Risk Management: The energy industry is managing a plethora of risks, which have only multiplied in recent years.

From safety and asset management to political and geopolitical risks, and environmental and reputational risks, the energy sector has stepped up risk assessment, management, and control to continue smooth and safe operations and ensure the energy supply the world needs. Amid geopolitical tensions, cyber security risks have also become prominent in recent years, while the conflicts in Ukraine and the Middle East have added to supply chain cost risks amid changed trade flows and routes for delivery of oil and gas and raw materials for new energy projects.

Careful and successful risk management improves safety and mitigates operational risks of spills, explosions, and accidents. It also boosts financial performance as it could avoid losses and ensures regulatory compliance with all relevant authorities.

The assessment and management of various risks could also streamline processes and improve decision making by identifying potential risks and opportunities. Companies have operations management systems to help them verify process safety or flag potential hazards. Many firms in the energy sector have started to use various forms of AI for visual analysis, operations connected with Internet of Things (IoT) applications, and digital twins, for example, to identify, assess, and mitigate potential risks.

Technology Use Rises

Digital twins, for example, have been gaining rapid acceptance in oil and gas operations, data and analytics company GlobalData said in a report in May.

These digital representations of energy assets can help detect, prevent, predict, and optimize the physical environment using AI, real-time analytics, visualization, and simulation tools. In the case of oil and gas, digital twins can support the entire project lifecycle from the project design to commissioning, GlobalData says.

Digital twins can effectively simulate the management of an oil and gas asset and forecast potential scenarios. They also have the capability to dynamically model the performance of the asset in real time.

GlobalData estimates that the global market of digital twins technology will be worth $154 billion by 2030, up from about $20 billion in revenues from digital twins services and software this year.

Initially, digital twins were deployed in capital-intensive oil and gas production facilities to streamline processes, mitigate emission footprint, and generate cost savings. Companies have recently created twins of their pipeline systems, gas plants, LNG terminals, as well as refineries and petrochemical complexes, GlobalData notes.

“Digital twins are rapidly becoming a mainstay in oil and gas operations as companies strive to optimize asset performance and minimize unplanned outages. This aims to make oil and gas operations relatively safer while lowering the carbon footprint and improving profitability,” commented Ravindra Puranik, Oil and Gas Analyst at GlobalData.

“Besides, companies are also deploying these tools for remote monitoring and predictive maintenance, among other benefits.

Moreover, oil and gas companies are exploring using the digital twins technology for their newer ventures beyond oil and gas, including in carbon capture and storage (CCS) and renewable power projects.

“There is considerable potential for digital twins in improving the efficiency and effectiveness of CCS projects and to predict the power output from wind or solar farms,” GlobalData’s Puranik said.

“Another emerging use case is in supply chain and inventory management, where products can be tracked in real-time to ensure their timely availability for end use applications. This would help in streamlining logistics costs and maintain product quality for end consumers."

In a separate report, GlobalData found that Saudi Aramco, the world’s largest oil company by both production and market value, is spearheading innovations in the industry by embracing cutting-edge technologies like AI, both within its core operations and beyond, which places the company ahead of the curve.

The Saudi state oil giant has significantly invested in research and development (R&D) compared to its industry peers, allocating about $3.5 billion in 2023, which represents a 15-percent annual increase despite global challenges. Aramco is involved in more than 250 areas of innovation, spanning technologies poised to disrupt the oil and gas sector, such as AI, drones, robotics, electric vehicles (EVs), and hydrogen technology, GlobalData says.

Aramco is a leader in utilizing AI for oil exploration and underwater operations, fault monitoring, and drone control, according to GlobalData’s Technology Foresights.

AI Rising

Across the oil and gas industry, AI is mostly used for predictive maintenance a recent poll by GlobalData has found.

The survey, conducted between November 2023 and January 2024, showed that 41 percent of respondents believe that AI is having the greatest impact on predictive maintenance, analyzing equipment in real time. Another 28 percent see AI impacting the most operations of smart monitoring by tracking emissions profiles and energy consumption. Further 25 percent of respondents believe AI has the greatest impact on forecasting energy production and promoting price stability.

The applications and the market for AI technology, including in various aspects of risk management, is only set to grow in the coming years, analysts say.

AI is one of these advancements in the oil and gas industry that has really changed the game in recent years, transforming every facet of the industry from production and exploration to distribution and refining, BCC Research said in an analysis in May.

The global market for AI technology in the oil and gas sector is estimated to increase from $2.8 billion in 2023 to $5.1 billion by 2028, rising at a compound annual growth rate (CAGR) of 12.9 percent from 2023 through 2028, according to BCC Research.

AI is being used for various processes and operations, including exploration and production, reservoir management, safety and environmental monitoring, and predictive maintenance.

“When it comes to AI solutions for the oil and gas industry, North America continues to lead because of its enormous reserves and technological expertise, closely followed by the Middle East, Asia Pacific, and Europe,” BCC Research said.

However, companies need to overcome some challenges to see the full benefits of AI. These obstacles include data quality, cybersecurity concerns, and interoperability challenges, wrote Sandeep Singh Negi, a Senior Executive in Marketing Operations at BCC Research.

But AI deployment isn’t all without risks, says Havtil, the Norwegian Ocean Industry Authority.

For example, weak data quality in training machine learning (ML) models could result in wrong outcomes and put users on the wrong track, says Linn Iren Vestly Bergh, a senior adviser at Havtil.

As AI is being increasingly adopted in operations with safety significance, securing acceptable data quality and management, maintenance, meaningful human control, openness, and transparency will become ever more important, according to Havtil. That applies particularly to sectors like petroleum which involve major accident risk.

“The question in the future will be less about whether we’re going to adopt AI and more about how we do this in a prudent way,” Bergh concludes.

“It’s important for this work that employers, employees and government collaborate, engage with it, and contribute experience and expertise.”

Increased digitalisation comes with increased cybersecurity threats

A GlobalData analysis of the Q1 2024 company filings and earnings calls transcripts showed that the global oil and gas industry saw an 87-percent jump in company filings mentions of cybersecurity in Q1 2024 compared with the previous quarter.

Cybersecurity was one of the most frequently referenced themes in the first quarter of 2024, ranking highest in terms of mentions, ahead of individualism and expression and quantum computing, according to GlobalData’s Company Filings Analytics.

The top companies with sentences related to cybersecurity in the industry were EQT, Baker Hughes, ConocoPhillips, HF Sinclair, and Shell.

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