Smart Oil & Gas:
Digital Transformation of the Industry

From barrels
to bytes

The 4^thFederal IT Forum of Russian Oil and Gas Industry "Smart Oil & Gas", held on September 19-20, 2018 in St. Petersburg, confirmed the status of the main platform for professional discussion of lines, technologies and solutions for the digital transformation of oil and gas companies.

The forum showed that the Russian oil and gas industry is in the forefront of digital transformation, and industry companies are able to find proportion of foreign and import-substituting products that is close to ideal.

Digital transformation begins with understanding of opportunities and awareness of risks. Many steps along this path require concerted action of oil and gas companies, as well as state bodies and development institutions. The 4^thFederal IT Forum of Russian Oil and Gas Industry "Smart Oil & Gas" invited participants to a journey that has not been completed yet by any gas or oil company in the world: from cubic meters and barrels to bytes.

Along with Gazprom Neft, LUKOIL and SIBUR, the plenary sessions, round tables and forum discussions were attended by representatives of such companies as Zarubezhneft, Salym Petroleum Development NV, Gazprom International, Gazprom transgaz St. Petersburg, Surgutneftegaz, Shell, The International Coordination Center (Kuwait), Rosneft, Tatneft. And also the heads of the subsidiaries of the Russian oil and gas market participants were among the speakers, including Gazpromneft STC, Gazpromneft-Snabzhenie, ITSK, Avtomatika-Service, NoyabrskNefteGazSvyaz, LUKOIL-Inform, Sibintek, Zarnestservis, etc.

Speaking at the forum plenary session, Vyacheslav Berzin, Chief of Metrology Control, Automation, Standardization and Information Technologies Department of Zarubezhneft, noted that industry companies have different understandings of what digital transformation is. In his opinion, it consists of two blocks – a technological block (including the new solutions' piloting) and a block of cultural transformations. At the same time, Vyacheslav Berzin accentuated that since digital transformation should lead to changes in business processes, digital initiatives should not focus on piloting. "Pilot implementations do not lead to changing processes," he said. "The project that ended with a pilot is a project that ended with nothing." Zarubezhneft attaches special importance to cultural transformations: according to Vyacheslav Berzin, the company is actively involved in the process of knowledge management and the creation of a system for knowledge' distribution. This, in turn, is associated with increasing the level of business maturity at all levels.

In contrast, Alexander Pruzhinin, Head of the Customer Service Center for Information Technology Support, Department of information and technology support, LUKOIL, supports pilot projects. "The oil and gas industry is conservative, and we are a large company, so most of the systems in LUKOIL are being implemented after the pilot projects and the expected effects verification," Alexander Pruzhinin said.

Dmitry Moskovich, Deputy General Director for Automation, Gazprom transgaz Saint-Petersburg, pointed to the obstacle to digital transformation: in many industry companies "ordinary IT specialists whose hands do everything, are poorly versed in production, and the producers are not at all able to think systematically in IT terms." "And while we do not settle the exchange of information between them, it is too early to talk about a full digital transformation of production. Often the IT systems' implementation is "for the sake of IT people". The large flow of information that we send to production workers does not cause them joy or understanding of goals and reasons for filling in different forms," Moskovich complained. At the same time he accentuated that properly organized digital transformation is a huge resource for increasing the enterprise efficiency even within the scope of the available technologies.

According to Alexander Pruzhinin, business units in LUKOIL are involved in making decisions on the use of digital technologies, and most of the projects are carried out with business' direct participation. "Therefore, we are insured against situations when the IT unit does something, and then the business does not use it," he said.

Evgeny Korneyev, Head of Information and Information Technologiesin Salym Petroleum Development N.V., said that his oil company that is small and independent had to decide whether to compete with giants who can afford to invest in expensive pilot projects, or choose a different path to remain competitive. He reminded the forum participants about the change acceptance curve, according to which 60% of employees are not in the forefront. "We need to understand how the whole company will move into the digital age, and we will not go there without these 60%, so our focus is to work with the company as a whole," said Korneyev, adding that this strategy does not exclude point pilot projects.

Acting Head of the Department of Information Technologies, Automation and Telecommunications, Gazprom Neft, Alexey Poperlyukov, who is also General Director of ITSK, said: "At Gazprom Neft, the digital transformation is in high gear: this is no longer a hype, and in some cases it's even a routine. Business units have tasted new technologies – they require them, they invest in them and they want more." He reminded that the chairman of the board of Gazprom Neft, Alexander Dyukov, set the task to turn the company into a global benchmark for efficiency, security, and technological equipment, and it is digital transformation of business that is the key to its solution.

Konstantin Tarasevich, Automated Control Systems Department, Management Information Systems and Telecommunication Division of Gazprom International, recalled that his company represents Gazprom interests abroad, participating in upstream projects around the world through 30 joint ventures and subsidiaries. "Our main goal is to manage projects effectively, and to deal with it we need to manage the data, analyze them and make the right decisions. We have prepared for large-scale digitalization, made projects that optimize internal business processes," Tarasevich said. At the next stage, Gazprom International intends to create ecosystems to enhance the effectiveness of interaction with business partners. "Involvement in digital transformation processes for industry companies will soon become a matter of survival," Tarasevich summarized.

The Chief Executive Officer of Gazpromneft STC Mars Khasanov recommended paying special attention to the first stage of deposits development, including the creation of geological hydrodynamic models. "At the first stage, you can increase efficiency by 2-3 times, and if you make a mistake during the deposit development, the subsequent online optimization can increase the efficiency by no more than 15%. In the old days, we were deterred by the lack of computer capacities; now these barriers have been removed," Khasanov stressed. He pointed out that often the emphasis in digital transformation is on exploitation, on making quick decisions, on online optimization, that is good for the deposits that are already equipped ("where all the mistakes are already made, the main capital costs have already been incurred, the deposits have already been drilled"), and called for more active use of digital approaches to create concepts and geological and hydrodynamic modeling, when it is necessary to make decisions in conditions of uncertainty, and to master the entire new regions of the scale of Yamal or Eastern Siberia.

