Integrating digital transformation with decarbonization in the upstream sector

Obioma Levi-Johnson and Shane Fitzsimmons, KBC (A Yokogawa Company)   

Digital transformation and decarbonization, once seen as separate trends, are now recognized as interlinked forces shaping the future of the oil and gas industry. As global concerns over carbon emissions escalate, sustainability has become a top priority for companies in this sector. To tackle these challenges, companies are strategically leveraging digital technologies to reduce carbon emissions and achieve their sustainability goals.  

Digital transformation serves as a catalyst that enables upstream oil and gas companies to adopt sustainable practices, driving more efficient and data-driven operations that ultimately reduce emissions. This article aims to introduce strategic insights and solutions for companies in the upstream oil and gas sector by showcasing a real-world use case that demonstrates the practical applications of digital transformation in saving energy and emissions.  

Why decarbonize? Decarbonization and energy transition are vital strategies fostering sustainability. Details from the IEA’s World Energy Outlook 2023 show that oil and gas operations account for 15% of total energy-related emissions globally, which is about 5.1 billion tones (Gt) CO₂-eq in 2022 of greenhouse gas (GHG) emissions. 

Decarbonization involves reducing or eliminating carbon dioxide (CO₂), methane, and other GHG emissions, while energy transition aims to shift towards cleaner energy sources. By analyzing key levers for emission reduction, this article provides insights for oil and gas companies seeking to embrace sustainable practices. 

Decarbonization strategies. Decarbonizing the upstream oil and gas sector requires changes in exploration and production, energy generation, and consumption. The four primary levers for reducing emissions include adopting low-carbon technologies, improving energy efficiency, integrating renewable energy, and implementing circular economy practices like recycling and reusing materials and adopting circular supply chains. 

Decarbonization and energy transition are crucial for CO₂ emissions reduction. By implementing strategic approaches, the upstream sector can reduce emissions and promote sustainability. Figure 1 shows the four levers that can reduce emissions in the upstream oil and gas sector. 

LEVERS OF DECARBONIZATION IN UPSTREAM OIL AND GAS 

Transition to renewable fuels. The shift from fossil fuels to renewable sources is crucial for sustainability. For upstream oil and gas operations, this can involve installing solar panels or wind turbines at drilling sites to power operations. Additionally, companies can purchase renewable energy to power their rigs and production facilities, reducing reliance on traditional energy sources. 

Hydrogen and decarbonized fuels. Hydrogen presents a promising alternative fuel for upstream operations. By producing hydrogen through electrolysis using renewable electricity, companies can create decarbonized fuels that can be used for powering drilling equipment, transportation, and other field operations. This approach helps to minimize the carbon footprint of upstream activities. 

Zero costs and circularity. Implementing circular principles involves reusing and recycling materials and energy within upstream operations. For example, water used in hydraulic fracturing can be treated and reused, reducing the need for fresh water. Additionally, waste materials from drilling can be repurposed or recycled, minimizing environmental impact. The concept of zero costs focuses on optimizing these circular processes to reduce waste and financial expenses, promoting sustainability in exploration and production activities. 

Process improvement and efficiency. Enhancing the efficiency of upstream processes is key to reducing emissions. By integrating digital technologies, such as real-time monitoring, advanced analytics, and automation, companies can optimize drilling and production operations. These improvements can lead to reduced energy consumption and lower emissions, aligning with decarbonization objectives. 

Enablers for decarbonization. To achieve decarbonization goals, upstream oil and gas companies often rely on several enabling factors: 

• Innovation: Developing and implementing new technologies that support decarbonization in exploration and production. 

• International collaboration: Sharing knowledge, resources, and best practices with global partners to drive industry-wide change. 

• Digital transformation: Leveraging digital tools and technologies to enhance sustainable practices, improve efficiency, and optimize operations. 

By focusing on these levers and enablers, upstream oil and gas companies can significantly reduce their carbon footprints and contribute to a more sustainable energy future. 

Digital transformation. Digital transformation leads to more efficient production activities, energy saving, and decarbonization. According to the World Economic Forum, digital technologies can lead to emissions reductions of up to 20% by 2050.  

This reduction includes 8% in the energy sector, 7% in the materials sector, and 5% in mobility. In hard-to-abate sectors, such as energy, materials and mobility, emissions are largely driven by poor efficiency and high levels of fugitive emissions. Digital technologies can significantly support operational improvements and drive efficiencies throughout the value chain.  

