Digitalization offers High Returns for Emerging Gas Producers like Mozambique
Digital investment and uptake represents a billion-dollar opportunity for emerging LNG producers like Mozambique, as COVID-19 accelerates the demand for reduced-cost exploration
The benefits of digital investment in the oil and gas sector are multifold: increased productivity, cost savings and improved performance all tend to follow investments in big data, the ‘Internet of Things’, artificial intelligence and other digital technologies. Yet according to Deloitte’s digital maturity index published last May, upstream oil and gas trails significantly behind other industries when it comes to the pace and degree of digital adoption.
Resistance to digitalization in the upstream energy space can be ascribed to several factors, some of which apply to hydrocarbon producers regardless of the maturity of their assets or the sophistication of their sector.
For example, the oil and gas industry imposes strict health and safety regulations to protect employees against high-risk environments, such as offshore oil platforms and, as a result, companies cannot be laissez-faire about implementing automated or robotic technologies without ensuring that the new technologies sufficiently address safety precautions. The sector is also dependent upon an extended global supply chain, in which labor forces vary in skill, capacity, size and cost. Compounding these factors is frequent market volatility, making digital transformations difficult to roll out in tune with ever-fluctuating oil prices.
However, one of the primary obstacles to digital adoption is exclusive to mature producers, in that digital technologies must be integrated with legacy systems, as well as with the oil and gas personnel who operate them. Such markets are often characterized by narrow exposure and high resistance to change. As a result, digitalization represents a unique opportunity for emerging producers like Mozambique, which discovered major offshore gas reserves in 2010 and took the $20-billion final investment decision on its Area 1 Mozambique LNG development as recently as 2019. The relative infancy of the sector – as the country prepares for first gas by 2023 – enables Mozambique to build technology into the DNA of its sector as it evolves in real-time, rather than upgrade technologies and systems retroactively.
Oil and gas operations rely on highly technical, physical processes, in which digital transformations must apply themselves to complex, capital-intensive assets, such as offshore platforms, LNG terminals or pipelines. For its part, Mozambique has been at the forefront of spearheading large-scale gas developments that are the first of their kind both in the country and on the continent, including the Coral South floating LNG terminal, the first newly-built deep-water floating liquefaction plant globally. Mozambique has also leveraged German technological innovation with Siemens Energy’s supply of four centrifugal compressors and six SGT-800 industrial gas turbines to provide on-site power generation at the Mozambique LNG facility. In short, Mozambique has proven a worthy recipient of foreign expertise and remains in need of additional technology and knowledge transfer to apply to its range of world-class gas infrastructure projects.
As companies across sectors have had to adopt digital tools for remote work, COVID-19 has accelerated the need for digital rollouts, positioning technology as a means of coping with transformational changes facing nearly every industry. Within the oil and gas sector, specifically, digitalization and optimization of oilfield assets have emerged as principal cost-cutting mechanisms, as energy companies continue to face threats to efficiency, sustainability and profitability. Well integrity, enhanced oil recovery, manufacturing execution systems, cloud computing – such digital applications are capable of uniting real-time data with advanced analytics to improve decision-making and boost efficiency and sustainability, especially as the need to allocate capital to assets with the highest returns and operational efficiencies becomes more pressing.
Now more than ever, Mozambique is in the midst of competing with other frontier oil and gas markets – both in and outside of Africa – to attract foreign direct investment into its budding energy sector. Digitalization represents a strategic competitive advantage, whether through advancing seismic surveys that enable companies to make better drilling decisions, or reducing data interpretation time and associated cost of exploration. For Mozambique, digitalization represents a billion-dollar opportunity that cannot afford to be overlooked.
Africa Oil & Power is working with the Mozambican government to promote investment in energy and diverse sectors, including agriculture, industry, tourism, construction and logistics in 2021.