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Aker BP's approach to digital technology

Thursday, February 24, 2022

Karl Johnny Hersvik, CEO of oil and gas operator Aker BP gave a comprehensive overview of how the company approaches digital technology, speaking at a Cognite 'Ignite Talks' event.

Today, Aker BP's Valhall field, in the Southern part of the Norwegian Continental Shelf, is 'a fully digitalised asset, with fully digitalised infrastructure and real time data access,' said Karl Johnny Hersvik, CEO of Aker BP, speaking at Cognite's 'Ignite Talks' event.

'Our offshore operators are equipped with connected handheld devices for easy access to data and communication.'

'[Regarding] this whole discussion about HoloLens and that very fancy visual technology. HoloLens works fine in the conferences. But take one out here in February in a gale force wind, sea splashing around it, I can tell you it's not that funny,' he said, in a video he recorded from Valhall shown during the event.

Sustainable and profitable

'Oil and gas companies of the future need to be more adaptive, more efficient and much more sustainable,' he said. The question is, 'how do you convert that into increased profitability?'

Aker BP's answer is a commitment to continuous improvement. 'Improvement is the name of the game and its intrinsic to everything we do.'

'The best part of the improvement agenda is to understand how digitisation, processes, procurement, flexible business models work together.'

Digitalisation and processes

'Digitalisation is fantastically fun when it works, it is incredibly frustrating when not,' he said.

Digitalisation is a key part of achieving continuous improvement. But before you digitalise, you need to take out waste from your work processes, he said.

'There's lots of discussion around how do you digitalise a business process. To digitalise a business process without moving that waste first, it is just digitalising waste.

'It is a lot harder to digitalise waste than to digitalise waste-less processes. [So] lean is intrinsic to digitalisation and success.'

'You can only do that if you're really good at process improvement. There's a clear link between how we think about improvement and how successful we are or not in digitalisation.'

Starting in 2014

Aker BP's continuous improvement drive goes back to the 2014 oil price crash. 'In 2014 the oil price went from $105, we ended the year at roughly $30.'

'I remember it clearly because Jun 2 that year I signed the document to acquire Marathon's assets in Norway.' (This was a $2.1bn acquisition which Mr Hersvik made as CEO of Det Norske, a company which merged with BP Norge in 2016 to become Aker BP).

'In 2015, 28th February, we had the first capital markets day. We timed that perfectly at the bottom of the market, $28. We were fantastically brilliant in the summer and idiots in the winter.'

'That actually started this whole movement. The need to improve started that summer. We need to make the most of our production. That is a focal point in our journey.'

'We went from cost reductions to process improvement to driving an improvement culture.'

Aker BP went on to partner with Cognite as an industrial digitalisation partner in 2016, and began its digitalisation efforts, he said.

Aker ASA is a common shareholder in both companies, owning 50.5 per cent of Cognite and 40 per cent of Aker BP. In addition, Aker BP owns 7.4 per cent of Cognite.

Today, Aker BP's 'operating model' is focused on 'flexible business models, a keen look at alliances and recognising the value chain,' he said. This is in addition to the 'dedicated focus to process improvement, and speeding it up, turbocharging with digital technologies.'

Beyond use cases

When implementing digital technology, it is not enough just to demonstrate a use case. 'Everybody talks about use cases, use cases are fantastic. But if you're talking about transformation they are not sufficient,' he said. 'If you're talking about transforming you need to think about this as an end to end process.'

'I use a simple picture, think about this as a pipe. You remove a nozzle, but don't get the higher flow through that piece of pipe entirely because you have other [flow restrictions].'

'If you declare success, 'I have removed this nozzle,' the guy sitting at the other end says, you might have been successful, but the business isn't transformed. You need to think about this entire pipe, this entire process.'

Management attention

To make digitalisation work, 'management attention is crucial,' he said.

'Line management attention is crucial, top management attention is crucial. Owning it, driving it, understanding it, making decisions.'

At Aker BP, 'the business leaders responsible for profit and loss in each part of the business are making technology choices. Because they are the guys and girls who have to live with it.'

Flow of data

'It's easy to talk about the application, the fun part of it, the user interface. [But] the crux is the data.'

'The quality of the data, and thinking about how the quality of the data is going to be sustained, is crucial to business success. No matter what the quality of the algorithms.'

There has been a lot of focus on handheld devices. 'What are handheld units really? It is data liberation, giving operators data, available in their pocket, in their hand, wherever they are.'

With its handheld devices, 'we [weren't] able to fully utilise the value creation [until] we were able to fix both the infrastructure and the data issues,' he said. Early handheld devices 'were really expensive MP3 players and phones.'

The value was achieved 'only when we were able to connect the sensor through the SCADA system, into the historian, feed it back to the cloud, into the handheld device with high reliability, so he's pretty sure that when he's reading his pad, its exactly the same as what is going on in the sensor.'

Reducing man hours

For the business to see financial benefits from digital technology, it needs to reduce the number of man hours being paid for.

As an example of a technology which does actually reduce man-hours, Mr Hersvik cited an automated vessel painting system called RoboCoat, with a robot which climbs around a vessel's hull, sandblasts and scrubs the steel, and paints.

'It's doing maintenance two orders of magnitude more efficiently than humans with no exposure to humans,' he said.

'It won't transform the business but it's a pretty cool case.'

'As a demonstration how you can work with technology and partners to solve practical problems, this is one of the cases where we probably earned the most money,' he said.

Another area where digital technology is reducing man hours is in helping plugging and abandonment (P&A) of old wells, which is 'going to be a huge industry on the North Sea,' he said.

'On Valhall, we have 15bn NOK ($1.8bn) in commitment [to P&A] before we started the existing wells.'

