with Richard Gaut, CFO of Petro.ai and Geoffrey Cann, Speaker, Trainer, and Author of Bits, Bytes, and Barrels: The Digital Transformation of Oil and Gas
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Full Transcript
Richard Gaut: Geoff, thanks for joining us on our Passion for Change interview series! You've written a really influential book, Bits, Bytes, and Barrels: The Digital Transformation of Oil and Gas, that our customers have been talking about, that’s getting a lot of publicity, and that is part of the zeitgeist now. It is so great to have you on as a guest for our very first video interview.
Geoffrey Cann: I very much appreciate the invite. Thank you so much.
RG: Across the oil and gas complex, what do you see as the technology with the largest opportunity for a digital solution to make an impact?
GC: The digital solution which offers the greatest potential today - by far - is the world of artificial intelligence and machine learning. The oil and gas industry is blessed with enormous deposits of data assets, which have accumulated over the years and will continue to accumulate.
Unfortunately, this data sits in places where the industry has either forgotten it exists, doesn't understand its value, or dismisses it out of hand as being “dirty data”. I believe that the fastest way to value in the world of digital isn't necessarily to generate more data, though that's very easy to do. Instead, it is harvesting the data assets that you've already got. If you wanted a shot that you could pull today that would yield a meaningful outcome, it would be to apply artificial intelligence or machine learning somewhere in the business.
RG: Where do you see folks on this transition from managing their own IT systems versus finding service providers in the cloud? What's the industry doing to manage these huge data volumes?
GC: Well, the first challenge that the industry has to come to grips with is, as you point out, is the enormous growth in the volume of data out there. There's the first problem. How do you get your arms around all of this data and, if you're an oil company, can you afford to stand up your own incremental infrastructure year-on-year, just to store all of this data?
That brings with it all kinds of other interesting questions: Where do you locate your data center? How do you handle backups and recoveries? How do you build in your redundancies? What about your redundant power supplies? How are you going to even fuel it, since so much energy goes into running a data center.
The leading oil and gas companies have concluded that the right answer is to shift off of this “roll your own” infrastructure and to leverage the capabilities afforded by the large cloud computing companies. Migrating out of your proprietary data center and onto cloud infrastructure. That, in turn, opens up all of the new business model possibilities that we've seen from other industries that have migrated ahead of oil and gas. That's step one.
Step two, though, has to be investing in the talent and the capability to take the data that you're sitting on and make sense of it. That's where the need to bring onboard data scientists and other data specializations comes from; so that you can begin to extract the value promise from all of that data.
RG: There's a really great phrase in the book that I learned and I hadn't heard this one before, Geoff. It’s “wetware.” Can you tell me what “wetware” is?
GC: Well, if software is what's on your computer and hardware is an iPhone, then wetware is you and me. We are our own compute capacity. It's just up here in your brain where things are wet! So wetware refers to the humans that are working with both hardware and software. For the time being, we are going to be in a wetware world. We're going to have lots of people managing and administering our facilities and our assets.
RG: The fact the matter is that humans just weren't designed for it. Wetware just is not capable of digesting, ingesting, or contextualizing these incredible volumes of data that we're now privy to.
GC: Quite right. As humans, we learn at a certain pace and so we are at a significant disadvantage when you think about the pace of digital change in how fast machines are able to learn.
RG: It feels like there's some top-down initiatives at the board level to undertake some of these transformation initiatives, but when the rubber meets the road inside the company things are more challenging. What have been that the successful strategies that companies have undertaken to take a tangible first step after that memo comes down from the board?
GC: The short and quick path forward that most companies take is that they will create some kind of digital task force, innovation council, or digital Center of Excellence somewhere in their organization. Then it becomes this group’s job to move digital initiatives forward. This can work, but in my view it needs four essential ingredients for success. One, it needs organization. Two, it needs to have resources so it can actually do things: money and budget to spend. Number three is that it needs to have ways of working. Fourth is that team needs to have real hard measures of success. If you don't have those four ingredients, your task force is not going to be successful.
The second ingredient you have to have in place is it's got to be implemented in a business unit. To get to a successful outcome, the business unit itself has to be ready to embrace this digital change. That means changing the performance metrics for the manager in that unit. Then, you need to train the workforce in that unit so that they know that what's coming at them is an expectation of the company. If the workforce doesn't embrace these changes and drive digital growth, then the whole unit will suffer.
RG: You make a really interesting argument about what competes for capital in an up market versus what competes for capital in a down Market. Would love to hear your specific thoughts about that.
GC: We have some real challenges in the context of how to drive this change agenda forward. You can go from midstream companies with a viable digital game plans underway, to upstream companies, and even to refineries. The place in the value chain doesn't matter; the digital agenda should continue to run regardless of where we are in the cycle.
RG: Another thing that I was really interested in was IT and OT and their roles in digital transformation. If you could just walk us through how they end up managing these projects.
GC: Sure. Most commercial businesses will have an Information Technology (IT) department and within it you'll find the team that makes sure the email system works correctly, the ERP systems are supported properly, and that the infrastructure is in place to do things like Zoom calls. They let you bring your tablet to work and gives you single sign-on and all that sort of stuff. IT’s specialization is integrating these multiple technologies together and making them appear seamless. That’s one of their secret sauces. The are generally very good at patching, keeping complex systems going, and securing and providing a whole range of services responding to employee needs.
OT is what we call Operational Technology. OT is what you find in a plant as it runs 24/7. It never shuts down. It is responsible for keeping physical infrastructure running within certain set points. OT can go by the name SCADA, which stands for Supervisory Control and Data Acquisition. Here, you're supervising an asset and you're capturing the data from that asset as it's running. Historically, IT and OT have been two separate solitudes.
The problem, though, is that in a digital world, they start to come together. If you look at the oil and gas industries from one end of the spectrum to the other (upstream, midstream, downstream, retail, trading, or capital projects), you'll find slight and distinct differences all the way along the chain. Differences in ghw people think about an approach the world of IT their world of Operations Technology and how they connect in the world of digital technology. There isn't a clear cut answer emerging … yet.
RG: This has been really fantastic, Geoff! I greatly appreciate the opportunity to visit with you. I wanted to show the group that we have our own copy of Bits, Bytes, and Barrels that you were kind enough to help us print our own Petro.ai logo on. So, if this is something that you are interested in, follow us on LinkedIn and join our Petro.ai ommunity and we will give you an opportunity to get a copy of Geoff's book. We’d love to share this with you. But, before we sign off is there any wisdom you'd want to share with us as parting words?
GC: Not one thing, but three things! The first is that I write a weekly article series about digital innovation in oil and gas which is available on my website. It's absolutely free. A companion to that is a podcast that I also publish every week on iTunes, Stitcher, and Spotify and all the places where you find podcasts. It's called Digital Oil and Gas. Third, a government agency asked me if I would turn my book into a training course and so I did that for them. I built all the materials and then recorded all the materials as a series of online lectures and they're available on Udemy for about the same price as the book itself.
RG: Thanks so much for taking the time.
GC: You bet. I'm delighted to do it and look forward to doing this sometime in the future again. Take care.