What is digital transformation? Digital transformation refers to the comprehensive integration of processes, people, technology, and data to modernize and streamline operations. It enables companies to move from traditional, manual processes and embrace automation, efficiency and reliability.  

Key components of digital transformation include enhanced data management, predictive analytics, process optimization, and digitalizing operations. Digital transformation in upstream oil and gas involves integrating advanced technologies to modernize and optimize exploration, drilling and production. This can be achieved through remote operations. The transition enhances efficiency and reduces carbon emissions through automation, data analytics, and digital workflows. 

With the integration of advanced data analytics, artificial intelligence (AI), and machine learning (ML), systems can predict operating conditions that may lead to increased emissions and implement control measures pre-emptively. This proactive approach enables a 3%-to-5% reduction in deferment and flaring, as evidenced by studies on predictive maintenance and emissions management in the oil and gas industry. 

Near closed-loop operations, facilitated by digital twin technology, ensure that oil and gas facilities operate under optimal conditions by dynamically balancing production and emissions. This results in a 20%-to-25% reduction in emissions through the optimization of the energy cycle, minimizing human error and enhancing operational efficiency. 

By automating repetitive human intervention tasks, companies can significantly reduce the need for personnel on-site. This automation leads to a 30%-to-50% reduction in the organizational footprint and associated Scope 2 emissions, particularly from commuting to offices, integrated operations centers (IOC), and field facilities.  

In the context of enabling decarbonization, digital transformation strategies must be aligned with sustainability and efficiency goals. This requires developing a framework that integrates technology with environmental considerations. Key elements of this framework include: 

1. Carbon footprint assessment: Evaluating and understanding the company’s current carbon emissions to identify areas for emissions reduction. 

1. Digital infrastructure upgrade: Upgrading technological infrastructure to support sustainability initiatives, such as cloud computing and digital platforms for data management. 

1. IoT and smart sensors: Implementing Internet of Things (IoT) devices and smart sensors to monitor energy consumption and optimize resource usage. 

1. Energy management systems: Deploying energy management systems to track and optimize energy usage across facilities and operations. 

1. Renewable energy integration: Integrating renewable energy sources, such as solar or wind power, into the company's energy portfolio. 

1. Data-driven decisions: Leveraging data analytics to inform decision-making processes and identify opportunities for carbon reduction. 

1. Circular economy practices: Implementing practices that promote resource efficiency, waste reduction, and product lifecycle management. 

1. Employee training and engagement: Providing training and fostering employee engagement to promote sustainability awareness and encourage participation in carbon reduction efforts. 

1. Regulatory compliance and reporting: Ensuring compliance with environmental regulations and standards and implementing systems for transparent reporting and accountability. 

1. Continuous monitoring and optimization: Continuously monitoring and optimizing processes and systems to identify areas for improvement and maintain progress towards carbon reduction goals. 

1. Stakeholder communication: Engaging with internal and external stakeholders to communicate sustainability initiatives, gather feedback, and foster collaboration towards shared objectives. 

By implementing a comprehensive framework that encompasses the aforementioned elements, upstream oil and gas companies can effectively scale their efforts, remain agile in response to changing conditions, and promote cross-functional collaboration towards successful carbon reduction goals. 

Despite its potential for change, digital transformation comes with its set of challenges. These difficulties include substantial investments, quick adoption and implementation decisions, integrating new technologies into existing infrastructure, managing large volumes of data, and ensuring workforce readiness by upskilling employees with the requisite digital competencies. 

Addressing these obstacles effectively is crucial for companies to successfully navigate their digital transformation journey and realize its full potential in driving innovation and competitiveness. 

30 high-potential use cases to drive decarbonization. To see these reductions, the World Economic Forum has identified more than 30 priority, high-impact use cases, Fig. 2.  

If scaled, they can deliver the most benefits in energy, materials, and mobility sectors. Before these use cases can be implemented and scaled, the following criteria must be met: 

1. Ensure company data are available, standardized, and shareable across value chains. 

1. Make sure the workforce has access to new technologies and skills to scale digital technologies. 

1. Foster cross-business collaboration. 

The use cases highlighted in green are those that the authors’ company and/or parent company have either worked on or are in the process of developing solutions.  

In both companies, solutions are delivered through a strategic approach, leveraging the solution delivery areas where digital and asset transformation is the catalyst to drive innovation and reduce CO₂ emissions. 

Below is a use case that was successfully implemented to help a client create a fully unmanned facility, which increased operational efficiency and transparency to drive digital transformation. 

