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Economic Prosperity in the Digital Age

SAN JOSE – Around the world, people are demanding change. Recent electoral outcomes – perhaps most notably, the Brexit vote in the United Kingdom and the presidential election in the United States – have highlighted rising economic uncertainty. In this environment, it is imperative that leaders articulate and deliver on a clear vision for inclusive economic growth, one that accounts not only for tax and trade policy – the focus of many of today’s debates – but also for digitization.

Representing $19 trillion in potential economic value over the next decade, digitization has the power to enable countries to kick-start GDP growth, job creation, and innovation. We’re already seeing the profound impact that digitization can have on countries that embrace it as a core driver of their economic strategies.

In India, for example, Prime Minister Narendra Modi is implementing a strategy that is transforming India into a technology powerhouse and setting the stage for a digital future. In France, the government has invested in an extensive national digital plan that is expected to create 1.1 million jobs over the next 3-5 years and contribute $101 billion to GDP over the next decade.

While other countries are embracing robust digital strategies, the US is falling behind. Despite having led the Internet race in the 1990s, the US is now the only major developed economy without a clear digitization plan. The consequences are already starting to show: according to the 2016 Bloomberg Innovation Index, the US is now the world’s eighth most innovative country, having fallen two spots since 2015.

The message is clear: when it comes to digitization, nobody is entitled to anything, and there is no time to waste. Even in Silicon Valley, we must constantly reinvent ourselves to stay competitive. The US economy must do the same, or risk losing its innovative edge. Only with a clear and effective digitization plan can the US ensure that it retains its status as a global economic leader in the Digital Age, while fulfilling its citizens’ demands for more economic opportunities.

I believe that connectivity has the power to transform economies and generate new opportunities. That is why America’s new digital agenda must rectify the fact that, despite living in one of the world’s wealthiest countries, one-third of the US population still lacks broadband access at home.

Existing Smart City initiatives promoting connectivity in Chicago and Washington, DC, are encouraging. But, to close the digital divide, a more comprehensive national digital strategy is needed, one that emphasizes digital infrastructure investment, rather than just physical infrastructure investment, as in the past. Only with broad access can technology continue to fulfill its potential as one of the great economic equalizers.

An effective US digitization plan must also support start-ups. Young companies represent the future of job creation – they are the primary source of new jobs in the US – and technological disruption. Yet start-ups are on the decline in the US. According to research by the Brookings Institution, the start-up rate (the number of new companies, as a percentage of all firms) has fallen by nearly half since 1978.

To boost innovation and job creation, we need to reverse this trend, injecting more fuel into the US economy’s start-up engine. This will require businesses and government to work together to create an environment that encourages entrepreneurs to bring their visions to life. A combination of legislation, such as tax benefits for early-stage companies, and corporate/venture capital investments that provide financial backing and mentorship opportunities to start-ups, will be vital to sustain this ecosystem.

More broadly, US leaders must create an environment that encourages all kinds of business growth and investment. Trump’s call to update US tax rules in 2017 could produce benefits on this front, assuming that the new rules promote domestic investment by encouraging companies to bring back their overseas earnings and by lowering the corporate tax rate, currently one of the highest among OECD countries. These steps could bring more than $1 trillion into the US economy, creating jobs and economic opportunities in the process.

Yet another critical element of an effective digitization plan is education and training. Businesses need to invest in the existing workforce, which largely lacks the skills necessary to compete in the Digital Age. At the same time, we must transform our education system, so that younger generations acquire the skills they need to secure the high-paying digital jobs of the future. To this end, we must move beyond emphasizing science, technology, engineering, and mathematics – the so-called STEM subjects – to think about how to apply technology and digitization to all fields.

Digitization could create $5.1 trillion in economic value for the US by 2025, while significantly lowering unemployment. But the US cannot realize this potential unless its leaders work effectively across party lines and with all industries to drive forward a digital agenda.

Technology is changing everything: the way we do business, the rules of capitalism, and entire economic ecosystems – all at tremendous speed. The US must change with it, acting now to do what it takes to reclaim its innovative edge and thrive in the Digital Age.

John Chambers is Executive Chairman of Cisco.

