This OODA special report focuses on Digital Transformation in the Energy Sector. It is written both for firms that are in the sector who are seeking competitive advantage and for firms in other sectors that can use this awareness for strategic planning (all our market based special reports are available on our OODA network resources page).

As a market-based assessment, this special report will be of most use when read in conjunction with the functional and technical research we provide OODA network members, and we provide contextualized recommendations for related research throughout this assessment.

Companies in this sector provide functions like exploration, production, marketing, refining and/or transporting of oil and gas products, coal and other consumable fuels. Some of the world’s biggest, most widely known brands are in this sector. Companies like Exxon Mobil, BP, Chevron, Halliburton, Marathon Oil, Phillips 66, Shell, Sunoco are powerhouses in the industry and are also household names because they deliver oil and gas directly to consumers.

Innovation in The Energy Sector:

Digitization in the energy sector has led to a wave of innovation around instrumentation of production and distribution operations. This has included more compute around analysis of what action to take. Digitization efforts are now being applied to more/better instrumentation and control devices. Results to date have included safer and smarter exploration, production, distribution and consumption of energy. Other key points regarding innovation in this sector:

• Many firms in the energy sector are investing heavily in technologies that will help to bring fuel to consumers that are cleaner/greener. Review of shareholder reports indicates this is clearly an area of interest and we expect continued innovation and improvement here.
• Solar and wind power generation is growing, and digitization is helping to optimize how these new clean sources are created and delivered, but breakthroughs are needed in energy storage to optimize these sources.
• Instrumentation and automation of production and distribution has introduced new security challenges. Energy sector firms are investing to meet these challenges. Security firms are adjusting to bring needed capabilities to the sector.
• Innovation efforts are being aided by ubiquitous communications, including connectivity with most remote operations.

Cybersecurity in The Energy Sector:

Successful digitization requires appropriate cybersecurity. Energy sector efforts in cybersecurity are uneven. Larger, well resourced firms may have mature efforts with multiple layers of defense and an ability to detect issues and respond appropriately. Many mid-sized firms and most smaller firms have room for significant improvement.

Our recommendations for cybersecurity in the energy sector:

• Establish a relationship with the appropriate cybersecurity information sharing organization for your firm (for many this is the Oil and Gas ISAC or the Downstream Natural Gas ISAC). Membership will enable sharing of information on threats but also provides a venue for exchange of best practices in cybersecurity.
• Larger firms can aid in improving the security of smaller firms and their entire supply chain by advocating for use of common cybersecurity frameworks and taxonomy’s, like the NIST Cybersecurity Framework. Smaller firms can proactively show how serious they are about security by adopting this framework.
• All businesses in the sector should ensure executives in the business have a baseline understanding of cyber threats as well as geopolitical threats and technological risks. We provide a plain english daily threat brief designed to improve this awareness. Sign up at The Daily Pulse.
• Think through your nightmare scenarios. In this sector it could include disruption of production or distribution by cyber attack. Thinking through nightmare scenarios will help you plan to mitigate risks and prioritize resources appropriately.
• All firms, large and small, should leverage outside experts to evaluate security. This type of external assistance can include review of plans, policies and architecture. External red teaming efforts should also be leveraged as an independent way of evaluating comprehensive security programs. For more on both types of security evaluation see OODA.com

Enhancing Innovation in the Energy Sector:

The state of innovation in the energy sector today provides a great foundation to build upon. For energy companies seeking a competitive edge through digitization we recommend the following:

• Conduct a strategic review of corporate digitization efforts
  • What is in the near future of technology available to our digitization efforts? How might these technologies enable delivery of more value to clients?
  • Can digitization enable a reduction of expenses by optimizing decisions or reducing overhead?
  • Do we have a technology vision focused on the future business environment?
• Look for synergies with changes underway in other sectors of the economy. Knowing the future of IT and Transportation is especially important. The future of the communications industry is also key since even higher speed communications to all aspects of the energy sector will soon be available.
• Energy company leaders can contribute to visions of IoT deployments in ways that save consumers energy and contribute to a greener energy sector.
• The number one technology that will transform the energy sector is Artificial Intelligence. To leverage it, organizations need an AI strategy. Building this strategy can occur one of two ways, either top-down or bottom up. The top-down approach involves a corporate strategy that focuses on centralization of resources. The bottom-up approach takes a strategy of decentralization of resources. Pick the approach that fits the culture of your organization.
• Shifting data analysis to the cloud can enable new, faster algorithms and Artificial Intelligence to work over data to improve operational business decisions.
• Quantum Computing is in its nascent stage, but the devices have been proven to work. One day, perhaps 5 years from now, working quantum computers will be fielded in ways that transform exploration, optimize refining, and improve distribution. The time to think through use cases is now.

For Businesses Seeking To Serve the Energy Sector:

• Strategically your business may target a sector, but operationally you will target a segment that may be one of the five sub-sectors the American Petroleum Institute defines as: Upstream (exploration, development, production of crude or natural gas), Downstream (things that move oil and gas all the way to consumers), pipeline, marine, service&supply. And tactically your firm will focus on a particular company. Finding balance in actions between strategic, operational and tactical efforts is key.
• Executives in this sector stay very busy. Do your homework and prepare prior to any discussion so you never waste their time. Understand as much as you can about their needs before any meeting.
• Every publicly traded company in the energy sector provides an annual report that captures specifics on their market and approach which includes intentions for the near future. These are available on corporate websites and should be one of the first documents read before any sales call.
• Also understand what you can about their clients and supply chain since increasingly these are topics on the mind of corporate decision-makers.
• Be fluent in the technologies of high interest in this sector including Cyber Security, Cloud Computing, Quantum Computing, Quantum Security, and Artificial Intelligence.

These are additional references that can help accelerate digitization in the energy sector:

AI Topics:

• AI Security: Four Things to Focus on Right Now – This is the only security framework we have seen that helps prevent AI issues before they develop
• A Decision-Maker’s Guide to Artificial Intelligence –  This plain english overview will give you the insights you need to drive corporate decisions
• When Artificial Intelligence Goes Wrong – By studying issues we can help mitigate them
• Artificial Intelligence for Business Advantage – The reason we use AI in business is to accomplish goals. Here are best practices for doing just that

Quantum Computing:

• The Executive’s Guide To Quantum Computing: What business decision-makers need to know now about quantum superiority
• The Executive’s Guide To Quantum Safe Computing: Take these steps to make your enterprise quantum proof
• Is Quantum Computing Ushering in an Era of No More Secrets?: Context from OODA’s Matt Devost on the very near future of quantum computing.
• What To Do About Quantum Uncertainty: Guess what, besides uncertainty at a quantum level there is great uncertainty among business and policy makers regarding Quantum Computing.

Cybersecurity Topics:

• OODA’s Cyber Threat Analysis Report : OODA’s Cyber Threat Analysis Report provides the “so what” behind the news and events we track on a daily basis.
• A Traveling Executive’s Guide to Cybersecurity: No-nonsense actions to take to reduce risk for executives on the go
• Best Practices for Agile Cybersecurity: Kickstart your cybersecurity improvement program
• Essential Management Strategies for Cybersecurity: Management lessons learned and essential actions to mitigate risks

OODA network members can find these and all other research reports at our OODA Network Resources page