New Delhi [India], August 27 (ANI): Artificial intelligence could unlock approximately USD 230 billion in annual value across the global upstream oil and gas sector as the technology matures and autonomous operating modes become more common, according to a report by McKinsey & Company.
The report, said AI can unlock approximately USD 65 billion in annual recurring value across upstream oil and gas in the near term with technologies available today, with a "credible path to $230 billion at full potential as the technology matures and autonomous operating modes become more common."
McKinsey said the opportunity comes after a decade of digital transformation in upstream oil and gas, which delivered "real but uneven results", with improvements in efficiency, operational safety and data infrastructure.
According to the report, AI can create value through four main channels -- increasing production, reducing operating costs, improving capital productivity, and changing the risk and balance-sheet profile of assets.
The report estimates that the medium-term potential could reach approximately USD 125 billion annually as proven technologies are adopted more broadly, while the full-term potential of approximately USD 230 billion assumes autonomous operating modes and maximum addressability across the value chain.
AI-driven improvements in exploration could additionally unlock more than USD 35 billion annually in balance-sheet value through reserves accretion, the report said.
However, McKinsey said companies will need to be selective about where they deploy AI, as most of the opportunity is concentrated in a relatively small number of applications. Its analysis of more than 550 AI use cases found that the top 10 use cases account for nearly half of the identified value, while the top 60 account for about 95 per cent.
"AI in upstream is a concentration play, not a 'thousand flowers bloom' opportunity," the report said.
The biggest opportunities are in the develop and produce stages, particularly production optimisation, drilling, artificial lift, reservoir management and predictive maintenance. AI applications in these areas can help increase production, reduce equipment failures and downtime, and shorten drilling and field-development timelines.
McKinsey, however, warned that AI could create challenges for oilfield services and equipment (OFSE) companies because greater efficiency may reduce billable activity. About USD 17 billion of OFSE revenue could be exposed at current AI adoption levels, rising to USD 60 billion at full potential.
After accounting for costs that would also decline, the cash-flow impact is estimated at USD 7 billion currently and USD 24 billion at full potential.
The report said the industry will therefore need to move from pilots to larger deployments and develop commercial models that reward efficiency and share the gains.
"The next stage will not be achieved by technology alone," McKinsey said, pointing to the need for changes in workflows, talent, data infrastructure and commercial arrangements. (ANI)
AI could unlock USD 230 bn annually for upstream oil, gas sector: McKinsey