Aker BP achieved 'almost NOK 6bn ($710m) in savings' through 'a combination of automated offshore process, powerful drilling rigs, new technology.'

The most important and critical fact was not necessarily the technology but the fact we had mandated a team to act pretty autonomously, which is contrary to what we normally do.'

Failure with blockchain

A project to 'optimise capital intensive operations using blockchain' did not meet expectations and was stopped in 2019.

'The major roadblocks were technology, data quality, domain knowledge, collaboration, complexity.'

'This was cutting edge technology, beyond cutting edge. We had an ambition to transform how we acquire services, using digital tools such as blockchain. We had an ambition of tracking everything we sent out using blockchain.'

'But it broke. In 2019 we stopped it.'

'[But] that's not the important part. The important part is why did it break. It wasn't that technology didn't work. We lacked the technology competency in the whole value chain.'

'The quality of the data we use to procure goods is so poor we as humans need to use our imagination to understand what's in the requirements. We are good at using imagination, computers are pretty [expletive] at it.'

'We couldn't get this value chain to collaborate, there was too much [people] sitting on their own turf. It was almost impossible to get them to sign up.

'It was far too complex to address, it should have been thought through in the first place. We stopped it.'

'It's still a hugely successful project, the team are still out there they are still doing it. But they are now at a much simpler case.'

The ability to recognise when projects are not working and move on is important for digital transformation in general, he said. 'There's a pretty good overlap between poor dealing with failure and failure to transform the business.'

Subsurface

Aker BP would like to introduce more digital technology for the subsurface. It has a vision for an integrated subsurface interpretation and modelling workflow, he said.

This value chain 'consists of a number of best of breed software, a series of data platforms, a high degree of data density.'

'In future this needs to be fully automated, plug and play, microservices. 'We need an integrated, evergreen reservoir modelling tool.'

'Huge complexity and difficult to do. This, I don't know. Maybe we make it, maybe we won't.'

'But this is crucial for oil and gas businesses to fundamentally transform.

It's not sufficient [just] to search for a well log tool, or run an AI.'

Digital principles

Aker BP has some overall digital principles and core learnings.

It is betting on cloud, 'of course.'

Also, 'data liberation as a principle.' This means 'you need to give your organisation access to data.'

'Whatever you're doing in Aker BP you have access to data. I can access bottom hole assemblies on an ongoing drilling operation as long as I have an Aker BP user [account]. If you feel that's the wrong bottomhole assembly you're more than welcome to challenge.'

The company believes that 'use cases are fine as long as they're aligned with end to end use cases. Use cases on a standalone basis are unfortunately useless.'

The company also believes in combining digital and domain competency (such as in petroleum engineering). By bringing digital and domain competency together, 'this is where the magic happens.'

'You can't transform anything with just digital components. You can't transform anything with just domain competency. The magic happens at the interface.'

An important learning is that 'tech is easy, implementation is hard,' he said. 'It is very easy to acquire a system. It is relatively easy to train people to use it. It is really hard to convert your business processes to get out the waste. It is fundamentally difficult to transform that waste removal into increased revenue.'

Another learning is that 'you have to choose your partner well as elsewhere in life. The right partner will help you succeed, the wrong partner will drag you down.'

'You have to create a team. This can't be done solo. Your choice of team mates is what determines success. It's like playing football. You can be a fantastic football player, [but] if you team up with ten players who are not that good, you're not likely to win the series.'

Mr Hersvik advised companies to 'think about scalability from day one' - the project you are working on needs to be able to expand to the whole company if it is to add value.

'Top management attention and drive is vital. This is not about technology, this is about business transformation. If your top manager is not interested, doesn't know enough about it, or doesn't spend enough time on it, well, it's a fun way to spend your days but there are better more value ways to spend your days.'

'Digitalisation is happening inside your organisation, not outside your organization. Drive the changes.'

'If you're a top manager and this is new, you need to learn. Sign up to an online course, read a book, go to university or whatever, it's not similar to what you're used to.

'Make sure that the end state is agreed and understood. It is almost impossible to get to a place you don't know what it looks like.'

Mapping a path

'It takes a long time to agree on what that end state looks like. Make user stories, test them, tear them apart, build them up again, test them again, until you're pretty certain this is where you want to go,' he said.

Only then, learn that story by heart, you should be able to tell it to co-workers in less than two minutes. If they can't understand it, and they can't tell it to their colleagues, go back and do it again.'

'Make a clear plan, like a map too get to the desired state. If everything is foggy, you're not going to make any progress.'

'Then you need to set clear requirements for what success looks like, whether that's software product, s process modifications or whatever. The clear requirements that define success.'

'Unclear requirements will end up with a lot of discussions about whether your delivered or not.'

'Understand how these digital products interact with people and processes. This is where most of us failed. Fantastic tools, but we didn't have the processes to use them. Try your best to understand all the factors that are impacting the process.'

'Keep that list in the back of your pocket. Go back and re-assess every third month.

'Establish a clear implementation strategy with timelines, what is going to be done, by who and by when. You need a methodology for controlling progress. Are we progressing in the desired direction? Are we following our plan, do we have the right processes and people in place? This is tedious and boring but is necessary.'

'Make sure you have a plan to extract value, don't forget that time is not value. Cost is cost, and cost is usually cash. Value needs to be transformed to cash if the business transformation is going to happen.'

'Finally, do develop a plan for how to deal with failures, because you are going to fail. Those who go through transformation without failing, it's not a transformation. You are going to fail massively and spectacularly. The better you fail, the faster, the better it is.'

'Find a way of using events in your business to drive that transformation.'

'We basically set the ambition high, to be fully digital from the get-go. For every possible way we can take this project [digitally], we will take this project. Now I have an angle to drive change into the organisation.'



Associated Companies
» Aker BP
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