IT Manager of Shell, Russia, Mikhail Pokutny said from the rostrum of the IT forum: "Technologies have been with us over the course of decades, they allowed us to accumulate huge amounts of data, and exactly in these data that the opportunities for digital transformation are concentrated. From the data the insights arise, and from insights the actions arise, and this creates business results that assure the competitive advantages." According to the representative of Shell, in order to make this chain work, there is a set of critical success factors: firstly, the orientation to business, secondly, changing working methods (speed is a critical success factor, and one of the solutions is agile), and thirdly, people (in new conditions, oil and gas companies require specialists with hybrid competencies between technologies and business processes).

At the same time, all participants of the plenary session noted unanimously that the wide mention of digital transformation at all levels and the emergence of the State program "Digital Economy of the Russian Federation" increased sharply the interest to this topic of all business units of oil and gas companies, and it already led to increasing use of digital technologies.

Within the framework of all subsequent sessions the participants discussed in detail the application of various digital technologies and information systems in different areas of the oil and gas companies' business, up to the management of supply chains and logistics. Their numerous partners, including, for example, representatives of Chelyabinsk Pipe Plant and United Metallurgical Company, highly praised the automated procurement systems that are increasingly being introduced by the companies of the industry.

In the session "Robots and AI in the business environment: 3D (dull, dirty, dangerous), competitors to qualified employees, or sources of potential risk?" for the first time in history, together with representatives of companies developing robots and artificial intelligence systems, two robots took part: robot Alantim (that is Deputy Head of the Department of Robotics, Moscow Institute of Technology) and robot KIKI of AlfaRobotics company. Robots led the discussion on a par with people and, to the surprise of all participants, expressed relevant and appropriate sentences. In particular, the robot KIKI answering the question about whether it is a competitor to qualified employees for jobs, said: "I save people from routine work".

The 5^thFederal IT Forum of Russian Oil and Gas Industry "Smart Oil & Gas" will be held on September 26-27, 2019, traditionally in St. Petersburg.

In 2018 Infosys company supported the forum in the status of the Digital Transformation Partner, IBM company was Gold Sponsor, AUVIX and Beeline were Silver Sponsors, Huawei was Innovation Partner, Hewlett Packard Enterprise, Intel, Cisco, Dell EMC, INLINE GROUP, and Salym Petroleum were Bronze Sponsors of the forum, and Communi Gate Systems received the status of Communication Platform Partner. Forcepoint company took the role of delegates bags sponsor, Polycom was the sponsor of coffee breaks, and Orange Business Services was the registration sponsor. Galaxy Corporation, ITPS, Aplana Group of Companies, ITSK, Sibintek, Norsi-Trans, ER-Telecom, MegaFon, Gazprom Space Systems, AMTEL-SVYAZ, Nokia, Siemens, Citrix, Red Hat, SAP, TernGroup, AMT Group, Veeam, ALP Group, Lenovo and DMTel were sponsors of various sessions. The forum-2018 was held with the participation of Commvault, SUPERTEL, AVEVA, Rosplatforma, Digital Design, GE; and ITPS, Rostelecom, AUVIX and 1C Company were the General participants of the exhibition. Among the main bodies that supported the forum in 2018 are the Association of Business Process Management Professionals (ABPMP Russian Chapter), the Internet of Things Association (iotas), the Association of Manufacturers of Equipment "New Technologies of the Gas Industry" (founded with the support of Gazprom), RUSSOFT, the Association of Software Developers "Domestic Soft", and the Interregional Public Organization "Association of Heads of Information Security Services".

At the end of the first day of the IT forum, a solemn ceremony of awarding the winners of the 10th contest "The Top 10 IT Projects for the Oil and Gas Industry" took place.

Summing up the results of the 4^th Federal IT Forum of Russian Oil and Gas Industry "Smart Oil & Gas", Director for Information Technologies and Business Information of SIBUR Vladimir Savkin said: "The fact that we support this event shows once again that we support initiatives in the area of digital transformation. Every top manager of our company spends a lot of time discussing the initiatives we are planning in this area and reviewing the status of ongoing projects. We try to actively share information with colleagues on the market that gives us food for the mind. Therefore for us the events of this style are extremely important. I encourage everyone not to stop the active discussion that we started and to communicate more with each other: it is very important for all companies and the industry as a whole."

Head of International Innovation Centre of Gazprom Neft Vladimir Vorkachev continued his colleague's speech: "Communication is a key element of this forum. Many thanks to the organizers and to all companies that took the time to enter into a live dialogue and discussion in our digital age. The conversation turned out to be very lively: at a number of sessions I saw that all people communicate openly, and this is to confirm the fact that the issues of competition which are important for business indicators go to the background. We see great potential in creating a new world where absolutely different rules of the game will emerge, and competition will not be in the field of technical equipment, but in how well we meet the needs of our customers. We are talking about how to make our industry stronger and more competitive, which means our country too, and this forum works well for this purpose."

Alexander Pruzhinin from LUKOIL summarized: "Our forum began with a panel discussion, where we discussed in particular how much we are ready for collaboration in the digital transformation. The forum showed that we are not only ready, but we are already doing quite a lot in this way. LUKOIL always supports different forms of interaction between colleagues in the industry, to share the experience and develop generic solutions. We are glad that this forum turns into a large, stable platform that allows us to take the issues of interaction to a new level. I hope that the next IT forum, in 2019, will confirm this trend, and we will work even more efficiently."