Driving The Digital Agenda Through Outcome-Based Models

, I have covered the oil and gas sectors for more than 20 years. Opinions expressed by Forbes Contributors are their own.

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Technology has the potential to create enormous opportunity, but also presents several challenges. Digital disruption in the oil and gas space is no different. As many sectors worldwide have embarked on their own digital journeys, the energy sector has also started to explore the promise of digital enablement and Big Data.

One of the companies leading the march into digital future is Baker Hughes, a GE company (BHGE); merging the oil and gas expertise that Baker Hughes has developed over its many years in the sector with GE’s digital expertise from manufacturing, aerospace and healthcare amongst many other sectors. I recently sat down with Dean Arnison, global product leader-subsea production systems and services, at BHGE to explore what he felt digitization meant to the oil and gas sector.

Arnison believes that there are two main areas for improvement that will continue to dominate. One, in driving up productivity and two, in driving down cost, with new business models, strong partnerships and integrated service models central to these efforts. “We have seen some movement towards operators and suppliers working in a more unified manner, sharing data across the value chain, and this is something we expect to continue,” he said. “When you consider the levels of trust required for this type of integration and data sharing, however, there are undoubtedly significant barriers.”

Through the downcycle we have seen companies talk about the need to make oil and gas developments profitable at break-evens of as low as $35 per barrel. Regardless of whether it’s onshore or offshore, the industry needs new technology solutions that can help lower non-productive time, reduce cost per barrel and increase recovery rates. “So long as the industry makes sure its digital efforts are aligned with stakeholder interests, I believe we will see value created,” Arnison added. “An example from within our own business is in outcome-based business models, as opposed to transactional relationships. While still in its infancy, this approach, enabled by digital tools, is something we anticipate will become increasingly mainstream.”

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