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The Future of the Oil and Gas Industry – The SAP Industry Cloud Series – Futurum Tech Podcast Interview Series
by Daniel Newman | July 16, 2021

On this special episode of the Futurum Tech Podcast – Interview Series I am joined by Noe Garcia, Global Enterprise Account Manager at Intel and Craig Kindleman, Oil and Gas Industry Advisor for SAP. This is the fifth episode in a new series — done in partnership with SAP and Intel — where I will be speaking with advisors and executives across seven different industries on the state of their industry and how SAP Industry Cloud powered by Intel technology plays a vital role in the future.

The Future of the Oil and Gas Industry

In our conversation we discussed the following:

  • A recap of the last year in the industry
  • The significant investments in technology that are being made in the industry
  • The trends that are driving the changes in the industry
  • Why Oil & Gas is a hub of innovation and how companies view the innovations that are happening

The oil and gas industry, like many other industries, had to rapidly accelerate digital transformation last year. My conversation with Noe and Craig explores these changes and a little bit more. It’s definitely one you don’t want to miss.

If you’d like to learn more about the industry cloud and the Intelligent Enterprise strategy, be sure to check out our research brief: Intelligent Enterprise Fuels Oil, Gas, and Energy Industry Beyond the Traditional Hydrocarbon Molecule.

Listen to my interview with Noe and Craig on your favorite streaming platform here:

Disclaimer: The Futurum Tech Webcast is for information and entertainment purposes only. Over the course of this podcast, we may talk about companies that are publicly traded and we may even reference that fact and their equity share price, but please do not take anything that we say as a recommendation about what you should do with your investment dollars. We are not investment advisors and we do not ask that you treat us as such.

Transcript:

Daniel Newman: Welcome to the Future of Tech Podcast. I’m your host today Daniel Newman, Principal Analyst and founding partner at Futurum Research. This is another edition of the Futurum Tech Podcast- Interview Series covering the Industry Cloud in partnership with SAP and Intel. Excited today for this particular episode where we will be talking about the oil and gas industry and I will be joined by veteran experts from both Intel and SAP. We will have Noe Garcia and Craig Kindleman joining me in just a moment.

To set the stage he Industry Cloud Series is seven podcasts that cover a breadth of the different industries right now and the impact of technology and the industry specific clouds that can help businesses accelerate their transformations. By the way, all of these podcasts are great so if you like what you’re listening to today, hit that subscribe button and make sure you check out the other episodes as they become available.

Quick disclaimer, before I bring our guests onto the show, this show is for information and entertainment purposes only. While we will be talking to and about publicly traded companies, please do not take anything we talk about today as any sort of investment advice. All right, let’s get on with the show. Noe Garcia, Craig Kindleman, welcome to the Futurum Tech Podcast.

Noe Garcia: Thank you very much.

Craig Kindleman: Thanks, great to be here.

Daniel Newman: Without further ado, I’ve got some great questions we’re going to spend, I don’t know 15, 20 minutes talking today, but for everyone out there, you all know me, but they don’t know you. So Noe, Craig, I’m going to have you introduce yourself. Noe, would you mind going first?

Noe Garcia: No, absolutely, thank you. Noe Garcia, I’m in Houston, Texas, I’ve been with Intel 21 years, I’ve been in the technology industry for almost 35 years. Pretty much I work for an organization in our sales and marketing group called U.S. Business Consumption, calling on oil and gas accounts.

Daniel Newman: Fantastic. Welcome to the show. Craig?

Craig Kindleman: Daniel, so Craig Kindleman, Director of Oil & Gas Industry Group SAP, North America. I pretty much travel when we’re not in the middle of a health situation here in North America. All across North America I cover oil and gas companies from the Gulf of Mexico, all the way up to the Arctic circle. In SAP, that’s my focus working with both our customers, advising them as well as with our own organization, make sure that we are trying to achieve the top customer satisfaction.

