The Impact of AI on Offshore Oil and Gas Projects: Challenges, Opportunities, and Regulatory Considerations
Exploring the evolving landscape of artificial intelligence in the upstream sector and its implications for construction contracts and risk management.
Embracing AI in Offshore Oil and Gas: Insights from Glenn Legge of Endeavor Management
The offshore oil and gas sector is at the pinnacle of technological evolution, particularly with the burgeoning influence of artificial intelligence (AI). In December 2023, an article featured in Offshore magazine titled “Artificial Intelligence Applications Promise Improved Drilling Efficiency” delved into how the industry is considering AI across various applications, including drilling optimization and completion designs.
Fast-forward 18 months, Offshore conducted a survey to assess the pressing AI challenges and technologies within the industry. The findings, published in June 2025 as “Survey Reveals Biggest Challenge in Implementing AI Technologies in Offshore Oil and Gas Sector,” spotlighted a rapidly evolving landscape that requires both strategic implementation and a clear regulatory framework.
Key Insights from the Survey
The survey, which gathered input from operators, service companies, and EPC firms, revealed a breakdown of AI applications in the offshore oil and gas market:
- 43% focused on predictive maintenance
- 31% allocated to seismic data interpretation
- 17% for drilling optimization
- 10% dedicated to reservoir management
While the applications of AI are promising, the industry faces challenges such as integrating AI with existing systems, a shortage of skilled professionals, data security concerns, and high implementation costs.
Enhancing Safety with AI Tools
Moreover, the survey also highlighted how AI could bolster safety protocols in offshore operations. Responses included innovative applications like:
- Computer vision for equipment monitoring
- Real-time data analytics
- Automated inspection systems
- Predictive risk assessments
Navigating the Challenges
As the upstream sector harnesses the power of generative AI, crucial questions arise about its applications and functional scope of work under various EPC/EPCM agreements. It’s clear that the downstream implications of using AI in drilling, seismic interpretation, and facility operations must be carefully managed, alongside training for personnel and compliance with evolving regulations.
The Impact of EPC Contracts on AI Utilization
A report by Westwood Global Energy in January 2025 indicated that the EPC construction activity for offshore oil and gas and CO2 sequestration in 2024 reached a staggering $52 billion, with expectations to grow to about $54 billion in 2025. This highlights the massive potential for AI integration across projects.
Historically, under EPC contracts, contractors were responsible for design, engineering, construction, and procurement. The complexity of generative AI requires a reevaluation of these existing contracts to incorporate novel risks and challenges associated with AI applications.
Generative AI and Risk Allocation
As companies like Mintmesh leverage AI for more efficient project management, it’s crucial to outline the “single source of truth” (SSOT) for AI training data. This ensures that AI can operate effectively and adhere to industry standards. In the event of failures linked to AI application, the SSOT will be pivotal in investigating the causes, potentially placing liability on the data providers or AI developers.
Insurance frameworks are also evolving in response to these innovations. A notable example is the new coverage announced by Armilla and Chaucer Insurance at Lloyd’s of London, addressing mechanical underperformance and associated liabilities of AI systems.
Legal and Regulatory Developments
The landscape is changing rapidly, with the recent One Big Beautiful Bill Act introducing federal funding, tax incentives for domestic AI development, and tightened restrictions on foreign investment in AI technologies. Executive orders from the previous administration further clarify the role of AI in federal projects, promoting the export of American AI technology and addressing biases in AI systems.
Concluding Thoughts
As we navigate these evolving landscapes, the intersection of AI with offshore energy development represents both an opportunity and a challenge. At Endeavor Management, we recognize the speed at which industry practices are evolving, often outpacing regulatory frameworks. It is essential that both the private sector and regulatory bodies collaborate to ensure that the integration of AI into offshore operations is conducted in a safe, effective, and well-governed manner.
With advancements in AI promising transformative changes in operations, the future of offshore oil and gas holds exciting possibilities throughout 2025 and beyond.