the possibilities were, and then they could choose.” That is an approach that I have personally advocated for. Our technology equips operators with the right information at the right time so they may make better decisions that lead them closer to the initial, more optimal, performance plans.
The cloud makes it possible to process the amount of data that refineries handle today. Most of that data comes through sensors deployed all across the plant. On the topic of sensors, Marty talked about his view of how refineries could better utilize and manage the vast amount of data coming from the sensors. He encourages good stewardship of data in terms of building the architecture, making it accessible, making sure that the data models are good, and that the data is going to be used responsibly. So, ultimately, data yield value.
Finally, Ron touched on a topic I mentioned earlier, something I consider critical for the years to come – recruiting young workers. Within five years, 75% of the workers are going to be digital natives, Ron said. New generations do not have a positive view of the energy industry. In Ron’s words, “it’s a bunch of dirty machines out there creating carbon in the atmosphere.” I completely agree with Ron in that ease of learning and use are critical to adoption. Therefore, they are critical to digitalization. He said that today it takes seven years for an engineer to be fully skilled. That number needs to be drastically reduced to one or two years if energy companies want to avoid engineers fleeing to other industries. Digitalization will do that, he added. This ties back to my earlier argument: why digitalization. More specifically within digitalization, I consider that thoroughly designed user experiences – and the ability to access applications from mobile devices – will be must-haves if the industry is to entice new generations. This is especially relevant now, considering the workforce has become even more widely distributed as a result of the pandemic.
Ron also talked about digitalization being the democratization of decision making. This topic is fascinating to me. This is closely related to Joe’s point about collaboration. Both democratization of decision making and collaboration are traits of agile organizations. As Ron also said, people coming into the workforce demand to be able to make decisions; organizations need to accommodate that. Digitalization enables agility, which in turn allows people to distribute the right decision-making to the right levels at the right time. An example of technology that enables democratization is our technology at Beyond Limits. Ron is a big proponent of adopting AI for cognitive guidance with difficult solutions like optimization, planning, and design. That is precisely what Beyond Limits’ technology provides.
Lastly, Ron discussed the role digitalization is going to play in the refining industry’s upcoming sustainability initiatives. As some in the industry are targeting net zero emissions (e.g.: bp and Shell), technology and digital solutions are going to be absolutely crucial to companies setting out to accomplish those targets, Ron said. He paid special attention to fugitive emissions, so refineries know – and/or have an accurate account of – where the emissions are (e.g.: carbon or mass balance). At Beyond Limits, we are committed to helping our customers achieve environmental sustainability. We are putting our technology into service with the goal of helping to reduce our clients’ environmental footprints.
Digitalization for Agility, Collaboration & Democratization in Energy
I started this review by explaining why organizations need digitalization. This comes down to survival tactics amid challenging times, especially for the energy industry. With the help of our panelists, I introduced you to the challenges that the industry is facing to embrace digitalization. Challenges that resemble those I am very familiar with, those of product management. Challenges that we, at Beyond Limits, have experience overcoming for our customers. Then, I went through what the industry is currently doing, to which Marty had some incredibly powerful examples from bp – like how they are using Beyond Limits AI to digitize expert knowledge so “the way that expert did it, that can now live forever.” I closed the review with the panelists’ recommendations to the industry on how to accelerate digitalization. The key is embracing technologies such as cloud computing and artificial intelligence that will enable agility within the organization and, as a result, increase collaboration and democratization of decision making.
This featured post was written by Jesus Bouzada, Beyond Limits’ Product Manager for the Refinery Operations Advisor. Jesus has 15 years of international experience in Oil & Gas product development. Prior to Beyond Limits, Jesus worked with Schlumberger. Jesus combines his technical background with a Computer Engineering degree, and business background with an MBA from the University of Houston.