Cover story: Disrupting the status quo

Dietmar Siersdorfer, the company’s CEO in the Middle East, has spent three decades with the firm working across multiple sectors and regions and has witnessed seismic change during that time as technology has emerged from the pre-Internet age to the possibilities of artificial intelligence (AI).

Speaking to Oil & Gas Middle East after an event that looked with optimism towards the technologies of the future, Siersdorfer also sees upside potential in the hydrocarbon sector as oil prices remain healthy and regional governments are once again tempted to invest in future projects and opportunity.

“The oil price is close to $70, which is good news, and we see investment coming mostly in downstream at the moment. Also, when you talk to downstream companies active in the segment, when they look back at the last fiscal year, they all report very good figures even when there was a low oil price.”

By contrast, Siersdorfer doesn’t expect to see too many new upstream projects taking shape although he expects the Abu Dhabi National Oil Company (ADNOC) to invest in the “gas infrastructure” to reduce the UAE’s reliance on other countries and to maximise its own resources.

The demand for natural gas to drive power supplies is accelerating and Siemens Energy Outlook 2018, released earlier this year, emphasises that gas will remain the region’s number one source for power generation through to 2035 and beyond, “representing 60% of installed capacity”. But the report predicts that the use of renewables, an area Siemens is increasingly active in, will more than triple in the same period.

For Siersdorfer, investing in the exploitation of natural gas, if a country possesses that resource and can then remove a dependency on third parties, helps to offset the steep expense of some gas extraction techniques, like sour gas sweetening and gas liquefaction units, or trains, vital for liquefied natural gas projects. He feels a recent spike in the price of gas also allows “headroom” for further investment in the infrastructure required to exploit gas supplies.

But for an instinctive innovator like Siersdorfer, a lack of technical know-how and a missed opportunity is a tangible frustration, as Iraq’s energy sector demonstrates.

“Look, for example, to a country like Iraq, they have a huge amount of gas which they flare every day. If they would build some infrastructure to capture the gas from flaring, that would give them a huge amount of gas just to build power stations and use the gas efficiently, which today is just creating emissions and nothing is done with it.”

Siemens has certainly recognised the increasing influence renewables will have over the coming decades but Siersdorfer thinks natural gas will maintain a dominant hold on the regional power supply as clean energy alternatives cannot replicate the sheer magnitude of 200 gigawatt projects alone, although “scaling” renewables with natural gas is most definitely an option. This energy mix works by utilising renewables, like solar, when the sun is shining and tapping into gas at night or when it’s cloudy, as a go-to foundation power source.

At an earlier seminar in Dubai, Siersdorfer had spoken optimistically about the regional oil and gas industry and that its potential outweighed many of the geopolitical factors that constantly loom above it. But some of his positivity centres on how he sees the industry evolving and innovating in different directions.

“Many people talked, in the past, that the oil and gas market is down and maybe we come now to bury it. I don’t think that is the case. There will be, the next two hundred years for oil and gas, we will see many of these things in very efficient uses, for example in power generation, but maybe we will not see oil and gas used in the mid-term and long-term for individual travel, because we may not use benzene and diesel and whatever in cars, this will move into another way.”

If the rise of the electric vehicle is a worry for one area of the downstream market, Siersdorfer sees original and exciting possibilities in others – including construction.

“We can use different kinds of materials in the future to build structures. Today, we use concrete, all kinds of solid materials, steel and whatever, who says we can’t build structures in the future that are based more on polymers, and more on other ways like this, and maybe you can do that more efficiently than you do that today, with more technologies.”

Siersdorfer also believes technological advances, and support from firms like his own, will help unlock presently untapped potential at existing oilfields so that new exploration sites won’t need to be established, thus saving capital expenditure, and newer technologies will hold the key to maximising returns.

When it is put to him that perhaps Siemens, considering its range of technical expertise, could have a bigger foothold in the region’s hydrocarbon sector, Siersdorfer disagrees and points, as one example, to the German outfit’s award of a major engineering, procurement and construction contract for the Taweelah Gas Compressor Station in Abu Dhabi, a “very strategic” project, pumping gas from the UAE capital to Dubai.

Siemens’ involvement in Egypt and Cyprus in newly discovered giant gas fields, alongside Italian oil supermajor Eni, is certainly evidence of a prominent role in some of the region’s biggest and fastest-growing projects.

But one of the most notable disruptions to impact the oil and gas sector recently has been the gradual implementation of automation and digitalisation. However, Siemens’ regional chief suggests the hydrocarbon sector has more progress to make.

