Today, oil and gas industry is adopting a proactive measures rather than reactive approach to ensure optimum efficiency and ‘precision, consistency and repetition’ of all the processes within an upstream and downstream flow. This results in smooth functioning and higher productivity. To ensure this, the energy industry has shifted its focus towards digitization, artificial intelligence, automation, and other technological advancements to meet the needs of the diverse energy market. The impact of automation on oil and gas sector has been significant and will also impact the future course of events.
Automation is extremely versatile and can make an immense difference in the day to day activities. On the flip side, it means it can simplify the process and eliminate or modify some workforce requirement. Let us understand the activities that have been impacted by automation:
Diagnostics and monitoring- Inspection process of underwater equipment for repair and upgrade can be easily monitored by underwater drones and unmanned submersibles. The data can be broadcasted as live video feeds and can be centrally monitored and controlled. This will eliminate the need for skilled pilots however the vacancy for skilled auditor/analysts will open to analyze and monitor data
Weather monitoring system - Changes in seismic activity, ocean or atmosphere can impact the day to day activities of the energy industry. Thus, a weather monitoring system is put in place in the oil and gas industry. The system predicts natural calamities like earthquake, hurricanes and so on so that precautionary plan and safety measures can be activated. The automation here ensures job opportunity in the respective arena.
Drilling operations - Drilling is one of the most expensive processes for the oil and gas industry as it requires precision, high technical skills, and considerable safety risks for workers. Automating the manual activities like pipe handling and pressure drilling can enhance the overall drilling process by reducing safety hazards and speeding up the process. The labor force involved in these activities have a risk of losing job however if the workforce is trained well, they can be absorbed in some other tasks involving upgraded skillsets.
Measurement and monitoring pressure and flow - Automation has improved the efficiency manifolds. Smart sensors are installed to measure the pressure and flow of oil. sensors are connected to the central monitoring system, where the flow and pressure are monitored on regular basis and can be adjusted as per the need. This eliminates the requirement for an on-site crew. Only a few experts are hired to monitor and measure the pressure and flow and take the required action.
Rig management and monitoring - There are sensors that are installed on oil rigs at the various levels which produces data on a continuous basis. The data are carefully studied to manage, monitor and improve the performance of the rig. This also means the managerial and labor force required to manage rig goes down and new roles to comprehend data into meaningful strategies pop up.
Hiring and training - Energy sector had a traditional approach for hiring and training, however, things have changed with the advent of technology and digitization. Now with platforms like NrgEdge, finding the right candidate for the job role has got a lot easier. Also, the energy sector is absorbing new age tech-savvy candidates who are expert in digital media and analysis. For training and development of the workforce, simulation and augmented reality have made it easier to train candidate from any location. From job perspective, it will be safer to say job roles have changed but has certainly not declined.
Impact of automation on various aspects of job:
Labor productivity - Productivity tends to increase over time with automation and technological breakthroughs.
Job roles - job roles that require interpersonal skills, and creativity will be challenging to automate while the ones which require data collection, monitoring and analysis will be easier to automate.
Job polarization - Physical labor and some white-collar jobs have been replaced with automated processes and better software and computing power.
Hazardous work - Dangerous jobs in oil rigs have been automated or in the process of automation. This is done to ensure safer work conditions. However, it also implies lower compensation rates for workers as the risk factors get mitigated. Thus, automation deployed in offshore will reduce physical labor on rigs but will also open opportunities for more engineering jobs in control rooms.Final take: Will automation eliminate jobs or transform them?
Economists draw examples from the industrial revolution to demonstrate that the economy can create new jobs when the progress destroys the old ones. When technology replaces the labor in one sector, they get absorbed in another sector. So, it is safe to say the automation will transform job roles in the oil and gas industry and will not drop the workforce requirement. So, if you are looking to make a career in the oil and gas industry, it will be wise to upgrade your skills as per the changing needs of the industry.
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On 10 December 2021, if all goes to plan Royal Dutch Shell will become just Shell. The energy supermajor will move its headquarters from The Hague in The Netherlands to London, UK. At least three-quarters of the company’s shareholders must vote in favour of the change at the upcoming general meeting, which has been sold by Shell as a means of simplifying its corporate structure and better return value to shareholders, as well as be ‘better positioned to seize opportunities and play a leading role in the energy transition’. In doing so, it will no longer meet Dutch conditions for ‘royal’ designation, dropping a moniker that has defined the company through decades of evolution since 1907.
But why this and why now?