PROJECT-SYNDICATE.ORG

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GE’s on How Digitization Helps Reduce Costs in Oil and Gas

“Unplanned downtime continues to plague the oil and gas industry. The offshore sector, in particular, has been saddled with unnecessarily high costs and exposed to unnecessary risks as a result. This was made clear in a study by Kimberlite, an international oil and gas market research and analytics company, in Summer 2016. And the problem is only going to get worse as budget cuts, aging assets, and the loss of industry experience take their toll. There is a solution. Digitization enables offshore operators to reduce unplanned downtime while simultaneously reducing risks”.

The statement is part of a paper GE Oil & Gas has recently published and reached the following conclusions:

  • Offshore oil and gas organizations experience on average $49 million annually in financial impacts due to unplanned downtime. For the worst performers the negative financial impact can be upwards of $88 million.
  • Fewer than 24% of operators describe their maintenance approach as a predictive one based on data and analytics. Over three-quarters either take a reactive or time-based approach.
  • Operators using a predictive, data-based approach experience 36% less unplanned downtime than those with a reactive approach. This can result in, on average, $17 million dropping to the bottom line annually.

Digitalization and efficiency

In a world of low oil prices, organizations must move from “chasing barrels to chasing efficiency”. Unplanned downtime is not cheap, but the market’s most frequently used approaches to maintenance – which should ideally help reduce unplanned downtime – are not as effective in reducing it as more modern approaches.

Fewer than 24% of operators described, in the Kimberlite study, their maintenance approach as a predictive one based on data and analytics. The rest either took a reactive or time-based approach. As the digital worlds of organizations grow, privacy, control and security will continue to be top concerns. Evolving digitization has made sensitive data vulnerable, but it has ultimately triggered a wave of innovation as companies work to stay ahead of threats and be able to isolate and minimize their impact when they occur.

Another common concern when taking on digital initiatives is system integration. Oil and gas organizations are becoming increasingly connected across their organizations in terms of not just applications, but data as well, so there is a need to ensure that new application and technologies for better asset management can fit well into the broader organization.

Summing up, GE recommends:

  • Oil and gas executives responsible for offshore operations should work with their technology teams to create a digital strategy to reduce unplanned downtime that will be based on a foundation of data and analytics. Oftentimes there is a lack of comprehensive and specific strategies for digital opportunities with asset repair and maintenance. Strategies should be developed at a high enough level to ensure that digitization does not happen in pockets, and it is able to scale.
  • Challenge your OEMs to provide digitally-enabled equipment and machines that will provide the data necessary for reducing downtime, and they can assist with building a more comprehensive digital strategy for your asset management efforts. Ask your OEMs questions about their digital strategies, and truly understand their approaches and plans.
  • Evaluate asset performance management (APM) tools and technology to manage machine data and support more timely, data-based decision processes.
  • Consider cloud-based solutions and outsourced services. It is important to consider your organization’s core competencies and how much digitization aligns with them. Cloud-based and outsourced services can offer additional expertise and scalability to support data-driven approaches as they continue to grow and evolve.

Now is the time to embrace new digitization opportunities that will improve margins and profitability. PhDsoft is helping oil and gas companies see returns from digitization. Contact us to accelerate your path to mitigating risk resulting from unplanned downtime and to driving enhanced operational efficiency.

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PhDsoft’s revenue continues to increase in a $1 trillion potential market

“PhDsoft will grow in the current oil crisis because companies are searching for ways to reduce costs without raising risks, and that’s what we do”, predicted in the beginning of the year the CEO and founder of the company, Duperron Marangon. In fact, we know now, PhDsoft’s revenues are going to end 2016 in a 30% increase. Beyond the oil crises, though, there is a potential $1 trillion market to guarantee the company success at least until 2022.

Gartner has just published the report Top Strategic Predictions for 2017 and Beyond: Surviving the Storm Winds of Digital Disruption. “Digital business innovation creates disruptive effects that have a wide-ranging impact on people and technology. However, secondary ripple effects will often prove to be more disruptive than the original disruption. Digital strategists must actively identify secondary effects when planning change”, says the Summary.

