The oilfield services (OFS) sector is undergoing a profound transformation as digital innovation emerges as a defining force, creating new opportunities for sustained, long-term growth amid shifting market conditions. A new forecast from Rystad Energy suggests the oil and gas industry could realise savings exceeding $320 billion over the next five years by deepening the digitalisation of operations across five critical areas. The five critical areas are drilling optimisation, autonomous robotics, predictive maintenance, reservoir management, and logistics optimisation.Continued merger and acquisition (M&A) activity, along with new partnerships with technology firms and increased software integration, is poised to significantly transform the OFS business ecosystem, Rystad Energy said in its analysis. These factors are compelling key OFS players to adopt digital-first business strategies.“We estimate that $320 billion is a modest figure, as broader digital adoption across other business domains could generate even greater value,” Binny Bagga, Senior Vice President, Supply Chain.To realize this, executives will need to deliberately prioritize digital transformation by fostering a less risk-averse business culture. Digitalisation’s financial impact and valuation premiumDigitalisation is increasingly recognised in financial disclosures, despite the difficulty in standardization and measurement. While most supply chain market players don’t yet report a GAAP-level ‘digital profit’ like a pure Software-as-a-Service company, this trend is shifting, according to Rystad Energy. An example is SLB, which has begun to report a separate digital division in its earnings.Digital revenue streams offer more stable and resilient growth trajectories, with less exposure to the volatility often seen in upstream capital expenditure. For instance, SLB anticipates its digital division’s margin will reach 35% on a full-year basis in 2025. Similarly, Viridien, a global technology and geoscience leader, saw its Digital, Data and Environment (DDE) segment grow by 17% last year, generating $787 million in revenue and delivering adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $458 million.Source: Rystad Energy“The investment community is increasingly valuing energy-technology narratives, with service companies that clearly articulate technology-driven and recurring-revenue strategies often commanding higher valuation multiples than those tied solely to equipment cycles,” Bagga said. However, such premium valuations hinge on demonstrated scalability. Emphasizing digitalization is a direct pathway to creating lasting shareholder value. Barriers to adoption and strategic responsesDespite the advantages of digital oilfields, their widespread adoption is hindered by significant barriers, particularly the high upfront costs associated with hardware, software, persistent maintenance, and robust cybersecurity. These challenges are particularly severe for smaller companies or those utilising older infrastructure, making it difficult to justify the investment, especially during periods of economic instability, the Norway-based energy intelligence agency said. In response to these difficulties, different strategies are emerging: mid-tier companies are strategically integrating targeted digital upgrades, while smaller, specialized vendors and niche software providers are concentrating on offering flexible, custom, and modular solutions.The trend in digital investment increasingly involves strategic partnerships with technology firms. This approach serves to enhance digital capabilities, alongside existing strategies like internal development and acquisitions.The intensity and frequency of these partnerships have seen a sharp rise, particularly since 2021, according to the agency. The most notable increase has occurred in the last two years, involving major companies like SLB, Halliburton, NOV, and Baker Hughes.This pattern highlights a clear industry shift toward digital transformation, with large suppliers actively accelerating their collaborations with technology partners in recent years.The post Digital transformation will unlock over $320B in savings for oil, gas industry, says Rystad Energy appeared first on InvezzThe oilfield services (OFS) sector is undergoing a profound transformation as digital innovation emerges as a defining force, creating new opportunities for sustained, long-term growth amid shifting market conditions. A new forecast from Rystad Energy suggests the oil and gas industry could realise savings exceeding $320 billion over the next five years by deepening the digitalisation of operations across five critical areas. The five critical areas are drilling optimisation, autonomous robotics, predictive maintenance, reservoir management, and logistics optimisation.Continued merger and acquisition (M&A) activity, along with new partnerships with technology firms and increased software integration, is poised to significantly transform the OFS business ecosystem, Rystad Energy said in its analysis. These factors are compelling key OFS players to adopt digital-first business strategies.“We estimate that $320 billion is a modest figure, as broader digital adoption across other business domains could generate even greater value,” Binny Bagga, Senior Vice President, Supply Chain.To realize this, executives will need to deliberately prioritize digital transformation by fostering a less risk-averse business culture. Digitalisation’s financial impact and valuation premiumDigitalisation is increasingly recognised in financial disclosures, despite the difficulty in standardization and measurement. While most supply chain market players don’t yet report a GAAP-level ‘digital profit’ like a pure Software-as-a-Service company, this trend is shifting, according to Rystad Energy. An example is SLB, which has begun to report a separate digital division in its earnings.Digital revenue streams offer more stable and resilient growth trajectories, with less exposure to the volatility often seen in upstream capital expenditure. For instance, SLB anticipates its digital division’s margin will reach 35% on a full-year basis in 2025. Similarly, Viridien, a global technology and geoscience leader, saw its Digital, Data and Environment (DDE) segment grow by 17% last year, generating $787 million in revenue and delivering adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of $458 million.Source: Rystad Energy“The investment community is increasingly valuing energy-technology narratives, with service companies that clearly articulate technology-driven and recurring-revenue strategies often commanding higher valuation multiples than those tied solely to equipment cycles,” Bagga said. However, such premium valuations hinge on demonstrated scalability. Emphasizing digitalization is a direct pathway to creating lasting shareholder value. Barriers to adoption and strategic responsesDespite the advantages of digital oilfields, their widespread adoption is hindered by significant barriers, particularly the high upfront costs associated with hardware, software, persistent maintenance, and robust cybersecurity. These challenges are particularly severe for smaller companies or those utilising older infrastructure, making it difficult to justify the investment, especially during periods of economic instability, the Norway-based energy intelligence agency said. In response to these difficulties, different strategies are emerging: mid-tier companies are strategically integrating targeted digital upgrades, while smaller, specialized vendors and niche software providers are concentrating on offering flexible, custom, and modular solutions.The trend in digital investment increasingly involves strategic partnerships with technology firms. This approach serves to enhance digital capabilities, alongside existing strategies like internal development and acquisitions.The intensity and frequency of these partnerships have seen a sharp rise, particularly since 2021, according to the agency. The most notable increase has occurred in the last two years, involving major companies like SLB, Halliburton, NOV, and Baker Hughes.This pattern highlights a clear industry shift toward digital transformation, with large suppliers actively accelerating their collaborations with technology partners in recent years.The post Digital transformation will unlock over $320B in savings for oil, gas industry, says Rystad Energy appeared first on Invezz