Daniel Newman: Well, it’s great to have you both here, Craig, where are you? Because I know Noe said he’s in Houston, unsurprisingly, where are you at?

Craig Kindleman: I’m actually right now up in Calgary. I have two places, one in Montana, one in Calgary. As you know, Daniel, I was down in Montana but given to make sure that we are following the health advisory, not traveling, staying close to place in Calgary and doing everything digital, including of course, conversation with you and Noe today.

Daniel Newman: Absolutely. Keeping it safe as we work our way through this pandemic. Which there are signs that we are getting closer to the end but I say signs and closer because until we are we aren’t. I hope everybody out there is staying safe. I’m actually making my way, I’m in Chicago, but over the next several months, I am moving to Austin, Texas, Noe. So we’ll be a little bit closer.

I want to get closer to the next wave of technology but Houston is a absolute beaming market for oil and gas. Obviously it’s been up and back the last year has been quite chaotic. I believe it was actually about a year ago on this date that the big free-fall of the oil industry, oil prices I shall say, took place. A year later we’re seeing the market come back relatively strong. We’re seeing crude up over $60 a barrel, which again, you’re the experts.

What I will say is I’ve heard there are sort of these threshold numbers that oil kind of needs to be for some of these large oil and gas companies to be in the black, making money, stabilizing their businesses. It’s been good to see the recovery and it’s a really important industry, and while I know everybody’s excited about Evs, and solar power, and wind, this is still a really big and important industry to our world. The last several months has given all of us a pause, we’ve changed our lives, we’ve not been on planes, we’ve driven less, our mobility is down, but oil and gas is still going and it’s a big thing.

I guess just before I get to some of the core questions, you two being in this base, I’d love to just hear a couple of minutes of thoughts from you on what is that 12 months been like? Kind of as I said, 12 months ago, we were having that big free-fall of so much of the market and now oil is coming back strong.

Noe, I’ll start with you. I’m just kind of curious on a little reflection.

Noe Garcia: Thank you. It has been a very, gosh, thinking time for those last year, reflecting on what is happening. You kind of try to understand, you look at the markets, you look at just the global arena, and it’s just so many different things that influence the outcome.

I think that the U.S. market’s really providing a tremendous amount of supply of assets, oil, has really become an area that we never thought and realized that we could do. But it really accelerated the adoption of what companies are doing from a technology standpoint and how they can get better efficiencies in the supply, just beamed throughout the market. Then with that though, like you say, we hear about a lot of the EVs and I think that’s a big criteria of what people are looking to go do, but that will take a very long time before things really evolve and how it can be displacing all of these products that are out here based upon petroleum. Now I think it’s still going to be a very very long time before we see that transition.

Daniel Newman: Yeah, and if you listen to my automotive podcast for part of this series I did with Tom Madonna from SAP, you’ll know that I’m a combustion guy. I mean, I think it’s killer that you can have a minivan looking SUV, like Tesla does that does zero to 60 in two seconds, but I would much rather hear the roar of a Hemi or a Ferrari all day long.

Noe Garcia: Same here, same here.

Daniel Newman: You know I guess that’s just kind of one of those things. Call me old school. I’m an old school millennial.

So Craig, any add to that little commentary just ahead of my line of questioning on some of the tech transformation going on, kind of the last year thoughts?

Craig Kindleman: Yeah, I think, Daniel, you were gracious enough to invite us on about a year ago. I think just as the pandemic was starting we were having a discussion. I mentioned that time, we ran some scenarios because we’d looked at… and energy is energy, right? It’s BTU’s, right? Which is that unit that we look at and say if we were all locked down… and very shortly after, I think we talked on your podcast, that we locked all of our offices down worldwide. We sent everybody home and said until the foreseeable future we’re doing everything remote. We said what is the implications of that from the energy side, the technology side, and we projected about an 8% reduction in hydrocarbon usage worldwide.

