Successful implementation of Big Data

and Advanced analytics in O&G

Oslo, February 10th 2015

DRAFT
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent
 Five fundamental digital trends are disrupting traditional
business models
High-
Ubiquitous Ubiquitous Unlimited Performance Intuitive
Instrumentation Connectivity Data Storage Computing Visualisation

Proliferation of High-speed Cheap and Increasingly Large displays ,

sensors, cameras, broadband reliable storage powerful CPUs, 3D technology
microphones, connections and solutions clever networking allow information
gyroscopes, GPS cheap WiFi solutions and to be displayed
transponders, etc. advanced and interpreted
algorithms intuitively

Rapidly increase in Range of speed per Global data in Moore’s law of Virtual reality are
“remote” broadband zettabytes doubling computing becoming mainstream
communications generation (1 ZB = 1 Trillion GB) power bi-annually
Giga
bit/s

1Bn
Mega
bit / s

Kilo 1Mn
bit / s

(Smart) Phones
bit / s Top: Google glass
Tablets
2nd 3rd 4th 1k Bottom: Oculus Rift
Desktop PCs
1980 2000 2020
Source: Press search, Bain analysis , Intel, Gartner
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 2
 Big Data and Advanced analytics build 4 key elements

Very large Unstructured Analytical High velocity

data volume + Data + complexity + of analytics

• Large sets of • Incomplete, low • Complex, large • Need for real-

data quality and/or number of steps time results i.e.
(>terabytes) hard to sort data to organize; in minutes
fuzzy logic

• Sensor data • Language • Inferring specific • TSA security

preferences from check decisions
• Machine to • Sound/Audio
machine logs general habits • Instances of
• Images
personalized
• Transaction data • Video advertisement
• Social media • Offers in a store

Big Data and Advanced analytics

Source: Bain analysis; Industry expert interviews
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 3
 Four key application areas are emerging for Advanced
analytics in Oil and Gas companies

Oil and Gas

applications
Predictive plant and
Digital fields
drilling analytics

Reservoir modelling and

Remote operations
seismic imaging

Big Data/
Advanced
analytics
Big Data and Advanced analytics

Enabling
Technology
Trends
High-
Ubiquitous Ubiquitous Unlimited Intuitive
Performance
Instrumentation Connectivity Data Storage Visualization
Computing

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 4
 These applications can have a transformative impact

PREDICTIVE PLANT / RESERVOIR

DIGITAL DRILLING REMOTE MODELLING AND
FIELDS ANALYTICS OPERATIONS SEISMIC IMAGING

• Downhole • Use of predictive • Use of telemetry and • Increasing insight

measurement and analytics to reduce sensors to create into subsurface
control systems costs and foresee "control rooms" structures by
linked to production events (failures) to which monitor providing 3D and 4D
model, providing act before they activities at (time-lapse) displays
real time occur multiple remote
optimization locations
potential

Less plant outages / Increased safety, less staff

Increased production rate Increase in accuracy
production stops on site
Growth funnel capacity
Higher ultimate recovery Reduced Maintenance costs Reduced operating costs
increase through higher
efficiency and quicker
Increased drilling speed, Additional revenue; screening of low potential
accuracy, reduced costs increased system prospects
throughput

Source: Bain analysis; Industry expert interviews; MIT Technology Review; SPE Reports; Company presentations and publications
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 5
 Growth of Advanced Analytics will continue

DRIVERS OF INCREASED DRIVERS OF INCREASED

POSSIBILITIES NEEDS

Cross leveraging from Desire for increased exploration

development in B2C industry certainty

Increased data availability Increased demand Lower drilling cost in

subsurface and surface and potential for unconventionals market
AA in oil and gas

Continuously increasing
Growing share of maturing
computer power
fields -need for enhanced recovery

Continuous development of
predictive, optimization, cognitive Cost reduction to sustain in low
and artificial intelligence margin environment

Source: Bain analysis, industry expert interviews

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 6
 However, the Oil and Gas industry has been relatively
slow to adopt new technology…
Impact of digital/physical transformation by industry, today and expected until 2020

R&D spend typically 5-10% of revenue R&D spend typically 1-5% of revenue

Source: Bain analysis; Rankings are based on examination of 300+ companies engaged in Digital/physical transformation projects, plus industry interviews
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 7
 …our clients cite many reasons

WILLINGNESS CAPABILITY

Senior management not bought in Lack of appropriate data in raw form

Unclear direction for the team Org. structure limits collaboration

Data architecture limits ability to use

Lack of business cases / proof points
islands of great data

Misaligned incentives for functional Insufficient Insufficient

managers technology skills analytical skills

Culture to enable change Lack of sufficient technology tools

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 8
 Boundaries are pushed by service companies and niche IT
players

Traditional Basic Advanced Innovative

Traditional Basic Advanced Innovative

Big 5

NOC’s

Mid-tier /
independents

Service Companies

IT vendors

Niche IT players

Indicative group median

Source: Bain analysis; Industry expert interviews

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 9
 8 steps to success

3• Organize to capture value, cut

through resistance in Business Units,
2• Prioritize centralize capabilities, decentralise
applications strategic applications
importance
Organize
1 • Size the prize, and 4 • Foster culture of
locate where in the innovation and drive
value chain change in the
business