Normally Unmanned Facility (NUF). Transition from remote monitoring and control to fully unmanned facility with autonomous operations (closed-loop, real-time optimization to eliminate human intervention) using AI/ML, data analytics, cloud, IoT, drones, robotics. 

Client: Major U.S. IOC. 

Plant type: Upstream oil and gas processing platform. 

Location: West Africa.  

Challenge: The client in upstream operations aimed to modernize their facility and transition to an autonomous operation model, with independent systems and no human intervention. Subject matter experts were tasked with building a business case and identifying initiatives to enhance operational efficiency, ensure optimal uptime, and enable unmanned operations while reducing field staffing and emissions. 

Solution: Subject matter experts evaluated the company’s digital maturity across strategy, leadership, culture, technology, processes and data. They assessed each dimension to determine the company’s maturity level. Then, the team analyzed the results to identify key risks, challenges and opportunities.  

By leveraging data analytics, various scenarios were identified to move the client to autonomous operations, prioritizing cost benefit analysis and automation requirements. New equipment design that could address Loss of Production and fugitive emissions were recommended. 

Benefit: The client received a strategy and roadmap of prioritized projects to transition to an autonomous, minimally unattended facility. The cost-benefit analysis determined the client’s required capital investment across three scenarios: one day, one week, and one month of unattended operations. Enablers were identified, including platform design simplification, equipment requirements, infrastructure upgrades, system automation, and IoT requirements.  

The projected results for the client to move to an unattended facility included an emissions reduction of 25% to 50% from logistics, a 2% production increase, a 15% OpEx reduction, and a lower risk profile with minimal-time offshore staffing. The KBC propriety integrated asset model has the capacity to reduce facility bottlenecks, ensuring the right size of equipment and energy. It also can identify major emission contributors and evaluate the economics for various scenarios. 

The carbon emissions benefits of converting to an NUF are substantial. These include reduced emissions from personnel transportation, lower power consumption, optimized process efficiency, enhanced use of renewable energy, predictive maintenance, and improved environmental monitoring. Together, these factors contribute to a significant reduction in the carbon footprint of offshore oil and gas operations. 

Conclusion. Leveraging digital technologies is essential for companies in the upstream oil and gas industry to achieve emissions reductions and contribute to a more sustainable future. The World Economic Forum has identified over 30 high-impact use cases that, if implemented and scaled, can deliver significant benefits.  

However, standardized data sharing, access to new technologies and skills, and cross-business collaboration are necessary steps for realizing these use cases. Companies must also address challenges, such as substantial investments and workforce readiness. By doing so, they can drive innovation, competitiveness, and reduced carbon emissions.  

Digital transformation not only improves the industry's environmental sustainability, but it also enhances its competitiveness in a rapidly changing market environment. As companies navigate their digital journey, addressing challenges and seizing opportunities will be key to realizing the full potential of digital innovations to Bring Decarbonization to Life^TM.  

^REFERENCES 

^{International Energy Agency (2023). Emissions from Oil and Gas Operations in Net Zero Transitions – Analysis. [online] IEA. Available at: https://www.iea.org/reports/emissions-from-oil-and-gas-operations-in-net-zero-transitions.} 

^{World Economic Forum (2022). Digital technologies can cut global emissions by 20%: here’s how. [online] World Economic Forum. Available at: https://www.weforum.org/agenda/2022/05/how-digital-solutions-can-reduce-global-emissions/.} 

^{OBIOMA LEVI-JOHNSON, PMP, serves as a senior consultant at KBC (A Yokogawa Company). With 16 years of experience as a petroleum engineer and project manager in oil and gas, she specializes in upstream, business strategy, decarbonization, and advanced data analytics. Formerly advising major IOCs on technology-driven operational improvements, Ms. Levi-Johnson now leads digital transformation and decarbonization initiatives. She is dedicated to driving innovation and sustainability in energy, enhancing industry practices through strategic leadership and technological advancement.} 

^{SHANE FITZSIMMONS is a principal consultant at KBC (A Yokogawa Company), leading the strategy and business excellence practice that focuses on operational excellence and digital asset transformation. With more than 20 years of experience in the oil, gas and power industries, including roles at bp, Reliant Energy, Ernst & Young and Booz & Co., Mr. Fitzsimmons drives efficiency through upstream and downstream oil and gas transformative digital projects, supporting unattended and minimal field staffing initiatives of assets. He has led engagements for business improvement, strategic direction and post-merger integration.}