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Digital Transformation in Midstream

Article · March 2019

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Digital disruption will occur in Midstream
as it is underway in other asset intensive industries

Sam Hemeda > Arundo Analytics

Abstract
The massive growth in Permian production further underscores the role Midstream companies play in the Hydrocarbon
value chain. A lack of processing facilities and pipeline capacity adversely impacts the value of E&P onshore pure plays.
The access to markets is curtailed for these E&P companies by lack of capacity to process and transport production to
refining facilities and/or export markets.

Midstream operators must adopt a technology-based approach to guarantee the readiness of aging asset, maximize
utilization and guarantee the safety of resources. Additionally, tap into a treasure of operational data for a precise un-
derstanding of equipment behavior, deploy “proven value” analytics to optimize operation, maximize the yield without
compromising safety or environmental regulation. The article highlights key functions areas within Midstream Value
Chain that can benefits from embedding analytics in workflow, additionally a quick recipe for digital transformation and
key success factors.
 PIPELINE TECHNOLOGY JOURNAL 25

RESEARCH / DEVELOPMENT / TECHNOLOGY

The current business model for companies in the Mid- operational decisions are based on intelligent data and less
stream Oil & Gas industry is unsustainable. Additional reg- reliant on management intuition or “gut feel”.
ulations, aging infrastructure, limited resources and labor
shortages are forcing these firms to adapt and change. The Once data is available and labeled, machine learning models
massive growth in Permian production further underscores are then deployed to improve critical asset uptime, anticipa-
the role Midstream companies play in the Hydrocarbon val- tion of unplanned shutdowns, alerts of potential bottlenecks,
ue chain. A lack of processing facilities and pipeline capac- predicting failures that would otherwise have triggered major
ity adversely impacts the value of E&P onshore pure plays. stoppages, incidents and in some cases fatalities.
The access to markets is curtailed for these E&P companies
by lack of capacity to process and transport production to The procurement team will be equipped with intelligent
refining facilities and/or export markets. supply chain tools with the capability to explore potential
risk scenarios based on analytics. Procurement will also be
The advent of digital enablement such as cloud storage, alerted to supplier issues in order to take proactive action to
open source Artificial Intelligence (AI), Deep Learning minimize supply route disruptions. As data quality improves,
applications and low-cost super-computing can be of a equipment performance is optimized. Utility expenditure can
great benefit to Midstream operators. Embracing a technolo- be reduced by using alternative pipeline networks with lower
gy-oriented mind-set allows operating companies to explore tariffs. Assessing the condition and availability of operating
innovation and deploy non-traditional processes to mitigate assets can also identify potential capacity in the pipeline and
capacity constraints and key operational challenges. Adopt- enables the operator to respond to spot orders, thereby
ing a digital transformation theme points the way to opera- increasing operating margins.
tional performance gains, minimized downtime, utilize any
identified capacity and further enhances shareholder value.

While the benefits of digitalization are proven and docu-

mented in other Oil & Gas segments, Midstream must avoid
a “follow the herd” approach. The adaptability and scaling of
technology can only be considered when needed and with
precise business goals. Embarking on the digital transfor-
mation mission requires that companies perform a thorough
assessment of organizational digital readiness and available
technologies to attain business value. Many existing applica-
tions such as ERP, Computerized Maintenance Management
Systems (CMMS) , Historian (OSI PI) and others offer a head-
start, and only then if operational data are accessible with an
acceptable level of veracity.

WHAT ARE THE BENEFITS?

The digital path may be structured for each business func-

tion, where each has its own set of significant value build-
ing blocks. The table below illustrates potential areas of
gain per activity or function and many of these functions
are in practice. Midstream companies can explore areas
to extract more value, such as asset condition monitoring
to increase uptime and prediction of failures, spills and
emissions to avoid hefty penalties.
Figure 1: Deployment of Artificial Intelligence in Midstream operation is
Midstream facilities operate varieties of industrial control limitless
systems and digital sensors. Secure and reliable streaming
of sensor data is a key step in implementing a holistic digital A typical midstream asset encompasses multiple facili-
vision that yields considerable gains. After connectivity ties, each with critical equipment and devices. However,
and visibility are addressed, virtual sensors, combined with for the purpose of this article, we will only explore Pipeline
physical sensor data, provide real-time monitoring of critical and Terminals as they play significant roles in Midstream
equipment such as compressors and pumps. Selection of value chain.
specific analytic tools depends on specific use cases. Critical
26 PIPELINE TECHNOLOGY JOURNAL

RESEARCH / DEVELOPMENT / TECHNOLOGY

PIPELINES

The installation of sensors and use of SCADA is widespread Data quality, availability and veracity is essential, digital read-
among many Midstream operators. However, aging assets iness, vision and business value among other should be
with obsolete SCADA and legacy technology can stifle digital ascertain before rushing into “low hanging fruit” initiative.
transformations. Aging infrastructure is a prime candidate for The following Spider Web diagram touches upon some of
a technology upgrade, installing Edge Devices, replacing an- the key variables. Midstream companies can adjust the
alog sensors with digital, mounting strain sensors, vibration diagram appropriate to their operations and objectives.
monitoring coupled with terrain and topography information Additionally, determining “Business Value” has always been
enables Midstream operators to visualize and pinpoint weak the subject of many budget discussions and Go/No Go
spots in the pipeline. Commercial drones are being deployed decisions. Companies can tap into the possibilities of
to canvas pipelines network using thermal, infrared sensors creating a mock-up or a proof of concept (PoC) use cases to
to identify weak points within the network and stream data explore the value and feasibility of scaling. However, once
to operation team for critical operational decision. deployed on larger scale, the expected value might be
diminished due to other variable such as Change Manage-
Many Midstream operators have adopted a 1st principal ment, implementation risk and management appetite to
equations for computational monitoring such as leak re-create the business model. Therefore, while the PoC
detection, spills and theft. Running smart PIGS for In Line results might be very attractive, what are the expected
inspection (ILI) data is a key input in Integrity management benefits of ramping up.
programs and a leading indicator of internal corrosion. Using
advanced analytics and incorporating data from ILI and,
metallurgy and previous historical data provide a self-learn-
ing models for the optimum corrosion prediction. Advanced
analytics tools offer engineers acceptable means to predict
the outcomes of future operational decisions and monitoring
the integrity of the pipelines with/out the absence of PVT
simulation models.

