The better the question. The better the answer.�The better the world works.

How ready are your assets to perform in the digital world?

IIOT and the Future of Digital in

Oil & Gas

How ready are your assets to perform in the digital world? Page 2

Returns in Oil and Gas are low

10%

90%

100%

0%

80%

70%

60%

50%

40%

30%

20%

Oil & Gas Cable

and Satellite

Hotels Automotive

manufacturing

Tech —

Semiconductor

Telecom Service Aerospace

and defense

Diversified Mining

and metals

Companies in Quartiles by Asset Intensity

Source: public data and EY analysis

ROA calculated as: Net Income/Total Assets,

Asset Intensity calculated as: Operating Assets/Total Sales

1st 2nd 3rd 4th

Average Annual Return on Operational Assets by Industry 2010–2014

Airlines

How ready are your assets to perform in the digital world? Page 3

15% Digital

10% Digital

Lack of digital penetration is one driver of low returns

Rest of NOCs

and independents

40% of output

Top NOCs 16

companies

40% of output

IOCs

9 companies

20% of output

9 to 18

(MM BOE/day)

Digital

Historically, digital in Oil & Gas focused on improved time to first oil and improved effectiveness of hydrocarbon extraction:

► Engineering visualization and collaboration centers

► Real-time drilling

Total: 93 (MM BOE/day)

20% Digital

► Intelligent wells

► Real-time operation centers

Source: EY Research and analysis

How ready are your assets to perform in the digital world? Page 4

Big data goes

mainstream

Cloud and

managed

services goes

mainstream

Myspace and

Linkedin

launch

BYOD goes

mainstream

US cell phone

adoption exceeds

50%

IPv6 Major

Adoption

Era 2: Focus on Output, technology costs decline

Era 3:

Now is the time to accelerate investment in the Industrial IoT Te

ch

Cost In

de

x

($)

WT

I P

rice

WTI Price Source: U.S. Energy Information Administration Independent Statistics & Analysis

Technology Cost Source: Publicly available data from leading technology researchers, the Federal Reserve Board, and U.S. Bureau of Labor Statistics

Era 1: Efficiency Mattered, technology

Cost to High

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

0

20

40

60

80

100

120

140

160

Cushing, OK WTI Spot Price FOB (Dollars per Barrel) Technology Costs

How ready are your assets to perform in the digital world? Page 5

IIOT can integrate the O&G value chain Quickly reducing the cost of operations

Digital in

Oil and Gas

7.5% Average Return on O&G

Operating Assets

2–3% Improvement in production

volumes

Driven through OEE improvements and

overall productive capacity

$5 — $10 Cost of Computing Power and

Bandwidth

Today’s cost to make a mechanical and/or

electrical device “smart.”

10–20% World’s Oil Fields that are

Digitally Enabled

5–10% Variable cost reductions

Parking-up over-capitalised fleet and

improving labour productivity

45 Average number of outside

service providers it takes to run

an O&G business

60% % of oil consumed outside the

country of origin

15–25% Reduction in primary

preventative maintenance costs

by driving from calendar to

condition-based maintenance

Immediate Benefits

How ready are your assets to perform in the digital world? Page 6

Harnessing the value from the IIoT requires more than adding sensors to machines and assets

By 2020

50

<3%

Billion assets will

connect and Send

data through the

Internet1

? 101101010101

001010101010100

01101010

00101010

Today

Of data Is

tagged or used

in meaningful

way2

Optimized Processes Smart Assets Coordinated Resources

1. IDC report: December 2012 — THE DIGITAL UNIVERSE IN 2020: Big Data, Bigger Digital Shadows, and Biggest Growth in the Far East — https://www.emc. com/collateral/analyst-reports/idc-the-digital-universe-in-2020.pdf

2. Cisco report: The Internet of Things. How the Next Evolution of the Internet Is Changing Everything — http://www.cisco.com/web/about/ac79/docs/innov/ IoT_IBSG_0411FINAL.pdf

Process orchestration &

process choreography for

faster, integrated decisions.

Mobility to synchronize

internal and external

resources through a single

business process.

Internet of Things to make

devices & assets smart and

connected.