A lot of people almost kicked us out the door of the building because they were like, you guys don’t know what you’re talking about. We said, no, no, no, look at the analysis because we know, all of us in the industry, Noe’s organization, our organization, where is fuel or energy needed and being spent? We said, if everybody’s at home we still need to eat. We’re all humans. We still need to eat. We still going to have income. We projected that it would switch from residential travel, tourist travel, to large transportation travel, of a pretty significant nature.

Right now the question we asked was could technology, as Noe talked about, take over the remote ordering, the actual internet based, cloud-based ordering… Were companies going to be able to transition to that type of a economy for a short period of time? Would they be willing to invest to do that?

When he projected oil and gas, 8% downturn, we were off by four, it went to 12%, maybe 15 in certain areas. We were pretty close to our projections. We think it’s going to come back very strong because now everybody has quickly gone to that new type of economy but they want that in-person, we’re all humans. We’re projecting and we’re seeing it now happen, right? Oil and gas is coming back, travel is coming back.

Daniel Newman: Absolutely. That brings me to the next point. Every industry had to transform, had to move quickly, had to get behind significant investments in technology and of course, getting people on board to move more quickly. When it comes to digital transformation, so now we’re onto that tech side of things, Noe, what are you seeing in the oil and gas industry?

Noe Garcia: You know, right now, I mean, it’s has been a journey. Adoption of digital technology to transform services and businesses, it is incredibly no longer a question. It is something that companies, oil and gas organizations, are looking at, investigating, developing strategies, and trying to figure out, okay, what, what do I do? Is it artificial intelligence which automates human to machine collaboration? We’re seeing a big uptake in concern around security, so cyber security, because of all the assets that are out there, out in the field, back at the cloud, and back at their data centers, what are they doing?

Then also can we use predictive analytics to make decisions quicker and easier at the edge? This whole concept around things is really growing. Then you have the cloud, the cloud is, and has been there, companies are transforming and changing their direction for a cloud, but it’s still a lot of devices and a lot of capabilities that are still on premise.

Daniel Newman: Yeah, no question about it. There’s so much investment, so much Core-to-Edge, and we’ve talked this a lot across some of these different industry podcasts and for just our podcast in general, about how the tech is evolving, how data is proliferating at just exponential scale in every industry. The desire to build AIML, and algorithms and frameworks that can enable industries to standardize, which is a lot of what’s going on with the industry clouds, right? There are consistencies across industries that companies can build to scale and companies like SAP are in a really great position to do that. Of course, built on the technologies of companies like Intel that power in a sense.

Craig, let’s kick one over to you real quick. Let’s talk about visible technology trends in your space, in oil and gas. What are you seeing that’s really hot in this first quarter?

Craig Kindleman: We’re seeing the trend actually in the oil and gas industry, which surprised a lot of people, be very aggressive in the sense of transformation as Noe talked about. I mean, they’re saying, hey, we already got cloud, right? Or as we’re talking here on a podcast, we’re already doing digital interchange. They’re saying, as Noe talked about, they want to know how do we get to that next step change? Can I, and in my core business process, I’m ordering during the pandemic, as an example, how do I actually now get artificial intelligence built in, but don’t have to go to a lot of effort to do it? Can the compute power handle that? We talked on this podcast it would be great to go digital, or video, but that requires more bandwidth, requires more chip processing from Noe’s organization.

The key I think, what we’re seeing is the customers and it’s surprised us, the aggressiveness that they want to get to because their point is oil and gas. Oil is going to stay at 50 to 60, 75. How do we actually now get more out of what we’re doing? We know we want to reduce our head count appropriately, we want to increase our growth, we want to go into new businesses. How do we actually go and take those trends that we’ve now seen, the large in memory, the advance in terms of chip speeds that Noe’s firms have been able to achieve, the cloud computing, we want to go now above that. We want that next level of digital transformation, let’s call it 2.0 as we’re referring to it. That’s I think is where we’re going to see a lot of the human benefit. A lot of it’s been foundation. Now this is where, I call it, the fun really starts from a business perspective.

