Avoiding CIO failure in oil and gas

It’s no secret that the Canadian oil and gas industry is struggling. The major issues afflicting the industry include:

1. Insufficient export pipeline capacity due to application approval gridlock.
2. Complex and uncertain regulatory approval processes for development projects.
3. Significant competition for markets from oil and gas producers in other countries including the United States of America.
4. Global oversupply depressing prices.

These issues conspire to reduce the profitability of oil and gas producers. Even in this profitability-constrained environment, the IT function can contribute significantly to reducing overall operating costs without ignoring growth initiatives.

However, in the oil and gas industry, IT and the CIO are often measured by achieving the lowest possible cost for operating the existing application portfolio. That low IT cost goal can create a constrained CIO who is focused on optimizing the status quo while failing to contribute to future growth and transformation. That narrow focus leads fairly quickly to CIO failure.

To avoid failure, CIOs need to position the IT function as an important contributor to advancing the business plan, especially in difficult times.

What initiatives should CIOs be raising with the oil and gas executive team to definitively demonstrate that IT is not just a boring, expensive back-room activity?

Promote data analytics

CIOs should reduce their focus on licensed software packages that serve functional needs.

Instead, thoughtful CIOs focus on digital opportunities that are largely data-driven. Significant tangible cost and elapsed time reduction benefits along the value chain can be achieved by advanced analytics. Successful data analytics applications require significant data inputs from multiple data sources.

Good data analytics applications along the oil and gas value chain include:

1. Reducing exploration risk.
2. Creating development scenarios.
3. Controlling drilling & completion costs.
4. Improving production operations.
5. Evaluating acquisition & divestiture opportunities.

CIOs are ideally positioned to provide the technical leadership, through their IT staff, to ensure the success of data analytics applications.

Facilitate cross-functional collaboration

CIOs should not simply react to a predefined IT strategy developed by others.

Instead, proactive CIOs reach out to business leaders, identify pain points collaboratively and focus on delivering business value by reducing the pain points. In many cases, reducing pain points requires cross-functional collaboration.

Frequently named pain reduction applications in oil and gas include:

1. Implementing industry-specific Software-as-a-Service (SaaS) solutions.
2. Improving data integration among installed software packages.
3. Initiating data quality improvement initiatives.
4. Encouraging business process improvement supported by robotic process automation (RPA).

CIOs are ideally positioned to provide the business leadership that can lead to successful cross-functional collaboration to reduce pain points.

Integrate IT and OT

CIOs should not simply accept the wide chasm that frequently separates the world of information technology (IT) from the world of operational technology (OT) in many oil and gas companies. In many companies, the OT world sits outside the domain of the CIO and falls in the realm of field operations.

Instead, proactive CIOs describe the value of greater use of the data from the OT world in the IT world to business leaders on both sides of the chasm.

Good example applications that use oil and gas OT data in the IT world include:

1. Close-to-real-time production data for improved product marketing and trading.
2. Equipment performance monitoring for improved predictive maintenance.
3. Field development planning based on geospatial reserves data, production data, pipeline data and facilities data.
4. Digital twins for optimizing operation, planning upgrades and major maintenance.

CIOs are uniquely positioned to provide the cross-chasm leadership to ensure the company uses the massive volumes of OT data it collects for more business value.

Accelerate digital transformation

CIOs should not simply accept the slow progress of digital transformation initiatives as these are blocked mostly by people change management hurdles.

Instead, proactive CIOs reach out to business leaders to explain and patiently re-explain the benefits case for digital transformation and urge them to break through the hurdles in their areas of responsibilities. The benefits case for digital transformation is most often its foundation for the data-driven organization.

Data that is managed in paper files often benefit the most from digital transformation. In oil and gas paper data includes:

1. Mineral land leases.
2. Contracts.
3. Regulatory approvals of wells, facilities and pipelines.
4. Regional assessments of exploration potential.
5. Subscriptions to industry newsletters and reports.
6. Weather reports.
7. Performance reports for management.

CIOs are well-positioned to provide leadership to ensure digital transformation initiatives succeed.

What strategies would you recommend to CIOs to add value in the Canadian oil & gas industry? Let us know in the comments below.