Research published by DNV and Goldman Sachs underlines the significant impact digitalisation is already having on the energy industry, as well as the impact it will have on the sector’s economics and the pace of the energy transition over coming years.
DNV surveyed 1,300 senior energy industry professionals for its new report, Leading a Data-driven Transition, and concludes that excellence in digitalisation tends to be a common factor among industry-leading energy organizations that were most profitable, most adaptable and making most progress in reducing emissions.
The report finds that those who DNV classifies as “Digital Leaders” are a lot more positive about the future of their business than those who felt their organisations were trailing the field, classified as “Digital Laggards”.
Digital Leaders comprise the 28% of respondents who said that their organisation was an industry leader in digitalisation and data-driven strategies, while laggards are the 37% of the total who said the opposite.
Of the Digital Leaders, 87% were optimistic about meeting revenue targets, compared to 55% of Digital Laggards. Meanwhile, 48% of the Leaders said they were optimistic about reaching decarbonization and climate goals, compared to only 31% of Laggards.
More of those Digital Leaders also believed they were in the vanguard of the energy transition – 83% of that group compared to 65% of Laggards.
Laggards struggle to keep up
DNV’s analysis of the data also unearths other interesting findings. For example, the top three most impactful data-driven applications for Digital Leaders are optimizing processes, integrating systems and databases, and automating operations. But DNV notes that more than half of Leaders also report “major” or “massive” impacts from a wide range of other data-driven innovations, from predictive maintenance to supply chain management.
“Laggards trail across the board, with the largest shortfalls in key areas such as the integration of systems and databases, automating operations, and empowering consumers or customers,” the report says.
The survey covers representatives of the whole energy industry, including the renewables sector and the oil and gas sector – each of which comprises around a third of total respondents – so those polled have a variety of perspectives and business objectives. But the survey’s findings do suggest that embracing digitalisation is making a positive difference across the board.
For DNV, the survey findings also define the mindset of the most progressive adopters of digital technologies.
“The defining characteristic of Digital Leaders, setting them apart from others, is not just the absence of resistance to change or the ability to adapt, but their proactive capacity to seize the opportunities that inevitably accompany change,” DNV said in the report.
The report follows on from a DNV report published earlier in 2024, which highlighted the role AI and digital twins could play in the UK energy sector and underlining how the effective deployment of AI-based technologies was essential for a successful energy transition.
AI to weigh on oil price
Another piece of research, this time from Goldman Sachs, highlights how digitalisation, could affect the economics of the energy industry – and not necessarily to everyone’s satisfaction.
The company said in a note published in early September that implementation of AI could put a damper on oil prices. Lower cost production and processing resulting from AI-linked factors, such as improved logistics, would increase the amount of oil resources that could be profitably produced, leading to increased supply that would in turn lead to lower-value barrels on international markets.
Goldman Sachs said reduced costs via improved logistics and resource allocation could result in a $5/barrel (b) fall in the marginal incentive price, if a 25% productivity gain observed for early AI adopters remained typical. It estimates AI implementation could reduce the costs of a new US shale well by around 30%, while an AI-related increase in the recovery factor of US shale could increase oil reserves by up to 20%.
In the note, Goldman Sachs also looks at the demand-side of the equation, which has received much more publicity in recent months, with some energy producers claiming that the growing electricity supply needs of the AI industry would extend hydrocarbons demand well into the future.
The company notes that the energy requirements of AI are likely to have a much smaller impact on demand for oil than that for natural gas – and for power overall – over the next decade. Looking at the oil price, Goldman Sachs estimates the impact of extra energy demand from the AI sector may add $2/b to the price of oil, which would fail to offset the $5/b fall it is predicting due to AI-linked production gains.
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