Noe Garcia: Yeah, and look, every industry, I don’t care if it’s high tech, all the way down to these legacy industrial type industries, all have a major road ahead. 2020 was like this accelerant, it was like pouring, we’re in oil and gas so let’s say it’s like pouring gasoline on the fire for transformation, a decade in some cases, more transformation in certain industries. But we also face it, I mean, from an exploration standpoint, oil and gas was always light years ahead in terms of using technology when it was about finding oil but a lot of times when you actually looked at some of the physical infrastructure, we look at what just happened in Texas. You could also see how certain investments could fall behind when they didn’t necessarily power bottom lines as effectively as other parts and companies like yours.

I keep looking back, and I know it’s a little controversial, but at what happened in Texas just a few weeks ago. Some of the AIML compute power that could have been on the edge and some of these devices, it could have made a difference. It could’ve made a real difference in detection in terms of management, in terms of notifications. There’s a big reason if we’re… and hopefully we’re learning from all of this, right? I mean I don’t know about you guys but I had to imagine you being in this business, you had to be seeing that.

Craig Kindleman: Oh, absolutely, definitely something that could have been done. I think, I’m sure they do have technology, but not to the extent that can make decisions at the speed that needed to be made. We saw all these rolling electrical outages that really was detrimental to human beings, so I would say, like you’re saying, it’s got to have some impact. It’s got to basically change the way we’re doing things today and how we look at things looking forward.

Daniel Newman: Absolutely. Again, I don’t want to get hyper-focused on that. It kind of is more company level, but it was, I mean, these world events, the market, the freeze, these are great learning opportunities, but also great opportunities for companies like Intel and SAP to talk to these customers about what these technologies could do. What could computer vision sensors at the edge, real-time data streaming, enriched algorithms that could provide a foresight. We knew that weather was coming and the difference even in that case and like a hurricane is there are more preparation you can do for that kind of situation.

All right, I’m rambling about that [inaudible] but a lot of things, and this is the applied analytics, applied machine learning, that really is, this isn’t the fantasy world I, Robot kind of stuff.

Another thing I’m observing by the way, quite a bit is, is oil and gas, they’re starting to divest pieces of their businesses. I’m guessing this probably has somewhat to do with legacy versus emerging, sustained, renewable, but what’s driving that trend?

Craig Kindleman: Daniel, I think Noe and I, if we look, our two organizations provide a lot of technology in different places to the oil and gas industry around the world. The oil and gas industry is what I refer to it as one of the smartest, it’s one of the longest industries that’s existed. It’s existed, let’s call it century, because in 1082 William the Conqueror looked and said, what’s my wood supply in Europe? Since then, at the turn of the century, it was a matter of, okay, we’ve got hydrocarbon in North America from the first oil wells that were discovered. They’ve always made smart business decisions. So the oil and gas industry is sitting and saying right now, where is our best return? The private equity companies, the investors, the funds that in some cases provide pensions for retired workers are saying, where should they put their investment? And is it getting a return?

It refers back to, you just talked about a power outage in a large percentage of the lower 48 states, was there a proper investment for the return there? Was there redundancy when Noe’s firm and our firm talk, Intel and SAP talk about a data center of not only is it the primary data center, but there’s a backup data center, and what’s the cost efficiency or cost effectiveness? Do we have to have it? What’s the return for the customer? I think that’s what we’re seeing now is that the change, the transition of the diversification is all about where’s the best place for an oil and gas company, the board of directors, their investors, to place their bets? Some cases it’s not low return oil wells, it’s higher return oil wells, et cetera.

Noe Garcia: Yeah, no, I totally agree, I mean it’s 100%.

