The years of high and rising oil prices led to a longstanding oil price of more than $60 per barrel, new extraction technologies have opened up new sources of supply with a new price equilibrium of $10 to $20 less per barrel.
Luckily for the Oil & Gas industry, a new suite of technology is promising the companies to tackle the challenges they are facing. The technology we are talking about is the Industrial Internet of Things (IIoT), which basically consists of sensing, communicating, and analytics capabilities, and has been simmering for a while.
There cannot be any one-size-fits-all IoT solution for an industry as diverse as Oil & Gas. But there are business objectives behind IoT adoptions: Optimizing Operations, improving reliability, and Creating new value. Each segment of the Oil & Gas industry can reap the greatest benefits from their initial IoT efforts in one of these objectives.
Upstream companies focused on optimization can achieve new operational insights by utilizing a varied set of data. Midstream companies seeking new commercial opportunities and higher network integrity will realize a significant benefit by building a data-driven infrastructure. Downstream players will be able to boost up their revenues by expanding their visibility into the hydrocarbon supply chain.
The push to optimize operations triggered by the fall in crude oil prices made the Exploration & Production players face technical and operational complexity. Players are developing systems that are able to operate at a pressure level of 20,000 pounds per square inch and survive at the temperatures up to 3500 F; extracting from old fields which have significant maintenance needs, and moving to hostile remote locations where safety is a key concern.
The upstream industry loses approximately $8 billion per year due to NPT (Non-Productive Time) as the engineers occupy 70 % of their time in searching for and manipulating data. On the other hand, the growing need to expand the scope of data is restricted by companies’ weak data-management capabilities. There are ample opportunities for upstream oil and gas companies by which they can improve operational performance via advanced analytics, but weak data management is preventing the progress for many.
Midstream: Intelligent Pipelines
With annual fuel losses of approximately $10 billion due to leaks and thefts in the US alone, the companies operating in the midstream foresee considerable upside in improving pipeline safety and reliability.
Installing more operational hardware and software would likely do little to improve the network’s reliability or reduce risks. To get over the problem, what may be needed is a shift toward data-driven infrastructure – in other words, begin with the Information Value Loop by investing in sensors which generate new data.
The midstream majors are at the state where they can create insights from new data volumes because of their diverse portfolio and integrated network. A big midstream player can leverage the power of data across its supply chain, helping shippers find the optimum paths to transport and charging them differently for having multiple route option in contracts.
Downstream: From inside out to outside in
The crude oil refining is a well-matured business with few innovations in processing technology recently. Less technical innovations and the commoditized nature of petroleum products, make the refining process the most commercially challenging element of the entire energy value chain.
Avoiding shutdowns is critical to increasing refinery output. Ineffective maintenance practices result in unscheduled downtime which costs global refiners an average $60 billion additional operational cost per year.
Typically, refiners preschedule schedule maintenance for individual units or for the entire refinery to allow inspection coordination and repair activities and to plan for alternative equipment arrangement. Refineries routinely pull individual equipment into workstations for inspection and overhaul, without having much information about the equipment’s expected condition. But now, smart devices (IoT Sensors), advanced wireless mesh networks (Network) combined with open communication protocols (Standards), and device and asset management analytics (Augmented Intelligence) are driving a shift to condition-based predictive maintenance strategies.
Changing issues of handling data and efficiencies don’t stop at the inbound logistics of crude oil sourcing – there is the outbound logistics of product distribution to be considered. The distribution ecosystem does include not only the refining and marketing companies but also the customers to which they sell. Apparently, the Oil & Gas industry is beginning to see the IoT’s importance for future success. But it isn’t as simple as installing more sensors: to create and capture value from IoT applications, oil & Gas companies are required to identify primary business objectives before adopting IoT technology.
- Upstream companies focused on optimization can get new insights into their operations by standardizing aggregated data and infusing integrated analytics across the operations (Exploration, Development, and Production).
- Midstream companies targeting greater network integrity and new commercial opportunities can be benefited by investing in IoT Sensors that will touch every aspect of their facilities and by analyzing more comprehensively throughout their network.
- Downstream companies operating at ecosystem level can generate new value by expanding their visibility into the entire hydrocarbon supply chain which enhances core refining economies and lets companies target new digital consumers via new forms of connected marketing.