5• Build Future proof IT

architecture, rethinking
data management
6• Build strategic
partnerships, capturing
Staying abreast in world the best of industry and
of changing technology technology specialists
requires constant re- 7• Build high performance
adjustment of the team, recruit talent, training
course
8• Drive execution pace to match ambition level

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 10
 1
The size of the price varies per business segment

Refining & Sales &

Exploration Development Production
processing Marketing

Value Increase speed Increase

Capacity of Decrease Increase
driver and improve (ultimate)
growth funnel operational certainty
decision making recovery
costs

Potential

Time to
value 5 years+ 3-5 years 1-x year < 1 Year < 1 Year
delivery

Source: Bain analysis; Industry expert interviews

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 11
 2
Prioritize analytic and technology applications aligned
with company strategy

A Fast Follow
(Copy)
B Develop
Competitive
Advantage

Strategic
importance
Do not
DPrioritise C Smart follow
(Selectively
pursue)

Ability to differentiate Value

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 3
The operating model must be adjusted

Structure Accountabilities

• Super-structure • Decision principles

• Shared services • Clear decision roles
• Operational footprint • Incentives

Operating
Model

Governance Ways of Working

• Governance forums • Non-negotiables

• Management processes • Collaboration model
• Metrics, dashboards • Expected behaviors

People Process Technology

• Architecture &
• Skills, mindsets • Critical processes delivery capability

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 13
 3
O&G generally centralise AA teams

Increasing centralisation of Advanced Analytics

ORGANIC BU-LED WITH CENTRE OF TOP DOWN

BOTTOM UP SUPPORT EXCELLENCE TEAM

• Relies on • BUs pursue • Collaborative - • Central team solves

‘champions’ within initiatives guidance from BU analytics
individual • Central capability central team to BU problems or other
business units provides team ideas developed
• Ideas driven assistance BU • Ideas flow up and independently
bottom-up team down

Source: Bain analysis, industry expert interviews

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 14
 4
Foster a culture of innovation to drive change

INNOVATIVE ENVIRONMENT BUSINESS APPLICATIONS

• Applying strict business trade-offs

will limit the ability to stimulate
innovation
Regular business
environment
where results are
judged on value
and efficiency

Nurturing
environment
where multiple
experiments
deliver some
breakthroughs Applications to reach
maturity before applied in
business context

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 15
 5
Legacy IT organizations struggle with achieving full
potential

TYPICAL POINT OF DEPARTURE SUCCESS FACTORS

• Facilitate reporting, enable financial • Real-time decision making; enable

decisions, or guide operational continuous learning
decisions

• Data captured and used in one • Data captured in one field/well used
field/well is not relevant elsewhere to improve outcomes in similar
operating areas

• Data not tied together through an • Data from all sources tied together
effective integration layer by enterprise-wide data
integration layer

• Data architecture set up to address • Architecture is set up to address large

large volumes of predictable, volumes of structured,
structured, and relatively clean unstructured and real-time data
data
Source: Bain analysis, industry expert interviews
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 16
 6
A broad set of players involved

Research institutions are

Operators focusing on
focusing on the long-term
“field of the future” and
applications of AA, such as
improved reservoir
integrated oil field and AI
management and
modelling

Small technology start-

ups are developing
unique applications
to specific problems
faced along the value
chain
Service companies
developing AA tools that IT Companies
reduce costs or enhance
production
Leverage knowledge from outside
by tailoring existing products
and services to O&G

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 7
Analytic talent and the optimal talent mix will be key

DATA
(20-25, ~30%)

ENGINEERING
(30-35, ~45%)

BUSINESS
(10-12, ~15%)
LEGAL
(5-10, ~10%)

Critical Big Data talent

Source: Bain Big Data Diagnostic Survey, N = 409
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 18
 8
Choose your battles – “Leadership” is not always the
best strategy

LEADER SMART-FOLLOWER LATE-MAJORITY

Researches and Quickly adopts select Adopts widely used

develops new practices industry practices industry practices

Strategic objective Capability

Resources Deciding factors Flexibility

Operating model Risk

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 8
Choose your implementation speed based on ambition
level and capabilities

SLOW AND STEADY MEASURED GROWTH FULL THROTTLE

“Somewhere in the group” “Leading in the climb” “Pioneering”

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 Big Data is not a fad…

Companies with the best Big Data and

Advanced analytics capabilities are…

1• ~2X more likely to be in the top quartile of

financial performance within their industry

2• ~3X more likely to execute decisions as intended

3• ~5X more likely to make decisions “much faster”

…However, only 4% of companies are actually

executing well on their Big Data strategy

Source: Bain Survey, N=409

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 21
 In summary - E&P companies can get ahead in the game

TYPICAL PITFALLS KEY SUCCESS FACTORS

• Choose your battles - Allocate scarce
• Assume technology leadership is the
resources selectively, choosing where to
right strategy
lead and where to follow

• Follow the money rather than

• Implement the technologically most technological fascination – understand
interesting applications where the value comes from

• Resource a dedicated team with • Invest in Talent - Invest in recruiting

internally recruited staff the best talent – look outside the
industry

• Foster a culture of innovation - this

• Ensure culture assimilation
should be isolated from the rest of the
throughout the entire company
organisation

• Integrate - Rethink data management,

• Build and hold on to legacy IT value is created by connecting rather than
architecture separating, build an integrated architecture
Source: Bain analysis, expert interviews
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent PER Big Data Analytics in Oil and ... 22