I think all of these oil and gas companies, like you say, there diversifying to try to figure out where is their best expertise? What’s the domain that they can take advantages of some of these other areas that they can, I would say, squeeze out as much profit as they can while the getting is hot? They’re selling off pieces not only because it’s a bad investment but maybe it’s not as a higher return as it used to be. There’s other organizations that can take advantages of what they have so they can basically use older parts of the company, they can sell it off. These other organizations or people that buy them can basically be better at what they do.

I think it’s a mixture of a lot of different things. Costs reduction, trying to figure out what are the expenses, like any company has to go look at, but then it’s what’s the rate of return? What’s their expertise? Can we take advantage of the new technologies that are coming out and apply those to other parts of the company to have more sustainably, more efficiencies and companies like SAP, they have the capabilities and the domain expertise to help a lot of these organizations realize how they get better.

Daniel Newman: Yeah, and it is really about being fluid and agile when a piece of a business splinters off. You have to be able to partition data, reconfigure the applications, build new intelligence, and use data visualizations, workflows need to change, partitioning of data, securing and basically reducing threat surfaces that can be created. There’s all kinds of technical implications of any sort of… Spin-off is much like an acquisition. It’s very similar. It’s just the reverse.

By the way, I think for some of the listeners out there that might be hearing about spinning off and selling, this is not an oil and gas limitation, this may be happening and being seen in oil and gas, but this happens everywhere. This happens a lot in big tech. Companies say, Hey, this particular business… I mean, Intel over the past years has spun a few parts of the business that [inaudible] business, the 5G mobile devices business and it was merely seen as these aren’t the most profitable or intelligent ways to put resources forward. We see a bigger opportunity elsewhere and we’re going to lean into that opportunity. Sometimes market-makers want to make something else out of it but usually it is, we have resources and more profitable opportunities elsewhere, and we’re going to go explore those.

It sounds to me like oil and gas has seen that. By the way, one of the things about oil and gas that’s very interesting for the market and for everybody out there listening, is these are some of the leading companies in doing things for sustainability and renewable energy, big oil and gas companies. They’re not ignoring this. They’re not going down the path and saying, we’re not going to be part of this. You will look at big companies like BP, they have very big shell, they have very big initiatives to participate in the renewable space and to make sure that their businesses are diversified as the demand for more sustainable and carbon neutral efforts continue.

Guys, I don’t know if you want to add to that at all but I feel like it’s worth pointing out because I sometimes think people look at this industry like it’s just an older stodgier industry but it really isn’t. It is a big hub of innovation for various types of energy.

Craig Kindleman: Well, and Daniel you’re correct. Renewables, the oil and gas industry has been in them for years because as even part of passages of legislation, years and years ago by Congress and the Senate, there was the try to have North America energy independent. Now a lot of people go that’s just for politics and the answer was no, it actually is to enable the GDP of North America, of the 50 states, the two districts of the United States, of Canada, of Mexico to actually be able to enable that innovation, enable that business growth without being energy short.

If you look at corn and soy, one of the largest corn consumers is the oil and gas industry, because if one ever pulls up to a pump, you see there’s the ethanol, which is derived from corn or soy. We look at it this way of Intel and SAP are helping move corn, and soy, and ethanol, and renewables, and have been for years. It hasn’t really been that visible as now the sustainability trend and the sustainability movement is really starting to get a lot of focus. I think that’s part of where people are saying, well, how is that going to continue? It actually has been going on. I think that’s part of where we’re going to see it get larger and more but technology has always been supporting that for almost 20 years now, in terms of renewables.

Noe Garcia: Yeah, no, totally 100% agree there. I can just recall working with a oil and gas company, this is 10 years ago, and they said, hey, is it possible that Intel might be able to share some other technology and understanding around wafers? And we say, well, why would that be? He said, well, we’re thinking about getting into the solar business and the discard of silicon that Intel use, because it’s not as high quality for your processors, could you maybe provide that to us as a oil and gas company but we want to create some solar type technology for that? This is 10 years ago and we kind of went down that path a couple of years, but really, I think it was a little bit too early for them, but things are now evolving back into that arena, sustainable other renewables and other capabilities. I think, like you say, Craig, they’ve always been looking at opportunities and always looking at other things to go do. I think now it’s just the right time to go in-depth in that.

