“…30% to 50% of [oil and gas engineering] work could be impacted by what is broadly called automation.” Roland Labuhn, Deloitte
The Alberta oil patch’s shift to digital technology received a big boost this week when Suncor announced a new strategic alliance with Microsoft “to further accelerate its digital transformation journey.” What the deal means in practical terms is more technology like artificial intelligence (AI) and automation, a dramatic change in the nature of oilfield work, and perhaps fewer jobs when the dust settles.
Microsoft will become the oil sand giant’s strategic cloud provider, according to a press release. Cloud “solutions” include a more connected and collaborative workforce, upgraded data centres, and greater analytics capabilities – an industry trend that is accelerating as computer hardware and software capable becomes available to crunch the enormous amount of data generated by oil and gas operations.
“This is an example of how we are driving to improve our business in ways that were not possible before – to make our people safer, increase reliability and productivity, reduce costs and improve sustainability,” said Suncor CEO Mark Little.
While the initial focus of the alliance will be cloud-based services, the company will use Microsoft’s Azure cloud platform to lever other digital technologies such as “artificial intelligence, machine learning, enhanced automation, and Industrial IoT (IIoT) and visualization.”
While Microsoft Canada President Kevin Peesker may be forgiven a bit of hyperbole when he said, “Suncor is embarking on a journey to transform the energy industry,” Roland Labuhn of Deloitte’s Calgary office explains that his oil and gas clients are also beginning to implement similar digital technologies for the same reasons.
The downturn of 2015 and 2016, when West Texas Intermediate oil prices fell from over $100 a barrel to $23, marked a significant change in how Canadian oil and gas producers approached their business, according to Deloitte’s digital energy and resource practice lead.
“We’ve gone from growth mode to raising productivity and efficiency, sweating the assets, right?” he told Energi Media. “And that’s a fundamentally different way to run your company.”
The switch from extensive (building more oil sands facilities) to intensive growth (producing more from the same facilities) permanently reduced the need from some occupations, like engineers. The growing use of digital technology will make even more of those jobs redundant.
“Depending on the nature of the engineering work, we’re seeing potential impacts on just that one job classification where 30% to 50% of that work could be impacted by what is broadly called automation,” says Labuhn.
Technologies like AI and machine learning will eliminate repetitive work in professions like engineer, accounting, and legal that were once considered immune from automation. Husky Energy is training all its head office staff to use AI software to automate their workflow, providing employees the capability to process huge amounts of data to glean better insights, which in turn leads to better decisions, according to innovation group leader Jason Hinchliff.
“We believe that everybody needs to understand how to use elements of data science,” he said, adding that Husky, like many producers, is a data-rich company that in the past haven’t had the tools to properly interpret the data. “Teaching our people how to use machine learning tools, teaching our people how to do data science, it’s part of what we’re doing.”
Labuhn says that automating repetitive tasks in head offices is fraught with challenges for white-collar jobs like engineering because professionals are being asked to codify their knowledge and experience into software that could make their job redundant.
“At some level it, you have to be brave because you have to allow the coding of your knowledge into the system and then allow the algorithm and machine learning systems to work,” he said. “You have to be willing to deconstruct your job then evolve how you approach your job in order to leverage that information instead of being the one that’s running all the spreadsheets.”
Storing data in the cloud (off-site servers owned by a hosting company like Microsoft), as Suncor will be doing, lowers the cost of the data and is the first step toward implementing more sophisticated software.
“Putting it in the cloud makes it safe, secure, and scalable. I can manage my costs better,” says Hinchliff, an industrial engineer who arrived the oil patch in 2013 after stints with Blackberry and a manufacturing company.
The bottom line for oil producers and engineering firms serving the industry is that cloud computing and AI/machine learning software means that fewer workers will be needed to produce the same amount of work or the same number of workers will generate a much higher output, whether that be oil and gas or professional services.
The number of Canadian workers employed in oil and gas extraction has already declined in 2019, falling from 90,800 t0 85,400, according to Calgary-based PetroLMI, down from a peak of 118,800 in 2012. Not surprisingly, most of those jobs (slightly over 30,000) disappeared in Alberta, while Saskatchewan lost 3,000 and BC lost about 5,000.
Experts interviewed by Energi Media are unsure how employment levels in the oil patch will be affected by the transition to digital technology, except that they are unlikely to grow significantly even as oil and gas supply is forecast to increase over the next two decades.
In an April, 2018 column I wrote about the “Tsunami of innovation” that was about to engulf the Canadian oil patch. Suncor’s strategic alliance with Microsoft demonstrates that the Tsunami has arrived.