“I think in the oil and gas sector we are at the beginning of digitalisation. What we have seen is that the oil and gas industries are very traditional industries. So adapting to new technologies, they are usually not the frontrunners, they are usually the late adopters. So that gives a lot of possibility.

“What the oil and gas industry realises is that they sit on a lot of data, which they can use and I am talking more about operational data. In the exploration and geology of the fields, I think they are the masters already.”

Siersdorfer believes digitalisation can particularly benefit upstream operators in “getting oil and gas out of the ground and once it is out of the ground.” The systems at this point of the operation are not so greatly impacted by the new technologies available.

“We have never been a company that went into exploration and said ‘we have the technology to support you to find oil’ or whatever, but we have the technology to operate your pump much more efficiently, to operate it remotely, to monitor it remotely and even to use that data to optimise how you would pump the oil and understand how the reservoir would behave if you do it a certain way.”

Part of the reason for the slow implementation of new methodologies and technologies by the vast national and international oil companies might be explained by their instinctive caution, as they prefer to adopt a more modular and standardised approach to operations in order to reduce both costs and risks.

Siemens had earlier used their Innovation Day to unveil a $500mn investment in developing 20 MindSphere Application Centres, which will offer digital solutions in 17 countries around the globe, with two of them located in the UAE and one, in Abu Dhabi, specifically targeted at the oil and gas segment.

The strategy undoubtedly makes sense for a firm with Siemens’ expertise but a number of its competitors have rolled out similar hubs and solutions centres in recent times – what makes the Munich based firm’s offering different to the rest?

“When you go to the digital space, and again oil and gas is a very traditional industry, when you come there and say we have an application for you, and they should use it, most don’t do it because usually it is a very specific situation for each and every customer. You have maybe similarities for certain applications but adapting it to the need of the particular field and that particular situation, that is what is necessary.”

Siemens will use ‘co-creation’ and ‘co-location’ whereby solutions and applications can be devised hand-in-hand with the customer at their specific facility. Siemens will also bring in data scientists, rather than oil and gas experts, to generate ideas in more original and non-traditional ways. They will also tap into AI and deep learning techniques.

To hear a senior executive within Siemens mention AI is intriguing. Last month SparkCognition, an AI specialist, opened its Middle East office in Dubai and oil and gas is to be a focus for the firm – but how can intelligent agents genuinely help the industry?

Siersdorfer uses an example from the rail sector regarding AI analysing visual data from cameras to predict the fallibility of train doors as they open and close.

“Imagine you apply such things to an oil and gas facility, maybe even a remote one, where you have an operation where a valve has opened or closed or whatever, and nobody is checking that all the time. You have maybe your data in your control systems, but imagine you can predict now what will happen based on visual data.”

Mapping, or digitalising, long-standing oil facilities or plants using 3D cameras also interests Siersdorfer as the results provide “a real asset database which is based on actuals”. Technicians could then be sent, guided by visual data and utilising smart glasses, to the exact spot where a failure has occurred.

Technology and new innovations are intrinsic motivations for Siersdorfer and in the lead-up to Siemens’ Innovation Day he wrote briefly about the potential impacts of blockchain –the most hyped technological innovation around right now.

But is blockchain a game-changer or a buzzword?

Siersdorfer observes that most people know blockchain through its connection to cryptocurrencies and its press coverage, but its real value, for example, is in tracking complex, multi-party series of transactions without risk of modification.

“What is coming out of the well, what is coming to the processing plant, what is transferred to the tanker, what is coming to the customer in Korea or Germany or wherever you transport your stuff. So tracking these many transactions that are done, who is getting what, in a blockchain, this is more secure than doing this manually. Typically there are many parties involved, many independent parties involved.”

With the “millions” of transactions undertaken in the oil and gas sector, blockchain offers a means to record and monitor them securely. Blockchain is a “young technology” and its potential innovations and uses are not yet available “off the shelf”. Siemens itself is assessing blockchain for its own internal operations, with regard to processing elongated and frequently adjusted contracts.

Siemens has an estimated 40,000 employees engaged in research and development (R&D) globally and spends $6bn a year on R&D alone as it works to stay ahead of its competitors. Innovation is not just a core value, but also a necessity.

With the changing industry landscape, and the increasing impact of AI, digitalisation, renewables and electric cars, there is a surely a need for more innovative ideas to start filtering down directly from the boardroom.

“I see a lot of companies, such as ADNOC, they are adapting to it, they got leaner, they slimmed themselves down, they made the operations better, they work much closer together between the former operating companies, so we see this happening and this is innovation. This is adapting to new technologies  – and this we will see in a greater scale. And the good ones will survive and the ones that are not adapting will not survive.”