Daniel Newman: Absolutely, and gents this has been a great discussion. We have a few minutes left. Beauty of it being my show is I realize we are going longer than normal, but you know, there’s no rules in podcasts so when a conversation is flowing and the insights are good… So thanks everyone for sticking with us and tuning in here to the Future of Tech Podcast- Interview Series on Industry Cloud.

I got one more question that I kind of just want to touch with you both on, all this that we’ve been talking about, I’d just like to understand what your company, so in your case, Noe, Intel and yours, Craig, SAP, how your companies view innovation in this industry? You’re not in the industry per se, but you are critical support for that transformation. How do you see innovation and how does each of your companies see the outlook for the industry?

Noe Garcia: I personally see the outlook as tremendous opportunities. Even though that the barrel, maybe not as high as what some of these organizations would like it to be, but it was a comment from my CIO, from one of these companies that said, if we don’t innovate and if we don’t have a future outlook, we’re dead. For them, it’s just a thing that they have to go do. Innovation is crucial for their survival.

What we see is an opportunity to help them provide some of these solutions as an SAP and as an Intel to work with them and help them with their problem solving and get them more efficiencies, more productivity, and along with that is safety for their personnel. How can we get all involved to go figure out how to make them successful and march on forward?

Craig Kindleman: And Daniel very similar from an SAP perspective. Our two organizations, Intel and SAP, from an SAP perspective, we believe we have a social responsibility. We have a presence and a size in the world that we have to facilitate innovation. We set a phrase called “Vision 2020,” which was actually, we established it in 2010, so 10 years that we projected by 2020 half of what we would look to provide to our customers we had never built and that it would come from innovation, from partners, from our customers, from others, and that we needed to actually facilitate that because from a social good standpoint, if we were just selling what was ours, we were not really helping others then try to step up themselves. That even goes to our social diversity programs.

So what we did was say, with Intel’s help look at technologies where we enable customers now to write their own software. We just acquired another company where they can do it by widgets. They can drag and drop and it actually creates code. That allows, we believe, an accelerated innovation. Right now some of that’s going to be for business, some of it is actually being used for social good.

We’re now rewarding our own internal people and others with, can you come up with something that actually makes us all better? You sit back and say, wait a minute here’s business going from some of the largest companies in the world, can we enable others to come up with something cool? The answer is, yeah because if it’s worth something, either Noe’s company or mine, we’ll look to want to buy it. There’s actually reason to encourage others because there might be something come out of somebody’s idea that actually would be worth a lot of money to us. That’s where our viewpoint is, we have a social responsibility for innovation.

Daniel Newman: Absolutely, and who doesn’t like to end an episode talking about future and industries with a little bit of good for society and the world because in the end that has become so core to industries, ESG, giving back, participating, inclusiveness, greener, more equitable. I love when we can tie those themes in to all the things that we do. Gentlemen, Noe, Craig, thank you so much for joining me today.

Craig Kindleman: Awesome.

Noe Garcia: Thank you, Daniel, Craig, thank you so much, and pleasure. Thank you.

Daniel Newman: For everybody out there that enjoyed this episode, please note again, this is part of our Industry Cloud Series here on the Futurum Tech Podcast, so hit that subscribe button and check out all the other episodes. There are seven of them in total. If it’s not out yet it’ll be out soon. Otherwise, hit that subscribe button, stick with us, follow us on our YouTube channel. Check us out on Spotify and Apple. We are talking all things tech and the future here on the Future of Tech Podcast. For this episode, I’ve got to say goodbye for now, but we’ll see you later. Bye bye.

 

About the Author

Daniel Newman is the Principal Analyst of Futurum Research and the CEO of Broadsuite Media Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise. Read Full Bio