China's AI revolution: outstripping the US

As recent studies show, China will unlikely surpass leading oil exporters like the US, Russia, and Saudi Arabia. With new technologies such as AI properly implemented, China now has the potential to disrupt the global energy market enough to undermine major exporters position.

Digitalisation is inevitable for oil and gas companies to be competitive and challenging in the current market structure, and we can already see obvious leaders of this trend. As Zyfra's recent research shows, China is occupying second place after the US in terms of AI development, while taking the podium in capitals and monetization. Some 48 per cent of all global AI venture funding went to China. Businesses and government have collaborated on a sweeping plan to make China the world's primary AI innovation center by 2030.

The picture across APAC

Within the petroleum industry, APAC is by far the largest region in terms of global refining capacity, with China accounting for approximately 12 per cent of global capacity in 2018. Within the next five years, growth will be driven by projects in China and India to meet rising oil product demand from the growing economies.

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US capacity remained stable throughout 2018, with no major new refineries, even taking into account recent shale boom, while ageing facilities in Western Europe and Russia have faced tougher competition from newer and more complex facilities in APAC and the Middle East which are able to process lower quality, and thus cheaper, feedstocks.

Smart concepts

By now the primary motivation for investment in digital transformation for O&G is to improve efficiency. According to Gartner, the “smart oil deposit” concept  development could help oil companies to cut cost by five per cent and to enhance production volume by two per cent. CERA anticipates that introducing “smart oil and gas deposits” could cut production cost by between one and six per cent, shrink oil-well downtime by up to four per cent, and lower labour intensity up to 25 per cent.

Chinese petro-giants have already annouced a number of projects which fall under the “smart” concept umbrella. China’s CNOOC has signed a production sharing contract (PSC) with Roc Oil and Smart Oil for the Weizhou 10-3W oilfield and Block 22/04 (contract area) in the South China Sea.

In a bid to align with smart shipping and innovation, Dalian Shipbuilding Industry Co (DSIC) is currently developing China's first smart crude oil carrier, that will be designed to incorporate technology to assist the captain in operation.

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Last year Huawei has also announced it will manufacture the MEC network system for the Ningbo Zhenhai smart refinery. The smart industrial facility venture is a noteworthy stride in the undertaking data improvement.

Moreover, China welcomed numerous world leading digital companies to create for its petro-industry among them are Wison Engineering Ltd, Honeywell, Zyfra Group.

Global financial gain

Global GDP has been predicted to increase by 14 per cent because of AI, according to PwC. The tech's deployment in the decade ahead will add $15.7 trillion to global GDP, with China predicted to take $7 trillion and North America $3.7 trillion, according to the multinational company.

When AI proceeds to actual application, China will benefit from its engineers, entrepreneurs as well as foreign and vast domestic market. The US has shared almost all of its top AI research with Canada and the UK, but China has the advantages that can enable it to eventually leapfrog them.

Being a major world energy consumer, Chinese approach towards digitalisation of the industry could dramatically undermine positions of those current leaders, who will fail to catch-up with digital technologies in just nearest five years to come. The overall interdependency and oil prices determined by demand coul shake up the traditional energy exporters hierarchy.

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