Digitally powered, transition ready: Building future-fit energy systems

How can energy companies stay resilient today while preparing for tomorrow?
Frank Schmidt, CGI’s Vice-President for Global Energy, joins host Angelina Bakshi to discuss hybrid portfolios, digital intelligence, and hydrogen strategies that drive resilience and ROI in a volatile market. 

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Chapters

• 0:00 Introduction to Energy Transition Talks
• 0:56 Optimizing Legacy and Low-Carbon Systems
• 3:07 Financial Risks in Mixed Fuel Portfolios
• 4:47 Digital Infrastructure Modernization Benefits
• 7:59 Geopolitical Risks and Energy Security
• 10:02 Public-Private Partnerships for Energy Transition

Transcript

Angelina Bakshi: 0:05

Hello, good morning, good evening, good afternoon. Wherever you're joining us from today, welcome to Energy Transition Talks. My name is Angelina Bakshi and we're here to continue the conversation for part two of Transforming Energy Systems Maximizing Return on Investment Through Smarter and Secure Infrastructure. It's a pleasure for me to introduce my colleague Frank today for the conversation.

Frank Schmidt: 0:32

Thanks, thanks for having me. My name is Frank Schmid. I'm vice president for the global energy sector within CGI, sector within CGI and, in that role, supporting primarily one of our larger oil and gas clients we have already for over 30 years, and also supporting other oil and gas clients that we have on the global scale.

Angelina Bakshi: 0:56

Integrating legacy and low carbon systems, and so how can companies optimize both traditional and renewable assets without creating cost duplications?

Frank Schmidt: 1:09

And that's a good question, because cost is of essence in nowadays energy world.

Frank Schmidt: 1:17

So if you look at energy companies, they are increasingly adopting hybrid asset strategies that integrate traditional and renewable systems through digital platforms.

Frank Schmidt: 1:30

First of all, I see the use of digital energy systems modeling, which enables better simulation and optimization of entire portfolios and that avoids duplication in infrastructure and operations. A second one I see is edge computing and AI that allows for real-time performance monitoring across both the fossil side and the renewable asset side and that identifies synergies and reducing redundancy. And a third one I see is the use of hybrid energy systems and, for example, think about combining solar and battery storage or LNG with hydrogen, which ensures reliability while minimizing overlapping capital expenditure. And one of the examples where I think CGI is very knowledgeable, due to our long-term experience in the subsurface and wells domain, is optimizing the workflows in that subsurface and wells domain, but also using that technology that we used to use to get oil or gas out of the ground, but use same technology to store carbon or store hydrogen in that same well. So those are all optimization efforts and potential drivers that we see in the market that are very relevant.

Angelina Bakshi: 3:07

So what are the financial risks and opportunities of mixed fuel portfolios? You know, we're seeing a lot of LNG, we're seeing a lot of hydrogen.

Frank Schmidt: 3:16

Yeah, if you look at the opportunity side, I think that LNG provides short-term reliability and arbitrage potential, while hydrogen offers long-term decarbonization. Upside, another opportunity is the flexible contracting and portfolio optimization which can improve margins and reduce exposure to spot market volatility. And a third one I see is hydrogen integration into LNG infrastructures blending, co-locate, which can reduce transition costs significantly. On the risk side, I see, for instance, high price volatility in LNG markets, an uncertain hydrogen economic situation, and that on its own can strain balance sheets. And another one is regulatory shifts in carbon pricing which may impact asset valuations, and asset valuation for oil and gas companies is of crucial importance.

Angelina Bakshi: 4:24

So I want to talk a little bit more about something you've touched upon, but around digital infrastructure at scale. So we've heard about digital twins. How are terminals, grids, pipelines being modernized to reduce downtime costs and improve their asset life cycle?

Frank Schmidt: 4:47

Well, what you see in that modernization effort is that oil and gas companies and the energy sector is focusing on a few important drivers like predictive analytics, virtualization, the use of digital twin and IoT sensors, which improves asset life cycles and reliability. Asset life cycles and reliability so that is what you see happening all over the sector and it goes across all assets, offshore, onshore, also, in the chemicals side of things, you see that these, let's say, drivers are used more and more. And let me give one example. Imagine you need to go with a Haley to a rig to do a pipeline inspection If that same pipeline has IoT equipment, so you can do it remote, or you can have someone from the rig do the inspection with remote support that is, for instance, not on the rig. That saves a lot of money and it's faster and it's cheaper.

Angelina Bakshi: 6:06

So you really are getting a return on investment fairly quickly here.

Frank Schmidt: 6:11

Yeah, absolutely, it's very visible.

Angelina Bakshi: 6:14

That leads me to a question that I often hear from executives of you know what are the key performance indicators that prove the cost efficient effectiveness of these digital investments? Because they can be quite significant.

Frank Schmidt: 6:41

Absolutely so. Currently, if you look in the oil and gas sector and you focus on that side, you could, for instance, mention energy production efficiency, which measures the actual output versus capacity. More into the utility side, you could look at cost per kilowatt hour or megawatt hour, which tracks operational cost per unit of energy. A traditional one, but still really important, is system availability, so the uptime percentage across an asset. More environmental is carbon intensity, so emissions per unit of energy produced, for instance, and also a traditional one is the return on investment, so the financial return from a digital upgrade, for instance, and these are a set of KPIs that you see used a lot, and these KPIs help quantify both financial and sustainability impact within the oil and gas sector.

Angelina Bakshi: 7:33

Really appreciate your commentary and description about some of the key performance indicators that oil and gas executives can focus in on when we talk about building resilient and adaptive networks, because the reality is that we live in a fairly volatile place and energy security is top of mind for a lot of companies and governments and individual citizens. So how do geopolitical risks and climate volatility create hidden cost exposures?

Frank Schmidt: 8:08

Yeah, that's a very good question. Let me start by saying that hidden exposures arise from supply chain fragility, regulatory shifts and infrastructure stress, and let me give you three examples of those First geopolitical tensions, and in particular those ones, disrupt fossil fuel supply routes and renewable tech sourcing, so that's an important one. A second one is the climate volatility that increases asset damage risk and increases insurance costs for our clients. And a third one is cybersecurity threats to energy infrastructure, which can trigger and cascade failure, which obviously is of high risk. Ways to mitigate are, for example, diversification of the portfolio, keeping strategic reserves and that's, by the way, also an important KPI for oil and gas clients, because the stock they have is also valued in regards to their strategic reserves. And a third one is the digital resilience. If a company is digital resilient, the risk of cybersecurity threats is minimized, and that's why you see a lot of oil and gas companies spend a lot of time and effort into the cybersecurity side of things.

Angelina Bakshi: 9:52

I guess one of the next questions I have is how are public-private partnerships de-risking investments and accelerating cost-effective energy security?

Frank Schmidt: 10:02

Yeah, this is a very important one again. And why? Because if you look at public-private partnerships, they are unlocking capital and innovation right. So when governments provide policy support, subsidies and permitting acceleration, private firms can bring capital and expertise for the long term. And that combination is of great importance to the sector and to us as a whole. And we need these collaborative models and cooperation, especially in hard-to-abate sectors like chemicals, hydrogen, to enable shared infrastructure and risk pooling to get us through the energy transition.

Angelina Bakshi: 10:49

Let's see all the time we have today. I really enjoyed the conversation about our transforming energy systems and maximizing the return on investment through smarter, secure infrastructure. Really fascinating things happening in this space.

Frank Schmidt: 11:05

Thank you for your time. Many thanks, angelina, for having me, and have a great rest of your day.