The big oil companies have always looked with distrust, and a certain arrogance, at the promise of benefits represented by digitalisation and renewable technology startups. They believed that the only innovation crucial to their business was purely industrial, incremental and petroleum-related: how the ‘black gold’ was found, how it was extracted, how it was refined and how it was marketed and distributed through traditional channels. Now, things are changing fast. Very fast.
At this time, the list of large private oil companies that do not have investments in ‘green’ startups in Silicon Valley is shorter than the opposite. These are floods of billions of euros, although it is true that they cannot be compared with the wide ocean of total investments in the sector. It must be remembered, in any case, that they are carried out in the midst of very difficult debt reduction cures, of increasingly ambitious programs to optimise spending and remunerate the shareholder and, finally, of a costly productive transformation that displaces the centre of the scene to oil to enthrone natural gas as the main source of income. They don’t have enough money.
That is why it has come as a surprise to many, that Shell has invested in a company that produces electricity with huge kites (wind energy), in Total’s wind turbine rental platform for small businesses and homes, in BP’s business that promises recycling urban waste into biofuel, in those of Exxon in a firm that wants to convert algae into biofuel, and in those of Chevron that points to forestry waste as a source of energy. But these investments are less surprising if one takes into account that the oil companies know that the only way to compete with the renewable energy giants in their territory is on the back of a technology that reaps or weakens one of their pillars.
Simultaneously, oil companies are advancing on large-scale digitalisation, to begin with, because they need to reduce the costs of operation and maintenance of large infrastructures, first, through the analysis of massive data with the help of artificial intelligence and, second, with devices that allow simple faults to be solved remotely. This makes it easier to understand why Repsol signed an agreement with Google in May to maximise the performance and improve the management of its Tarragona refinery.
The opportunities that involve robotising increasingly complex tasks, using robots for the most risky and dangerous jobs and deploying drones for infrastructure monitoring operations – for example at sea or in the middle of the desert – are very attractive. Furthermore, since Repsol and many of its rivals already produce more gas than oil, it is not lost on them that, according to the consulting firm McKinsey, the integration of digital applications can allow gas companies to reduce their capital expenditures by up to 20%. It is a very tempting saving in times of cutbacks.
Electrifying
On the other hand, oil companies, and here Repsol appears again, are entering the electricity marketing and distribution sector, buying, at the same time, companies or wind farms. Julia Díaz, Director of Innovation in the Energy and Health Predictive Analytics area at the Institute of Knowledge Engineering (IIC), believes that wind or photovoltaic ‘power plants’ need smart electrical networks (smart grids) to guarantee supply and “make the operation and maintenance of networks cheaper” with the help of “digital management”.
If they want to satisfy the end customer with their electrical service, Díaz warns, “the best tool to know them is the data from smart meters,” which will allow them to put “better offers and an adapted service” on the table. This, he warns, should result in attracting and retaining users in a market where it is much more difficult to differentiate in product (they all offer the same energy) and in price (margins are relatively small). That is where companies such as Endesa, Iberdrola or Naturgy have already launched themselves headlong, which are the ones that control a good part of the distribution and marketing of electricity in Spain. Repsol, Galp and Cepsa have been trying, since this year, to gain ground on them.
Everything seems to indicate that the energy distribution and marketing segment is on the verge of disruption. If the deck is broken and there are new rules, the oil companies could take advantage of them to try to prevail over traditional operators. According to the CEO of the Kiatt technology group, Manuel Fuertes, this disruption could come from smart grids, the decentralisation of energy production from the general electrical grid to local micro-grids, and the intelligent supply of energy thanks to the use of artificial intelligence and predictive algorithms.” To these should be added, the expert continues, “the possibility of storing the energy that we do not use in batteries with increasingly greater capacity and faster charging.”
The oil titans, after years of scepticism about renewables and Silicon Valley gadgets, have decided to embrace a technological transformation that takes them to a continent to explore. The renewable energy giants and large electricity companies are waiting for them impatiently. It is one of the fights of the century
