The upstream oil and gas industry operates in a volatile market. A recent boom has driven a thirst for innovation and investment in digitization to address costs, ease margin pressures and optimize performance.
The Internet of Things (IoT) is a key driver in the transformation of exploration works, drilling and production. Much of this activity takes place in remote locations where many assets need to be tracked and optimized. IoT has the power to connect field workers to applications, such as real-time data analytics, predictive maintenance, asset management, environment monitoring, and health and safety for faster decision making and a safer working environment.
According to market researcher Technavio, global IT spending in the oil and gas industry will be worth $50 billion by 2020. This rejuvenated interest in technology is primarily being driven by an aging infrastructure, an increase in cyber-attacks, a shortage of skilled labor, the arrival of IoT and the necessity to improve operational efficiency to stay competitive.
A smart future for oil and gas
Currently, technology investment in the upstream oil and gas industry is centered on mobility, asset management, data analytics and cloud adoption, and is targeted to lower infrastructure costs. Initial IoT adoption is therefore focused on efficiencies and can enable more informed decision making.
With production costs rising, IoT has the capabilities to help upstream oil and gas overcome several significant challenges it faces, such as increasing legislation and the difficulty of hiring and retaining a workforce.
“With prices stabilizing, the sector now feels confident to move forward with technology investment, and it is all too aware it must update its legacy systems,” explains Olivier Vicaire, Senior Digital Business Consultant, Orange Business Services. “Once the likes of business intelligence and cloud are in place, we’ll see IoT take up grow significantly.”
As well as improving operational and asset efficiency, IoT can in some cases increase output. Intel, for example, claims that data analytics in gas wells can increase output by 30 percent. This is achieved by connecting sensors to gather pressure and temperature data from plunger technology, which accurately removes liquids that inhibit the flow of hydrocarbons to monitor effectiveness.
With companies in this sector often having assets deployed across many countries, IoT solutions will need to provide a robust, always-on and stable solution that can work in multiple remote locations – and often extreme environmental conditions. In addition, new technologies are being deployed to improve monitoring and data collection, such as drones inspecting off-shore drilling and production platforms.
Effectively optimizing operations
The upstream oil and gas industry has until now found it difficult to push production to the maximum, due to lack of insight into operational efficiencies. McKinsey estimates that offshore platforms on average are running at 77 percent of maximum production levels.
IoT and advanced analytics tools have the ability to boost this, allowing oil and gas companies to analyze the petabytes of data they collect to gain valuable intelligence. Applied accurately, these advanced analytics solutions can yield returns as high as 30 to 50 times investment within only a few months of deployment, according to a report by McKinsey – thanks to their ability to identify answers to complex production optimization issues.
Data generated by large oil and gas companies already exceeds 1.5 terabytes per day, coming from the likes of well management systems. Accurate data capture and analysis can improve productivity, while providing insight into how choices made during a well’s development stage can impact the effectiveness of production decisions, according to research by Deloitte.
Real-time monitoring of critical assets
IoT will prove invaluable to oil and gas companies to monitor fleets, plants, rigs and machinery from a central point, thanks to a network of embedded sensors generating relevant data.
An IoT-based maintenance strategy allows for vastly improved maintenance and management, enabling failures to be predicted before they happen, which will cut down downtime drastically. “Maintenance is a major issue for oil and gas companies, IoT is already enabling early adopters to monitor the health of their assets in real time,” adds Olivier Vicaire.
Smart pumps, with a demonstrable return on investment, for example, are forecast to experience high demand. “IoT-enabled pumps and solutions that can turn big data into predictive information are disrupting the digitization strategies of oil and gas companies in developed countries,” explains Anand Gnanamoorthy, Industrial Automation and Process Control Industry Manager at analyst Frost & Sullivan.
Big potential for cutting waste and emissions
With the upstream oil and gas industry coming under increasing pressure from regulators and pressure groups, it is already looking to IoT to help it manage and minimize the impact that operations have on the environment.
In the U.S. alone, the oil and gas industry leaks around 1 million tons of powerful pollutant methane into the environment every year, according to the Environmental Defense Fund. By deploying IoT and sensors, companies can dramatically identify and reduce such leakage.
“IoT has the potential to do much in terms of increasing sustainability in the sector, while reducing the all-important environmental footprint,” says Vicaire. “But this is very much dependent on regular, accurate transmission of data.”
Delivering on improved health and safety
Oil rigs and gas plants are hazardous working environments, and IoT can contribute to improving health and safety for workers by making these often remote locations safer places to work. For example, IoT can monitor for leakages or be integrated into smart clothing. Orange Business Services smart vests activate an alert if a person gets too close to a restricted area.
Autonomous robots are being used in North Sea oil rigs in areas considered very high risk for humans to monitor equipment and inspect for gas leaks. In the future, robots are likely to fill the skills gap the industry is facing. By taking on mundane and dangerous tasks, the robots allow the human workforce to take on more skilled, flexible activities.
Accidents are very expensive. By deploying these IoT-enabled safety measures, upstream oil and gas companies can not only keep their workers safer but can also benefit from lower insurance and corporate liability.
A positive start to a connected future
The upstream oil and gas sector loses billions of dollars every year due to so called non-productive time. IoT will fast prove invaluable in creating smarter, leaner organizations.
Advanced data analytics can work with a host of sensors to automate some systems, freeing up staff for more critical roles. Connected technologies reduce downtime by using real-time data and predictive maintenance to keep operations moving. At the same time, they can help prevent accidents and reduce environmental incidents.
Transformation is starting out slowly, but it will gain momentum says Vicaire. “Huge investments have been made in legacy systems, so it is a case of starting with sensors here and there,” he says. “These will rapidly evolve as companies realize the unprecedented visibility IoT can provide over their operations.”