One of the Strategic Planning Assumptions of the document is that “by 2022, IoT (Internet of Things) will save consumers and businesses $1 trillion a year in maintenance, services and consumables. The key findings were that: Assets under maintenance globally exceed $240 trillion, with maintenance costs of $27 trillion; Moving to predictive maintenance (with PhDC4D, for example) can often save 10% to 20% over preventive maintenance; IoT, properly deployed, can unlock this $1 trillion savings opportunity (excluding new technology investments).

Near-term flags are: Emerging use cases demonstrating the use of IoT to drive predictive maintenance; Proliferation of digital twin models to optimize predictive maintenance efforts by 2020; Reporting of improved efficiency based on IoT implementations by 2018; Software models of physical assets provided by suppliers by 2020.

The study recommends to: Identify costs associated with scheduled maintenance and consumable expenses; Target a 10% reduction of these costs, based on a shift to a predictive regime; Build a roadmap to implement IoT projects against the portfolio, targeting the fastest returns, initially focusing on larger, more complex and expensive assets — where downtime and waste are expensive — and instrument to deliver “low-hanging fruit” cost savings, starting with POC projects that have short payback periods in order to build momentum for these projects; Continue to prioritize additional IoT instrumentation for additional cost savings until you approach the point of diminishing returns.

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An Expert Interview About Information Technology in the Oil Industry

Concluded in last June 1st, the Energy Perspectives 2016 – Long Term Macro and Market Outlook, from Statoil, begins with the following statement: “Global energy markets are in transition”. In fact, the 2008 crisis is not over yet and new technologies are promising to revolutionize the energy business, which also means lots of opportunities. This is the drive for Duperron Marangon, CEO and founder of PhDsoft: “We will grow in the current oil crisis because companies are searching for ways to reduce costs without raising risks, and that’s what we do”.

Expert in technology management and asset integrity maintenance, Marangon has been in the oil industry for the last three decades and see too many uncertainties regarding the future: “Everybody likes to talk about clean energies. I’m not different. The instant image associated to that is of a better planet. But nobody knows if this is going to be economically sustainable. Statoil Outlook, for instance, asks if cost reductions in extraction could affect the competitiveness of different fuels. There is no answer, as they analyze on the following excerpt”.

The Productivity Puzzle

Total Factor Productivity (TFP), primarily driven by labour productivity, has for several Western countries fallen since the IT boom of 1994-2004. This is unfortunate as its stimulus to economic activity has been slow and productivity gains are a necessity for a robust wage development. It seems legitimate to ask why this weakening has come about. Some of the recent new information products, such as social media, are innovative and improve people’s living standards, but do not seem to increase efficiency in the same way that the advent of PCs or the growth of the Internet did. Since the end of the financial crisis, companies have had easy access to labour and hence expanded the labour force instead of investing in technology to boost output. Furthermore, job creation has to a large extent been within low-skilled jobs in the service industry, where productivity improvement is typically low. It is also possible that companies have become more reluctant to invest in labour productivity due to stricter and more complex government regulations introduced in recent years. These regulatory efforts boost growth over the longer term, but slow the current momentum within industry and trade. Finally one might question if productivity gains are fully measured and captured in the “new economy” of e-commerce and so-called “sharing”, and in the service industry in general.

The world might have to get used to somewhat lower future productivity growth compared to recent decades, with a consequent slightly negative impact on the economic outlook. However, there will be supportive factors for productivity that could push it upwards. Reaping the full effects of the IT boom might come with a delay, as was the case with many earlier inventions, which were so comprehensive that it took years for their full impact to emerge. This – combined with the more recent drop in the cost of 3D printers and sensors, big data management, ongoing automation, and more – has the potential to transform the economy and increase productivity. Today, the world is increasingly connected and progress can spread rapidly. As labour markets in the Western world continue to tighten, putting pressure on wages, companies will have a stronger incentive to invest in training and technology, which will add support to productivity growth. Governments’ policy support, reform, and increased ability to invest in infrastructure will also be decisive for productivity in the decades to come.