Virtualizing the pipeline and boosting stations by creating

a digital-twin that mimics the behavior of the assets will
prove valuable in exploring optimal operational scenarios
and determining remedies for bottleneck and unplanned
events. Compressor and pump performance is monitored
and machine learning tools offer a “look-ahead” early
warning of failures. Figure 2: Key factors to consider in drafting a Digital Transformation Initiative

TERMINALS
MANAGEMENT COMMITMENT
Terminals operation is a complex system of processes, exe-
cuting a significant number of orders, as well as delivery and There is often too much hype around new technologies for
storage of various products. The focus on quality, safety and the C-suite to ascertain what will work and what won’t. A
efficiency is paramount. Terminal operation has benefited large set of the C-suite find challenges in making the digital
from installing ERP systems for handling massive amounts opportunity real. They hesitate because it is complex and
of data with remarkable success in streamlining opera- outside the realm of other tech/management initiatives of
tions. The U.S. onshore production and demand fluctuation, the past like ERP, or quality practice like Lean Six Sigma.
increased U.S. export and LNG spot buying adds another There are many different components, many moving parts
level of complexity to terminal operations. Running Terminals and many are unproven technologies. Creating mock-ups
analytics can trim few percentages in operation expenditure and PoC’s , getting the C-suite to experience first-hand new
while increasing capacity. technologies proved beneficial in generating a deeper un-
derstanding of digital transformation and its contribution to
business value.
THE RECIPE
DIGITAL STRATEGY
As we indicated earlier, many Midstream applications
-currently in use- offer a digital transformation head-start. The objective of Digital strategy is business performance
However, that fact does not guarantee successful outcomes. improvement, exploring new products, re-inventing current
 PIPELINE TECHNOLOGY JOURNAL 27

RESEARCH / DEVELOPMENT / TECHNOLOGY

TECHNOLOGY ADOPTION

methodology and restructure business models. New Digital transformation requires more than just the IT and
technology makes it possible for innovative companies to business sides working together. Human resources and
provide new and add-on services. Digital Strategy propos- development teams have a big role to play in accomplishing
es how technology enables organizations to create new a true enterprise-wide results from digital transformation.
competitive advantages, as well as the tactics to achieve Alignment between different business functions is a none
realize gains. However, organizations should not be lured trivial undertaking, yet essential. HR & IT teams need to part-
into the “low hanging fruit” and “quick gains” if it ham- ner together more closely to synchronize their goals and get
pers the pursuit of holistic digital vision with less desired the most out the employees as jobs and functions evolve.
impact on competitiveness or performance.

OPEN SOURCE TECHNOLOGY

IMPLEMENTATION RISK
One of the key benefits of open source technology is its
IT Project Management and execution developed a reputa- minimalist cost. While IT cost is a factor, true value of open
tion of cost overruns, missed deadlines, scope creep, and source applications arrives by aligning the operation and
failure to meet business requirements. Companies must developer teams and accelerating the collaboration towards
adopt agile methods and a transformative approach to keep business objectives. Participating in technology focused
pace with constantly evolving technologies. Use of analytics industry forums, data sharing and pursuing open source cog-
to predict and manage risks and steering a course correction nitive analytics is a desirable approach. Containerization has
becomes inevitable. been gaining momentum, it enables developers to interact
with business operation and create predictable outcomes
from their newly developed applications..
CHANGE MANAGEMENT

Change management is a catalyst for digital transformation CONCLUSION

success. Yet, it is often undervalued by organizations when
embarking on major IT initiatives which is a key contribution Current Midstream business models and practices are be-
to project success. Organizations must cultivate a philoso- ing challenged by endless changes in Oil & Gas exploration
phy of supporting workers to adopt to the changes that drive and production landscape. Embracing digital transforma-
project success. tion can equip Midstream operators with tools to cope with
ebbs and flows in both upstream & downstream. Addition-
ally, Midstream companies can tap into a treasure trove of
TECHNOLOGY MATURITY operational data to evaluate the integrity of their assets,
understand equipment behavior and abandon “run to fail-
Digital Maturity is an evolving process and is achieved ure” operating philosophy. Deploying advanced analytics
thru different development phases. Technology matured to explore optimum operational scenarios for yield in-
organizations easily deploy innovations and conduct busi- crease without compromising quality or safety. Start small
ness in a new and different ways. Additionally, monitoring and evaluate the result of specific use cases. Finally, Digital
and adopting to how your partners, clients and compet- Transformation requires bold actions, develop serious ini-
itors use such technology is a sign of a technologically tiatives in pioneering new Midstream business models.
mature organization.

Author
BUSINESS VALUE
Sam Hemeda
When mapping your path of digital transformation, it is Arundo Analytics
essential to know what market segment you will be in and
Senior Executive
what your customers objectives will be in 3-5 years, not
just meeting their current expectations. Mirroring their Sam.hemeda@
vision will help in laying foundations of a transformation,
capstoneenergyconsulting.com
delivery of a milestones with defined and measured KPI’s
that will address near and long term business objective of
your customer.

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