There is a complex web of reasons why, some internal and some external but the ultimate reason boils down to improving growth sustainability. Royal Dutch Shell was born through the merger of Shell Transport and Trading Company (based in the UK) and Royal Dutch (based in The Netherlands) in 1907, with both companies engaging in exploration activities ranging from seashells to crude oil. Unified across international borders, Royal Dutch Shell emerged as Europe’s answer to John D Rockefeller’s Standard Oil empire, as the race to exploit oil (and later natural gas) reserves spilled out over the world. Along the way, Royal Dutch Shell chalked up a number of achievements including establishing the iconic Brent field in the North Sea to striking the first commercial oil in Nigeria. Unlike Standard Oil which was dissolved into 34 smaller companies in 1911, Royal Dutch Shell remained intact, operating as two entities until 2005, when they were finally combined in a dual-nationality structure: incorporated in the UK, but residing in the Netherlands. This managed to satisfy the national claims both countries make on the supermajor, second only to ExxonMobil in revenue and profits but proved to be costly to maintain. In 2020, fellow Anglo-Dutch conglomerate Unilever also ditched its dual structure, opting to be based fully out of the City of London. In that sense, Shell is following the direction of the wind, as forces in its (soon to be former) home country turn sour.
There is a specific grievance that Royal Dutch Shell has with the Dutch government, the 15% dividend tax collected for Dutch-domiciled companies. It is the reason why Unilever abandoned Rotterdam and is now the reason why Shell is abandoning The Hague. And this point is particularly existentialist for Shell, since its share prices has been battered in recent years following the industry downturn since 2015, the global pandemic and being in the crosshairs of climate change activists as an emblem of why the world’s average temperatures are going haywire. The latter has already caused the largest Dutch state pension fund ABP to stop investing in fossil fuels, thereby divesting itself of Royal Dutch Shell. This was largely a symbolic move, but as religious figures will know, symbols themselves carry much power. To combat this, Shell has done two things. First, it has positioned itself to be at the forefront of energy transition, announcing ambitious emissions reductions plans in line with its European counterparts to become carbon neutral by 2050. Second, it is looking to bump up its dividend payouts after slashing them through the depths of the Covid-19 pandemic and accelerating share buybacks to remain the bluest of blue-chip stocks. But then, earlier this year, a Dutch court ruled that Shell’s emissions targets were ‘not ambitious enough’, ordering a stricter aim within a tighter timeframe. And the 15% dividend tax remains – even though Prime Minister Mark Rutte’s coalition government has been attempting to scrap it, with (it is presumed) some lobbying from Royal Dutch Shell and Unilever.
As simplistic it is to think that Shell is leaving for London believes the citizens of the Netherlands has turned its back on the company, the ultimate reason was the dividend tax. Reportedly, CEO Ben van Buerden called up Mark Rutte on Sunday informing him of the planned move. Rutte’s reaction, it is said was of dismay. And he embarked on a last-ditch effort to persuade Royal Dutch Shell to change its mind, by immediately lobbying his government’s coalition partners to back an abolition of the dividend tax. The reaction was perhaps not what he expected, with left-wing and green parties calling Shell’s threat ‘blackmail’. With democracy drawing a line, Shell decided to walk; or at least present an exit plan endorsed by its Board to be voted by shareholders. Many in the Netherlands see Shell’s exit and the loss of the moniker Royal Dutch – as a blow to national pride, especially since the country has been basking in the glow of expanded reputation as a result of post-Brexit migration of financial activities to Amsterdam from London. The UK, on the other hand, sees Shell’s decision and Unilever’s – as an endorsement of the country’s post-Brexit potential.
The move, if passed and in its initial stages, will be mainly structural, transferring the tax residence of Shell to London. Just ten top executives including van Buerden and CFO Jessica Uhl will be making the move to London. Three major arms – Projects and Technology, Global Upstream and Integrated Gas and Renewable Energies – will remain in The Hague. As will Shell’s massive physical reach on Dutch soil: the huge integrated refinery in Pernis, the biofuels hub in Rotterdam, the country’s first offshore wind farm and the mammoth Porthos carbon capture project that will funnel emissions from Rotterdam to be stored in empty North Sea gas fields. And Shell’s troubles with activists will still continue. British climate change activists are as, if not more aggressive as their Dutch counterpart, this being the country where Extinction Rebellion was born. Perhaps more of a threat is activist investor Third Point, which recently acquired a chunk of Shell shares and has been advocating splitting the company into two – a legacy business for fossil fuels and a futures-focused business for renewables.
So Shell’s business remains, even though its address has changed. In the grand scheme of things, never mind the small matter of Dutch national pride – Royal Dutch Shell’s roadmap to remain an investment icon and a major driver of energy transition will continue in its current form. This is a quibble about money or rather, tax – that will have little to no impact on Shell’s operations or on its ambitions. Royal Dutch Shell is poised to become just Shell. Different name and a different house, but the same contents. Unless, of course, Queen Elizabeth II decides to provide royal assent, in which case, Shell might one day become Royal British Shell.
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