“In other words, companies will not be able to keep going without raising investments in technology anymore. This is the only way to improve productivity, reducing re-work, preventing accidents and unplanned shutdowns, and so reducing overall costs. PhDC4D, our main software, has lots of cases, since it promotes more than digitalization of the whole maintenance process, but standardization. It makes everything more simple, effectively reducing costs without raising risks. As a matter of fact, it raises safety. As Statoil notices, all industries are expected to face digital disruptions in the 2020s, and will need to transition to new digital models to optimize their business”, explains Marangon pointing to another excerpt from the research.

Digitalization can improve efficiency and reduce costs, as illustrated by the progress made in the airline industry since the end of the 1990s. Sensors on planes have helped airlines realize fuel efficiency targets, maintenance and route optimization, while digitalization of sales and reservations has reduced errors and led to the “pricing and overbooking business” – where companies use big data to optimize plane occupancy. New ideas are developed as airlines understand their own data better, leading to a continuous learning journey of adapting and testing the operating model.

Brazil Oil & Gas Technology Radar

More focused in new technology and innovation, Lloyd’s Register surveyed Brazil-based oil and gas leaders, from 240 companies, between September 5 and October 3 2016, to produce Brazil Oil & Gas Technology Radar. It asked what the biggest barriers to innovation are today in Brazil, what challenges exist to the deployment of new technologies, and explored the impact of specific policies on the sector, such as the mandatory 1% levy on oil and gas production that is being redirected to local R&D. The survey also asked participants to rank a number of potentially game-changing technologies in terms of their short and longer-term impact on the sector.

Of the 26 technologies listed, respondents believed all would have some impact in the future. Distinctions were made between those that would have a high or medium impact in the short term (before 2020), medium (2020-2025) or long term (2025 or later) time horizon. Until 2020 were all incremental improvements on existing technologies: subsea robotics and other deepwater equipment advances, sensor technology such as wireless monitoring, and high-pressure high-temperature drilling.

“We’ve been investing in developments for the Internet of Things (IoT) for the last years, and our technology is ready to help the oil industry to get through the current challenges”, says the CEO of PhDsoft.

If You Read One Book About Integrity Management Read this One

“In addition to compliance with legislative and company requirements, there is also a significant business benefit from ensuring the integrity of the assets/facilities. Minimizing of productions losses, prevention of unplanned shutdowns and rationalization of the purchase and storage of spare parts are some of the benefits that can result from a well-managed and executed integrity management system”, says Dr, Peter McLean Millar in his must read Asset Integrity Management Handbook. You shouldn’t miss it.

Are You an Innovator? The 5 Stages on Technology Adoption You Must Know

“Innovation distinguishes between a leader and a follower”, Steve Jobs said. Innovation behavior has positive relationships with career progression (salary growth and the number of promotions) and career satisfaction.

Only a few people are really innovators. According to Everett Rogers, 2.5% of the population. The professor got to this conclusion in the book Diffusion of Innovations, in which he explains his theory on how, why and at what rate new ideas and technology spread. He divided the technology adoption life cycle in 5 stages, by profiles of people that prevails in each stage.

Innovators are willing to take risks, have the highest social status, have financial liquidity, are social and have closest contact to scientific sources and interaction with other innovators. Their risk tolerance allows them to adopt technologies that may ultimately fail. Financial resources help absorb these failures.

Close to them are the “early adopters” of new technologies, about 13,5% of people. These individuals are also usually seen as “innovators” and have the highest degree of opinion leadership among the adopter categories. Early adopters have a higher social status, financial liquidity, advanced education and are more socially forward than late adopters. They are more discreet in adoption choices than innovators. They use judicious choice of adoption to help them maintain a central communication position.

Following them are the “early majority”, with 34%. They adopt an innovation after a varying degree of time that is significantly longer than the innovators and early adopters. Early Majority have above average social status, contact with early adopters and seldom hold positions of opinion leadership in a system.

Nobody is an innovator or a laggard for everything.

Each behavior depends on what is at stake

In the fourth stage come the “late majority”, also about 34% of population. They adopt an innovation after the average participant. These individuals approach an innovation with a high degree of skepticism and after the majority of society has adopted the innovation. Late Majority are typically skeptical about an innovation, have below average social status, little financial liquidity, in contact with others in late majority and early majority and little opinion leadership.

