IIoT’s impact on the oil and gas industry

Oil & gas companies are looking to the Industrial Internet of Things (IIoT) to improve efficiency and productivity as the market slowly recovers.
By Anil Gosine, MG Strategy+ September 20, 2018

Oil & gas companies are looking to the Industrial Internet of Things (IIoT) to improve efficiency and productivity as the market slowly recovers. Courtesy: Anil Gosine, MG Strategy+The recent drop in oil prices resulted in some companies going through the traditional route of cost-cutting measures such as layoffs and capital expenditure (CapEx) reductions. However, some organizations realized these measures were counter-productive and began to invest in new tools to improve efficiency. These technological advances are designed to help companies maintain production in the new age of lower oil prices while maintaining some level of profitability.

The potential benefits of Industrial Internet of Things (IIoT) applications are being leveraged to create new value in information about elements of their business that manage existing assets for increased reliability, optimization, supply chains, and customer relationships. The IIoT solutions allow integration of sensing, communications, and analytics capabilities being developed. With the increase in computing devices, low-cost sensors, analytic tools, and economic data storage options, the oil & gas industry can capture more data in real-time to improve performance in the plant and the field.

There are several catalysts driving and enabling this shift to information-based value creation. Five in particular are:

  • Companies predicting the future with data.
  • Volumes of data spurring collaboration between operations, business, and information technology (IT).
  • Recognizing the value of data scientists.
  • Cautious and secure strategies towards the cloud and edge devices that address risk management.
  • A plan to successfully manage the transition for recreating processes and system architectures.

Corporate executives must link IIoT deployments with specific business strategies. Advances in instrumentation, process automation, and collaboration have proliferated the volume of data from sensors, weather, seismic and geolocation that needs to be harnessed.

From sensor-integrated drilling rigs to on-shoring systems, there are signs companies are taking every opportunity to ensure they remain up-to-date of the latest developments as the market recovers. Though layers of rock vary across geographic regions may be similar structurally; there are lessons learned that could reduce risk and assist in learning about the subsystem(s) by applying data science that increases the accuracy of decision makers.

Oil & gas companies have complex legacy technology systems and the architecture of Big Data complicates that. Businesses should lead these efforts because it requires cross-functional participation and leadership, which will help shape the organizational model needed to achieve the desired result.

Asset monitoring is critical in the oil & gas industry. From exploration to the transition of production, data is used to record every detail of its assets and manage the activities around each asset to maintain and maximize overall site productivity. These complex assets are exposed to remote and varying climatic environments; IIoT must leverage the power of Big Data analytics to improve productivity and efficiency through smarter asset monitoring solutions. 

Priorities for oil & gas industries

Within this diversified field, upstream organizations such as exploration and production can focus on gaining new operational insights. The data generated within this sector often exceeds 1.5 TB a day. The ability to harness and analyze that data seamlessly is key to realizing the potential benefits. Using seismic data signatures to enhance production and improve drilling success are a few areas where analytics can improve results.

Midstream organizations, such as transportation, pipelines and storage can focus on greater network integrity and commercial opportunities. A major pump failure can cost as high as $250,000 a day in lost production; utilizing IIoT and analytics to monitor additional critical points and equipment can identify when a pump or other secondary devices will begin to affect performance.

Downstream organizations, such as petroleum refiners and distributers, can focus on revenue generation by increasing their visibility into the overall supply chain and targeting consumers through connected marketing. In this highly commoditized area of the market, refiners focus on operating their refineries as efficiently as possible.

Avoiding shutdowns remains a problem for the oil & gas industry, which has 500 unscheduled refinery shutdowns per year within the U.S. From a global perspective, unscheduled shutdowns cost over $15 billion per year of lost production and when coupled with an estimated $50 billion in ineffective maintenance, IIoT vendors have a strong business case to make and present to the management teams.

Readying for the data revolution

Data science and analytics vendors that integrate their solutions with automation solution providers are gaining market share and are able to demonstrate potential benefits to customers. Solutions providers must continue improving their products, offer secure cloud based, open-source frameworks for data storage, agnostic data connectors for integration, proactive, and prescriptive approaches for data analytics and intuitive data visualization. The architecting and project management of these integrated solutions is the critical path of success for the partner firms.

Key differentiators include the flexibility to model a diverse set of equipment including auxiliary systems, ability to define and detect early warning signals based on a range of operational and diagnostics data, engineering tools for automated root cause analysis, advanced prognostics algorithms and advanced visualization to support operations, maintenance, reliability, and management teams.

Over the next three to five years, according to a Microsoft and Accenture survey, 60% of oil & gas executives worldwide say they will invest more than they currently do in digital; 85% believe they can leverage analytics to improve business practices.

The Big Data revolution is still in its early days with lots of the potential for value creation still unrealized. However, this technology has set the industry on a path of rapid change and new discoveries; stakeholders that are driven to innovation will likely be the first to reap rewards. The industry needs to understand how Big Data can be best used and what applications will utilize it; as there is a cost is collecting and storing that data.

Anil Gosine is a global program manager at MG Strategy+, a CFE Media content partner.