Lighting the way to digital transformation in mining & metals

SPONSORED BY PT PETROSEA TBK

Digital transformation in mining involves “the integration of digital technology into all areas of a mining company, optimising operations and value delivery”.

In its 2017 whitepaper ‘Digital Transformation Initiative: Mining and Metals Industry‘, the World Economic Forum stated that the cumulative impact of digital transformation initiatives on the mining and metals industry in the decade to 2025 could potentially generate more than US$425 billion of value for the industry, customers, society and environment (the equivalent of 3-4% of industry revenue during the same period).

It could also reduce the sector’s CO2 emissions by 610 million tonnes with an estimated value to society and the environment of US$30 billion and, through improved safety, save 1,000 lives and prevent 44,000 injuries.

Given figures like these, the imperative for digital transformation is indisputable. However, recent research suggests that, despite understanding the benefits of digital transformation and its burning need, the majority of companies in the mining and metals space are still struggling to fully realise their digital ambitions.

The latest iteration of Axora’s annual Innovation Forecast, published in September 2022, highlighted how “digital transformation and technologies offer companies an element of control in an industry where many factors are out of their control”.

The data showed that 100% of the 160 decision makers surveyed agreed that technology and innovation are critical to their organisation’s survival. However, the results also showed that barely half of the organisations described their progress towards deploying a digital transformation strategy as ‘advanced’.

This report compounds the findings from the 2021 edition of Boston Consulting Group’s Digital Acceleration Index, which showed that the metals and mining industry is roughly 30-40% less digitally mature than comparable industries, such as automotive or chemicals.

That’s a pretty big gap. What’s holding us back?

It’s hard to be what you cannot see

In its report, Axora stated that some of the key obstacles hindering the adoption of digital transformation technologies include cybersecurity concerns, lack of vision into the potential for digital solutions, lack of market knowledge surrounding new solutions and slow decision-making by senior management, as well as low capital spend – just 60% of budgets allocated to digital transformation end up being spent on it.

However, another key piece of the puzzle, is that it’s very hard to become what you cannot see. In mining and metals, there are few public examples of companies that have successfully made the transition from a traditional pen and paper-based organisation into a fully-fledged digital one and who are keen to share their processes and learnings.

One company that’s defying this trend is Indonesia-based PT Petrosea Tbk. The multi-disciplinary mining, infrastructure and oil and gas services company offers a range of pit-to-port services in mining, including open-pit contract mining, civil construction and infrastructure, project management, technical and feasibility studies and mine planning and optimisation.

Petrosea began its own digital transformation in 2018 and has seen significant results by aligning its business model, operations, processes and functions with technologies that underpin the Fourth Industrial Revolution (4IR). These include improved overall productivity, more efficient use of resources, as well as improved communications and safety.

Petrosea is currently the only mining company to be recognised as a 4IR Global Lighthouse Company by the World Economic Forum, and the company hopes that by sharing its own experiences and learnings, it can help other organisations to accelerate their own adoption of digital technologies.

Iman Darus Hikhman, Petrosea’s Mining & Business Development Director, joined me to discuss the challenges and opportunities.

“Like many industries with big challenges to future growth, current change in mining is being driven by technology and innovations in order to optimise operations and achieve sustainability,” he explained. “Digitalisation is the catalyst that is supporting mining operations to become ‘smarter’ by leveraging digital tools and optimal processes that make operations instrumented, interconnected and intelligent.”

Building a digital core

Petrosea began its transformation journey with Project Minerva, which stands for ‘Mining Engineering and Construction Advanced Analytics’. The Minerva digital platform was created inhouse with support from Petrosea’s digital ecosystem (one of the company’s key business model innovations) and was tailored to meet its specific requirements.

“This was a strategic step or catalyst in the digital transformation of our mining operations to ensure sustainable performance in the years to come,” said Hikhman. “Apart from harnessing real-time data and connectivity, our aim was also to become a ‘learning organisation’ by continuing to develop essential skills for 4IR adaptation. We do this by prioritising technical and business skills training along with leadership and character building.”

As the programme gathered momentum and the early phases of Project Minerva were completed, the team realised the extent to which technology could optimise the company’s operations and enhance its financial performance.