At last, with the same amount of people of innovators and early adopters together, 16%, are the “laggards”.  Unlike some of the previous categories, individuals in this category show little to no opinion leadership. These individuals typically have an aversion to change-agents. Laggards typically tend to be focused on “traditions”, lowest social status, lowest financial liquidity, oldest among adopters, and in contact with only family and close friends.

Nobody is an innovator or a laggard for everything. Each behavior depends on what is at stake. The closer you get to innovator behaviors, the more you resemble a leader. On the other hand, the more you distance yourself, the longer you will must follow other people.

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How Corrosion Management is Making the World (and Insurance Business) Better

“Basic Coverage for Equipment Used in the Production, Drilling and Exploration of Oil and/or Natural Gas in Marine Operations (offshore) and Land (onshore) – Special Conditions (…) Clause 2 – Risks not Covered and downs Indemnified/ 2.1. In addition to the provisions in clause 5 of the General Conditions, are excluded from coverage claims for indemnification for losses, damages, expenses, or other costs resulting directly or indirectly from the following events: (…) j) natural wear for the use (including abrasion, friction, deterioration or encrustation by boiling machinery, plant or equipment as a result of use or daily operation), gradual deterioration, including any effects or weathering, oxidation, rust, flaking, scale, cavitation and corrosion of mechanical, thermal or chemical origin“.

The excerpt of the policy “Oil Risk Insurance”, from Tokio Marine Insurance Company (in a free translation from Portuguese), makes clear a practice of the insurance industry: not to pay for insurance arising from corrosion events. And the “Special Conditions” for pipelines and offshore platforms also list corrosion as a “risk not covered and downs indemnified”. “All risks of incalculable probability over which the insurer has no estimate capacity are not covered by insurance policies”, explained recently the executive of a reinsurance company to PhDsoft CEO, Duperron Marangon.

In fact, nowadays,

corrosion is a predictable phenomenon

In Brazil, where PhDsoft won its first clients, the insurance company Porto Seguro requires hiring a tracker that allows the location of a car in case of robbery or theft to vehicles of value from R$ 200,000 (link in Portuguese). “It’s the same logic that we are seeking to bring to the oil industry. Despite of deep water exploration in Brazil, no accidents that can harm the environment as much as the one with the BP offshore platform, in the Gulf of Mexico, has happened and this is partially due to our software PhDC4D®. We explain it as a comprehensive system resulting from the synergistic integration of a 4D-space-time visualization with a predictive corrosion algorithm, a regulatory code compliance engine and automation of engineering activities and best practices. This consolidates a safer and cost effective maintenance process”, states Marangon.

In fact, nowadays, corrosion is a predictable phenomenon. There are only few corrosion processes that any intelligent solution would have difficulty to deal with. Pitting – a form of extremely localized corrosion that leads to the creation of small holes in the metal – is one. Since PhDC4D allows companies to monitor corrosion conditions and its evolution, insurance policies could start to cover corrosion caused accidents. That is technological disruption uniting two very traditional sectors in a win-win relationship for everybody.

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Where CMMS are Headed in the Next Five Years

Nanotech sensors connected to the internet are dispersed in the painting of hulls and pipes, measuring thickness and corrosion rates in real-time and practically eliminating risks of offshore operations. It’s cool, but it will take a little longer. So far, it’s only science fiction.

But if the painting nano gadget is still a dream, the use of sensors connected to the internet integrated by a software like PhDC4D is headed in the next five years. Until the beginning of the next decade, thickness or and corrosion rates will be measured all the time. Since we are talking about very large structures, human measuring will still be needed, but in a more intelligent way, focused in areas previously selected with the help of sensors.

In fact, any device with an on and off switch to the Internet (and/or to each other) will be connected, in what is called the Internet of Things (IoT). The IoT is a giant network of connected “things”, which also includes people. The relationship will be between people-people, people-things, and things-things. Intel says that by 2020 there will be over 200 billion connected devices. In 2015, there were 15 billion.

Anything that can be connected, will be connected

This includes everything from cellphones, coffee makers, washing machines, headphones, lamps, wearable devices and almost anything else you can think of.  This also applies to components of machines, for example a jet engine of an airplane or the drill of an oil rig. It is not different with Computerized Management Maintenance Systems (CMMS).