How ready are your assets to perform in the digital world? Page 7

Digital Oil & Gas Company of Future IIOT enables integration and intelligent enterprise

Gas Production Processing

Oil Storage and

handling

Production

Contractors

The cloud integration layer can coordinate all these entities through a single business process to optimize the end-to-end value chain to drive a

specific financial result

Access

Control

Finance &

Accounting

Human

Resources

Engineering

Purchasing

Project

Management

CRM

Data

Services

Functions

of ERP

Cloud Integration & Process

Choreography Connected Assets & Resources IT Environment

Capital

planning

Order to

cash

Business

strategy

Sourcing

Invoicing

Portfolio

planning

Logistics

Maintenance

Scenario

planning

Transportation

Gateway

8

35,000 engines monitored via Predix

Fidelity 30%

Detection 25%

Accuracy 12 pts 100MM flight records per year

How ready are your assets to perform in the digital world? Page 9

Logistics is a

material

expense and

continues to

escalate

Turn cost

center into a

profit center

Vertical

integration can

transform the

customer

experience

Supplier

Production Distribution Supplier

Supplier

Customer

Customer

Customer

“Enable Delivery to a customers doorstep in 60 minutes or less” Amazon Integrated Value Chain

Global delivery network that controls the flow of

goods from factories in China and India to customer

doorsteps in Atlanta, New York and London.

High Growth

Revenue

22% CAGR

Amazon Web

Services (AWS)

31% Market Share

63% Year-on-Year

Growth

Amazon’s latest digital transformation Integrated Value Chain

http://www.businessfinancenews.com/27258-amazon-plans-for-a-vertical-integration-to-take-on-rivals/

http://www.nurun.com/en/our-thinking/future-of-retail/moving-into-the-3rd-dimension-of-vertical-integration/

How ready are your assets to perform in the digital world? Page 10

Tesla Motors – Art of the Possible Synchronized supply chain through digital

Tesla Motor’s Inc.

Best Selling US

Luxury Sedan,

2015

+50% Increase in

Year-on-Year

Sales to Date

Achieved Highest

NHTSA Safety

Rating Recorded

Tesla’s successful entry into a highly competitive car

market has been enabled by a technology driven

flexible platform.

Connected Car 50% reduction in 1st year repair costs

by Integrating sensors to reduce

maintenance and downtime.

Scalable Orders and

Purchasing

Capacity to handle 500k/year through

online ordering process connecting to

a real-time supply chain.

Vertical Integration of

Strategic Assets

+30% cost reduction in first full year of

production by building scalable

“Gigabit” battery factory.

How ready are your assets to perform in the digital world? Page 11

Digital Oil & Gas Company Of the Future Roadmap to a Digitally Enabled Integrated Value Chain & Higher ROCE

% of Integrated Value Chain that is Digital

Today | 20% O&G is Digitized

Set up the

operating

platform for IIoT

Connect critical

assets and add

cyber security

coverage

Expand IIoT

enablement across

assets in an

operational platform

Enable Process

Automation |

Orchestration & Field

Mobility

Extend IIoT to

transportation,

terminal | depots,

warehouse assets

Add External

Market Data &

external resource

networks

Connect assets

across an

portfolio | enterprise

Industrial Internet of Things

Connected

Assets

Connected

Operations

Connected

Value Chain

Connected

Resources

Connected

Enterprise

Po

rtfo

lio

Pe

rfo

rma

nc

e

ROA | ROCE

Today

7.5% Average

Return on

Operating Assets

How ready are your assets to perform in the digital world? Page 12

Organizations can take the first step on the IIoT journey by organizing around three activities

Get connected Start by connecting critical assets and machines.

Connecting operational data to each other and

the people who need it are crucial to begin your

journey.

Get insights Use intuitive methods to analyze data to determine

true root cause and opportunities to improve or

resolve. You have enhanced ability to quickly

evaluate anomalies and take the correct action.

Get optimized Leverage digital to optimize the total lifetime

performance of your assets to increase availability,

minimize costs, and reduce operational risks.

EY | Assurance | Tax | Transactions | Advisory

About EY

EY is a global leader in assurance, tax, transaction and

advisory services. The insights and quality services we deliver

help build trust and confidence in the capital markets and in

economies the world over. We develop outstanding leaders

who team to deliver on our promises to all of our stakeholders.

In so doing, we play a critical role in building a better working

world for our people, for our clients and for our communities.

EY refers to the global organization, and may refer to one or

more, of the member firms of Ernst & Young Global Limited,

each of which is a separate legal entity. Ernst & Young Global

Limited, a UK company limited by guarantee, does not provide

services to clients. For more information about our

organization, please visit ey.com.

© 2016 EYGM Limited.

All Rights Reserved.

EYG no. 02860-164GBL

BMC Agency

GA 0000_07851

ED None

This material has been prepared for general informational purposes only and is not

intended to be relied upon as accounting, tax, or other professional advice. Please

refer to your advisors for specific advice.

ey.com