Copyright Forbes
Big Oil’s quest for improved margins and efficiencies in a volatile energy market has strengthened its ties with Big Tech. This pairing up is giving rise to an opportunity that’s worth billions of dollars, if not more. Despite the clamor for sustainability and low carbon alternatives, most in the industry admit that oil and gas will remain a sizeable part of the energy mix for a good few decades to the middle of this century and beyond. Yet, its an industry that’s pretty cyclical, often hostage to geopolitical strife and the economies of key global demand centers. In managing this dynamic and wider societal pressures to add renewables and low-to-zero carbon solutions to their portfolio mix, the industry is now incrementally turning to technology. New Lay Of The Land In fact, the transformation of the oil and gas industry over the past three years alone is nothing short of spectacular. Predictive maintenance solutions now routinely reduce downtime at refineries, drones with imaging sensors monitor miles and miles of pipelines, augmented and virtual reality applications help with training, and digital twins help refine projects and processes. Artificial intelligence solutions of myriad descriptions, smart portfolio management applications, and advanced automation are all in play in this new world. And as cyclical volatility drags oil prices lower, the sector may cut costs elsewhere but not its technological footprint and capital expenditure on it. If anything, a low price environment motivates many to do more with less - a industry mantra alluding to leveraging technology for improving throughput, efficiency, sustainability and ultimately, profitability. ForbesBig Oil Earnings Season Marks A Return To Basics With Lower ProfitsForbesEnergy, Industrial Firms Must Up Their Cybersecurity Game, Experts SayForbesVenture Capital Inflows Will Keep Green Investments Buoyant To 2030 Nowhere does this new direction of travel appear so obvious than at ADIPEC - the world’s largest energy event held every year in Abu Dhabi, UAE. The event - which drew 240,000 visitors last week and has been running for over four decades - was once a hard core hydrocarbon drilling, engineering and policy show peppered with bits and bobs of other energy solutions. But not any more. On the eve of the latest ADIPEC, the host Abu Dhabi National Oil Company or “ADNOC” signed a deal with Microsoft to integrate AI across its value chain. Both companies will “co-develop and embed AI agents” to drive autonomous operations and boost efficiency. The agreement will also include Masdar and XRG, which will develop sustainable energy projects and infrastructure to drive the expansion of Microsoft’s AI and data centres. “As AI continues to reshape how value is created and enhanced across industries, ADNOC, Masdar and XRG are not only embedding AI into every layer of our operations – we are also advancing the energy systems that will power AI itself,” said Dr Sultan Al Jaber, ADNOC’s group CEO, executive chairman of XRG and chairman of Masdar. “Through our partnership with Microsoft, we are unlocking new opportunities to fuel the future of AI, drive greater performance, and future-proof our business.” A recent report published by both companies noted that one in five energy companies is using agentic AI to automate complex decision-making. ADNOC was among the first to roll out generative AI enterprise-wide in November 2023 with Microsoft Copilot. And its not just Microsoft that’s busy courting business from Big Oil. Much of Big Tech was including Amazon, Google, IBM and dozen cloud solutions providers were at ADIPEC. Their growing presence came alongside industrial engineering, solutions and software providers like ABB, Emerson, Honeywell, Schneider Electric and Yokogawa, who are exponentially upping their industrial automation and AI product suites in service of the sector. Competition is heating up among these vendors, with the Middle East in general, and the UAE in particular, often leading the way, according to Peter Zornio, chief technology officer of Emerson. The company among those marketing software-defined, operational technology-ready enterprise operations platforms that digitize physical processes in the energy chain. “Three of our biggest customers are in this region. The Middle East is the fastest growing capital expenditure area for automation solutions providers like us. As an impact statement, we are bringing our leadership and client engagement forum - the Emerson Exchange - to the UAE for the very first time next year,” Zornio said. “While the region may be perceptively ahead in terms AI and automation spending, the energy sector as a whole globally is recognizing the value of the optimized barrel banking on industrial software and automation solutions. "U.S. operators are displaying a similar approach to their unique operational challenges. As such, the demand for automation solutions is on the up globally, and is expected to remain elevated in our opinion.” Earlier this year, Emerson took over industrial software vendor AspenTech. That’s after rival Schneider Electric bought out and delisted AVEVA from the London Stock Exchange. Rivals from Honeywell to Yokogawa continue to beef up their software portfolio, with a sizeable chunk of their marketing directed at the oil and gas sector. The quest for what Zornio described as an optimized barrel of oil or a molecule of natural gas has infused a fresh lease of life into oil and gas finance and investment too. Most banks are now opening eager to work with Big Oil in its bid to make operations more sustainable and efficient whilst achieving better margins. Representatives of twenty of the largest international banks, and many of their smaller peers, were in attendance at ADIPEC, alongside peers from venture capital firms, private equity houses and family offices. All eyeing a tech-premised energy sector horizon as robots roamed the exhibition halls and cloud computing providers handed out chocolate covered dates to attendees. It’s all about market realities and opportunities that the finance and investment community simply cannot ignore, said Siddharth Malik, managing partner at Green Investors, a Hamburg, Germany-based investment company that helps de-risk energy projects to accelerate their bankability. "AI is expected to drastically upgrade the oil and gas industry that relies on heavy duty computing. Specifically in upstream, AI’s potential lies in analyzing massive volumes of seismic and geological data to enhance the predictability of promising drilling locations, reservoir quality, optimization of drilling and reservoir management. “In midstream and downstream, predictive maintenance, supply chain, refinery optimization and safety are all expected to massively benefit from capabilities that AI will offer.” Malik also echoed business sentiment prevalent across ADIPEC about the potential of AI to incorporate multiple variables including geopolitical factors. “This will transform energy demand and price forecasting, thereby enabling smarter trading decisions and better revenue predictability.” How Big Is Big? Putting A Number On It It is clear the Big Oil and Big Tech partnership is indeed a big deal for want of another expression. But putting a turn of decade figure on the business opportunity remains tricky. In 2024, the industrial AI and automation business was estimated to be worth at least $200 billion, premised on a range of valuation methodologies deployed by multiple consultancies and data aggregators. Investment in core industrial AI solutions accounted for over a fifth of that headline figure, according to some forecasters. Looking ahead, spending on industrial AI is tipped to reach $400 billion, if not more, by 2030, at a compound annual growth rate of at least 8%, depending on which forecaster you rely on. But given what’s afoot in the industry that looks too conservative. Afterall, the current projections are based on guesstimates on the pace of adoption and deployment of existing technological solutions. Yet, the pace innovation and potential emergence of new solutions will likely have a bearing and may alter the trajectory regularly. Big Oil is also strategically evolving into Big Energy. In a rapidly changing landscape, pinning numbers on what the size of the business opportunity may be is a bit arbitrary, said Malik of Green Investors. “It is worth noting that AI will help optimize all aspects of energy generations for both conventional and new energy industries – planning, plant design, construction, land-use optimisation, grid optimization and the cost of stable, scalable and reliable energy.” In that sense, Big Oil or Big Energy, if we wish, and Big Tech are rapidly emerging as unexpected allies. So, perhaps it would not be unreasonable to expect this symbiotic relationship to potentially unlock a trillion dollar historical investment opportunity.