If you want to know more, have a look at this Guide to the Internet of Things produced by Intel.

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PhDC4D Will be Available in App Form

PhDC4D is going through its final adjusts to be launched in App form, for Windows Mobile, Android and IOS. The App will allow user to do everything he does in the site, managing inspections and defects in hulls, pipes and other structures. Although PhDsoft expects it to be much more used to register anomalies than to manage inspections.

Besides having all equipment status in the pocket, the user of PhDC4D App will be able to synchronize the anomalies registered as soon as he is back to the office, making data available to every member of the team. And thus, PhDsoft technology keeps evolving to the integration into three systems:

  • Computers – more technical, with its 3D models.
  • Internet – more managerial, where are registered all defects.
  • App – managerial and technical.

Intrinsically safe equipment

Since the App is going to be used in structures like offshore platforms, one alert we must make is that only intrinsically safe tablets or phones are allowed. Any other kind of equipment is forbidden because of the risk of explosions.

In intrinsically safe equipment, produced by companies like Aegex Technologies and Sonim Tehcnologies, the electrical energy available in any spark which can occur in the hazardous area will be non-incentive. This avoids the risk of explosions.

Brazilian companies ready for oil investments of R$ 3 billion

The Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP) has just appointed the members of its Scientific-Technical Committee (Comtec), which was created by the end of last year among the new regulation for implementation, by the oil companies, of the mandatory investments in Research, Development and Innovation (R&D). According to this contractual obligation, which exists since 1998, 1% of gross sales of oil and increased production of natural gas fields must be invested in R&D. So far, the funds generated exceeded R$ 10 billion and are predicted, for the next ten years, to reach an additional R$ 30 billion.

Comtec will develop and disseminate guidelines for application of funds corresponding to the minimum percentages established for accredited institutions and Brazilian companies, as dispositions present in Regulamento Técnico ANP 3/2015. For Brazilian companies, it means at least 10% of the amount, considering the concession contracts since de 11th round and the sharing contracts. This means R$ 3 billion in a decade.

With a 2-year term, this is the first composition of the Committee:

Representing ANP

-Magda Maria de Regina Chambriard, ANP General Director, as the President of Comtec;

-Tathiany Rodrigues Moreira de Camargo, ANP Superintendent of Research and Technological Development, as the Executive Secretary of Comtec;

-Daniela Godoy Martins Corrêa, ANP Head of Coordination of Local Content.

-Alternates will be their regular substitutes at ANP.

Representing productive sector

-Elói Fernández y Fernández, Director of the National Organization of the Petroleum Industry (Onip), as Full Member representative of Onip;

-Carlos Soligo Camerini, Onip Superintendent, as Alternate Member of Onip;

-Eduardo Santos, Relationship Manager with the S&T Community at Petrobras, as Full Member representative of the Brazilian Institute of Oil, Gas and Biofuels (IBP);

-Olivier Wambersie, Shell Technology General Manager, as Alternate Member of IBP.

Representing Academy, Science and research sectors

-Paulo Roberto Santos Ivo, Vice-President of Southeast Region of the Brazilian Association of Technological Innovation and Research Institutions, as Full Member representative of ABIPTI;

-Félix Andrade da Silva, ABIPTI Analyst Project Center, as Alternate Member of ABIPTI;

-Gustavo Henrique de Sousa Balduino, Executive Secretary of the National Association of Directors of Federal Institutions of Higher Education (Andifes), as Full Member representative of Andifes;

-Valter José Fernandes Júnior, Member of the College of pro rectors of Research, Graduate Studies and Innovation of the federal institutions of higher education (Ifes), as Alternate Member of Andifes.

The R&D clause includes, along with the payment of royalties and special participation, obligations of the contractors to explore and extract oil from the Brazilian underground. Royalties and special participation are deposited in the National Treasury. But the resources of R&D are applied in the facilities of the own oil companies or directly transferred to universities and research institutions or suppliers. Hence the need for ANP to establish rules and supervise their implementation.

If you want to know more on PhDsoft and how this Brazilian company has developed innovation in partnership with oil companies, contact us at +1 (713) 340-9958 or by the e-mail phdsoft@phdsoft.com.