Midstream players within the oil and gas industry will have to get onboard with the brewing digital revolution, especially when a jackpot of value is waiting to be realized by the sector.

In October 2018, Deloitte Insights released its study “The New Frontier: Bringing the Digital Revolution to Midstream Oil and Gas” which highlighted the importance of the sector digitally maturing.

“There’s hardly a piece of the [midstream] operations that digital wouldn’t touch, so the opportunity is huge,” Andrew Slaughter, Deloitte’s executive director of Energy, Resources and Industrials Research and Insights group, said in an interview with Hart Energy.

Slaughter said that while operational technology has always been developed and deployed, broadening that across a midstream company’s portfolio would carry “real improvements in efficiency.”

“You can make the whole scheduling, fracking and commercial arrangements more streamlined and reliable with linking up your operational data on flows and scheduling with your ERP systems, which is a huge source of value,” he said. “So, digitizing your planning, construction and commissioning process back through your supply chain, equipment vendors, scheduling and project management should allow you to reduce the lead times for new infrastructure and getting that online…there is a real need for that.”

For U.S. midstream companies to properly take on the revolution, the report found that the executives’ receptiveness to change is one of the biggest challenges to unlocking the potential for both their new and legacy assets.

Receptiveness across the midstream sector would not only benefit midstream operations, Slaughter said, but have a ripple effect on the growth opportunities for the upstream players as well. Particularly for infrastructure—which affects both midstream and upstream—he said bottlenecks are not unexpected and through digitization, each sector can become better prepared for the next occurrence.

“It always happens when a supply basin with upstream drilling develops faster than the midstream can come in and build new capacity…it happens again and again,” he said. “The issue is the timing and with digital you can actually plan, schedule and implement your new capacity programs faster and more reliably as you digitize your supply chain, material management and scheduling.”

Slaughter said this would allow projects to come online quicker—12 to 18 months—instead of the expected 24 to 30 months. “That is of huge value to the midstream companies of course, but also to the upstream players as well,” he added.

“I see opportunity in the near term on new project buildout particularly and in gathering and processing as well as pipelines. I think [those] should be at the top of the list. That is where the need and opportunity is [especially] when the new goal is to do it right from the get-go,” he said.

“In this new world of shorter cycles and faster capital commitments on the upstream in the shale plays around the country there is a need for midstream infrastructure both operationally and in capital terms to be more nimble and quick to build out,” Slaughter added.

Still, Slaughter insisted that the most important seed to grow the digital tree is a mindset shift in midstream leadership.

“It is important to say that leadership and behavioral change is just as important as putting in the technology and analytics. That’s the easy part. But, executives and boards really need to drive behavioral change to allow the benefits of digital to be reflected in results meaning you have to understand the algorithms in the analytics, trust them and deploy them over a wider scale.

“Digital allows you to open up to implementation and connection across a portfolio and link it with your other management systems and that’s as much of a behavioral change as it is a technological change,” he said.

But, the apprehension isn’t surprising considering the risk averse culture in the oil and gas industry when it comes to the digital transformation, causing the journey to take a little longer according to Slaughter.

“The issue around oil and gas of course is the huge inventory of legacy assets,” he said. “There is a very important culture of safety and reliability and so that means to implement new technology and ways of working, companies have to be really sure that’s going to work and not going to compromise integrity or safety and at the end of the day bring new value.”

Though challenging to the current culture in the industry, Slaughter said going digital will prove to be nothing less than advantageous for the midstream arena.

“You want to be able to reduce your maintenance on existing infrastructure quite significantly by 15% to 30%, speed up your development time on new projects, increase the reliability and integrity of your commercial tracking and arrangements, so there are pockets of value at pretty much every space,” he said.

“It’s a good thing for midstream companies to partner with tech companies if only to enhance their cultural acceptance of digital,” Slaughter added. “Of course, the companies that embrace this and get it right they will end up doing better than the companies that just carry on with business on a usual basis.”

Mary Holcomb can be reached at mholcomb@hartenergy.com.