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Business and Technology Insights

IoT is Becoming the Panacea for Overarching Problems of O&G Industry

November 28, 2018

The oil & gas (O&G) industry has been implementing incremental innovations for the last few decades. It started with adopting digital technologies for managing assets and resources, creating data points, and thereby optimizing costs and processes. Given the slow nature of this adoption and innovation, O&G companies are trying to leverage the available solutions with a focus on innovating further. For the last few decades, the Internet of Things (IoT) has proved to be one of the most important adaptive measures for these players. But the situation is somewhat divergent. On one hand, industry experts are talking about adopting advanced solutions on IoT through huge investments. On the other, these companies are trying to obtain economies of scale through optimization of costs and processes. This is further exacerbated by the volatility of oil and gas prices.

Time and again, analysts and consultants have focused on the benefits arising out of IIoT in a number of ways-- cost minimization, low power consumption, scalable solutions, miniaturization of sensors, reduced time to market, augmenting artificial intelligence (AI) solutions, embracing predictive maintenance and availability of compatible digital transformation platforms, among others. Last year, almost 89% of O&G companies adopted industrial (IIoT) to some extent or the other. Most modern oil rigs are equipped with advanced sensor-related technologies, which are capable of collecting varied types of metrics and data related to operations. Two of the largest O&G players, ExxonMobil and Petrobras, are investing in miniaturized sensor technologies, which would facilitate automation in oil-well monitoring operations. Technology firms have also seen an increased demand for implementations of backend technologies, which would allow O&G companies to make use of millions of data points collected from sensors. For instance, Chevron has been in news for extending its partnership with Microsoft for driving value out of IoT technologies. Shell, Engie, Total, StatOil, Centrica, ConocoPhillips, Repsol, Schlumberger, Saudi Aramco, among others have invested heavily in the last few years for extending their capability and thereby improving decision making, production, monitoring, maintenance, and more. They have chosen from among possible alternatives, such as investments in new technology adoptions, acquisitions of related companies, partnership with technology vendors, creation of incubation labs and internally developing solutions.

 IIoT’s role in pipeline management cannot be ignored either. Billions invested have already started benefiting incumbents in the midstream sector. Social media and daily news flashes have raised flags within non-users or minimal users of IIoT. This is already an inflection point for O&G players to enable them to become a part of the connected world of 50 billion devices by 2020

While O&G companies have come a long way in adopting advanced technologies, equipment reliability still remains a challenge, which often causes unplanned downtime resulting in losses in terms of production, revenue, and profits. Regular inspections still remain a cumbersome task despite IIoT helping companies monitor and predict maintenance of equipment, pipelines, and processes. Cases of oil spills or leaks have still remained a challenge for the Oil & Gas Companies. Greenhouse gas emissions and their control, coupled with decarbonization policies still pose further challenges and are acting as an enabling motivator for adopting more digital solutions for addressing the environmental, social & health concerns.

In the era of Industry 4.0, IoT could still come to the rescue of O&G companies. Data generated through IIoT sensors could be stored and processed using big data analytics in the cloud and then transferred securely over blockchain networks with minimum data loss. What causes this mindset is the collective notion of a readily deployable affordable solutions outlook, further hindering futuristic thinking. The mindset of adopting affordable, quick to deploy solutions need to change to embrace a connected future for O&G. Having a conservative outlook has further prevented their growth. IIoT coupled with other technologies and enablers could resolve the internal issues, while working closely with the existing solutions under focus. However, the lack of exposure and awareness, along with the anticipation of further losses, has prevented innovation in this area and in debarring IoT solutions from becoming the much needed panacea for the O&G companies in this era. Change management could be the enabler in helping the O&G operators to adopt the much anticipated solutions for an exponential growth in the future.

Swayambhu Dutta is a research analyst in the Energy & Resources (E&R) industry unit looking after the North America, ANZ, and MEA geographies. He has around seven years of experience spanning across E&R and Telecom verticals. Currently, he is working as a Business Analyst enabling strategic decisions and bid support for the company. Swayambhu is a Gold medalist during his MBA stint in XIM, Bhubaneswar. He is a telecom engineer with deep interest towards Oil & Gas value chain technologies.