“We soon realised that having the right information available in real-time would enable us to make the proper decisions in a timely manner, and that it could improve our performance and digital transformation even further. The main contributor to our success has been our ability to change our people’s mindsets through an effective change management strategy and a very strong focus on what we needed to achieve,” Hikhman continued.

Petrosea has now established a digital operating model that delivers value through operational, process and business model innovations. Its data platform provides a ‘single source of truth’ for the organisation from the CEO down to front-line operators, allowing people at every level to act upon and make decisions based upon the same data.

However, the company recognises that digital transformation is a continuous journey and cutting-edge technology adoption is needed to ensure that its efforts continue to deliver operational impacts. In that regard, the team is currently focusing on implementing cloud computing, machine learning and digital twin development.

Turning challenges into opportunities

Hikhman acknowledged that the team also faced their fair share of challenges during the programme.

“In the beginning we faced many challenges, both technical and non-technical,” he told me. “One of the biggest areas of transformation required was the upskilling of our people to enable them to work digitally by understanding the specific concepts and methods required at different levels. Therefore, we prioritised technical training to upgrade employee and leadership capabilities, and upskilling of the workforce with digital and analytical capabilities to create a workforce of the future.”

As a result, employees are now more aware of how to use digital technology to generate maximum impact, and the team understands that every part of their work can impact overall business performance. They are now properly equipped with the capabilities that support their roles and responsibilities going forward.

“When we began our digitalisation journey, another of our biggest challenges was very low internet connectivity at our remote mining site in East Kalimantan,” said Hikhman. “To overcome this, we switched over to V-SAT to support our real-time data access. We also installed a local Wi-Fi network covering the entire mining area to enable sensors to submit data faster and supervisors in the field to access advanced analytics via a mobile app. This was also equipped with a high-level cyber-security system.”

Sustainable results

Petrosea’s digital transformation has provided the company with various opportunities to improve its sustainability, efficiency and operational performance.

The company’s total revenue in 2021 increased by 22% which was driven by its transformation. The company also calculated that from 2019 to 2021, truck productivity increased 15%, loader efficiency by 19% and manpower efficiency by 10%. Meanwhile, its fuel reduction ratio decreased by 6%, meaning lower carbon emissions, 30% of its waste was diverted from landfill and water consumption was cut by a massive 72%.

“We have also improved our processes to enable us to deliver an enhanced proposition to our clients,” added Hikhman. “We now offer digital solution services and project management services as part of our project oversight. We also deliver end-to-end mining operations and comprehensive mineral project-development services from greenfield exploration to mine closure, all enabled with technology to deliver more value for our clients.”

Petrosea’s ultimate goal is to deliver the best technology-enabled services in the industry, which it expects will increase efficiency, productivity, safety and sustainability even further.

The company has also established a Remote Operations Centre (ROC) at its headquarters to monitor and control operations at multiple sites remotely in conjunction with advanced analytics. This allows it to plan, operate and enhance the performance of each site in real-time from one centralised location.

Data-driven decision making, informed execution, decisive and efficient critical responses, as well as task-oriented interactions have allowed Petrosea to focus more on strategy formulation, increased productivity and growth.

Lighting the way for others

In 2018, the World Economic Forum’s Shaping the Future of Advanced Manufacturing and Value Chains platform set up the Global Lighthouse Network. This rapidly expanding community, comprised mainly of manufacturers, shows leadership in using 4IR technologies to transform factories, value chains and business models for financial and operational returns.

Following a six-month period of rapid transformation, Petrosea joined the network in mid-2019. As a lighthouse, it now serves as an example for other companies, helping them to overcome challenges in applying Industry 4.0 technologies, such as artificial intelligence and big data analytics.

In recent years, Petrosea has also been recognised for its significant breakthroughs in digital transformation by the International Data Corporation (IDC). In 2020, Petrosea was named ‘Operating Model Master’ and ‘Talent Accelerator’. And, more recently, the company was awarded the ‘Best in Future of Operations’ and ’Special Award for Sustainability’ titles in the IDC Future Enterprise Awards 2022 Indonesia.

These achievements prove that Petrosea’s strategy to transform its operations through digitalisation has been the right step to ensure the company’s business sustainability in the years to come.