According to Gartner, digital initiatives topped the list of priorities for CIOs in all sectors in 2019, with 33 percent of businesses now in the scaling or refining stages of digital maturity and only four percent of organisations with no digital initiative at all, which signals a shift from digital as an option to digital as a mainstream platform. Whilst Accenture found that nearly 60% of refiners are investing more or significantly more in digital in 2019, compared to last year.
Unfortunately, not all mines and refineries have reached the level of digital maturity that is commonplace in other industrial sectors, such as manufacturing. Resource and Energy organisations are often encumbered with older systems that haven’t been upgraded, are reaching end of life or are no longer supported.
While technology improvements are being made in asset intensive industries, the pace of change is much slower than it should be. This could be due to lack of funding, lack of resources or low appetite to adapt, but there is a concerning “keep the lights on” mentality for some organisations in the sector.
Digital transformation should not be an afterthought or an independent strategy, but as an enabler of business strategy. Covid has put even greater competitive pressures on energy and resource companies and has changed the way digital is viewed and implemented. Pace and scale of an executable strategy will reduce costs, increase plant up-time and safety, and improve margins. Sticking with the old way of doing business will bring risk.
When looking for investment approval for digital technology, it is rarely difficult to articulate the benefits. There does seem to be an inability to recognize these benefits by refineries though. This can often be due to constraints that some refineries have that others do not, such as no corporate supporting body or parent company to make the strategic decisions. It is clear though that any improvements in the way refineries operate begin by technology solving challenges with existing processes.
It has been proven time and time again that it is possible to improve business processes by streamlining tasks to enhance efficiency. We are all familiar with the results of inefficient and dysfunctional processes, namely unhappy customers, stressed employees, missing or late deliveries and increased costs. That’s why it is so important to improve processes when they are not working well for a refinery, in order to improve the overall customer and employee experience, by investing in new digital platforms and tools to improve foundational capabilities.
It is crucial that a refinery’s digital transformation and strategy is driven by its senior leadership and they need to take a step by step approach when approaching this journey. Accenture found that refiners are realising that the last mile of digital transformation around organisation and people changes is very hard to achieve. Therefore, refineries need to ensure that leaders lead, as no digital transformation can be undertaken without visible leadership from the top.
In response to the digital transformation challenge, refineries are making long-lasting business model changes, which hinge not only on technology but also on their leadership. They need to be relentless about focusing on value in terms of both benefit realisation and new ways of working.
A starting point is to look at key areas, such as the reliability of the devices being deployed, data integrity, and how much control they will have to ensure the technology does not compromise the privacy, security and safety of users.
As levels of digitisation increase for refineries, so does the risk of cyberattacks, as was seen in the recent LockerGoga ransomware attack on one of the world’s largest aluminium producers, Norway’s Norsk Hydro. It was forced to revert to manual operations on some processes and the attack has cost the company an estimated US$50 million. Just recently Finnish oil refiner Neste admitted to suffering an “extensive information system failure” and it is not yet clear whether the cause is a cyberattack, but it has resulted in major delays in product distribution that will impact customers.
These two recent attacks should act as a red flag to refineries about the growing number of cyberthreats refining operations face, as their attack surface grows with increased automation, more instrumentation and a rising number of connected assets.
The question resources and energy companies should ask themselves is whether they are enabling more rapid delivery of digital projects using agile, lean methods with a clear focus on maximising their Return on Investment quickly.
The refining sector is increasingly seeing IT and OT (Operational Technology) being rolled out under a shared umbrella and these projects need to be driven by an innovation culture. It can be challenging to manifest an appropriate culture, but investing in new people and new skills to promote disruptive thinking inside the company is the key to refineries adopting new ways of working that will enable them to remain competitive.