Among the technologies that are in vanguard as a consequence of ongoing fourth industry revolution and is poised for a huge leap forward is called “Internet of Things”.
Internet, as we all know, is one of the most important and transformative tool that was ever invented. It is like a digital fabric that is woven into lives of all of us and we intimately touch it, one way or other. All the data, images, recordings, games, commerce, books, movies, all of that was created by people, for the people and about the people. Internet of People changed the world. There is a new internet emerging and it is poised to transform the world again. This is not just about connecting people, it is about connecting things, so it is named as Internet of Things (IoT), which means things start to share their experiences with other things.
The IoT technology may transform the way people work and live at a scale incomparable to major industrial revolutions of the past. It has a tremendous potential to benefit industry and society. Oil and Gas industry is also likely to be impacted by this change. The drop in crude oil prices is driving companies to squeeze as much efficiency as can be in order to stay competitive. The IoT is a God sent opportunity to optimize the industry value chain.
Internet of Things (IoT) implications for Oil and Gas Industry
The Oil and Gas industry has always been one of the early adopters of digital technology innovations. Some of these applications had a focus on better understanding a reservoir’s resource and production potential, improving health, environment and safety issues and enhancing marginal operational efficiencies at oil fields around the world. A wave of digital oilfield initiatives swept through most of the industry at the turn of this century. However, in the last one and a half decade, the oil and gas industry has not significantly embraced the prospects that emerged from utilizing data and information technology. As an example, an offshore rig erected in an ocean can generate huge amount of data every day, but only a small fraction of it is used for decision-making. For the oil and gas industry, the opportunity to leverage the transformational impact of IoT is apparent, because it can revolutionize the business and operating models through a holistic application this emerging technology.
The advent of Internet of Things (IoT) technology in the oil and gas industry enables operators to control, analyze and act on large data sets from the numerous physical assets deployed for the production and transportation of hydrocarbons. The IoT enables assembling of fragmented data into a structured data group, which can be analyzed to identify patterns indicating a potential hazard or equipment failure. Development of robust predictive analytical tools enables that such issues can be resolved by deploying proactive measures, be it preventive maintenance or activating early warning signals. As a means to improve business outcomes, oil and gas industry operators to pay more attention to adopt IoT technology for not only to improve financial performance but also maintaining critical uptime.
A potential challenge with the integration and convergence of IoT and operation technologies is that companies must be equipped to tackle new issues and risks, such as malware and cyber attacks. In the upstream sector, IoT can help with optimization by providing new operational insights from analysis of diverse sets of operational data (such as drilling parameters) and cross-disciplinary data (such as geological models). In the midstream sector, transportation, including pipelines and storage that aim for higher network integrity and new commercial opportunities — are expected to benefit significantly from building data-enabled infrastructure. Downstream sector could see potential in new revenue opportunities, from expanding visibility of the hydrocarbon supply chain and targeting digital consumers with new forms of connected marketing.
Case Study: Transforming Supply Chain Transactions
Once extracted, the crude oil has to be carried to refineries and further to the retail fuel station. Therefore, transportation is an integral part of it. To make this happen, an extensive network of ships, barges, pipelines, trains and trucks traverse the world. At the interconnect points in the above supply chain network, there is a piece of equipment called “skids” that measure the amount of product transferred from one container to another as it changes hands.
Known as Lease Automatic Custody Transfer (LACT) units, these skids have traditionally been just one of thousands of assets scattered around the world and often located in the middle of nowhere. Skids perform their function in isolation with virtually no connectivity and have historically depended on paper-based processes and periodic site visits for routine maintenance, leaving them vulnerable to inaccuracies of measurement– This is something that application of IoT can alleviate.
By modernizing LACT units with sensors and moving that information to the cloud, IoT technologies enables the skids for remote service and maintenance, including the ability to monitor the product being transferred to ensure it is correct, and coordinate immediate electronic invoicing.
The power of IoT to automate these transactions across thousands of machines and countless miles is indeed transformational for oil and gas industry. Various parties involved at various points of this multi-modal and global supply chain can have immediate electronic records of transactions and accountability on real time basis. This feature provides for immediate awareness for maintenance and diagnostics purposes.
Case Study: Building a smarter gas pump
On street corners around the world is another piece of equipment that is ubiquitous: retail gas pumps. While most people use these for petrol and diesel, today many public transportation vehicles are fueled by CNG and therefore, the modern pumps designed to handle CNG/LPG fuel sources are also making their way to filling stations worldwide.
In the west, major oil companies are working with their affiliate gas stations to connect and cloud-enabled pumps, by integrating IoT applications. Digital equipment attached to each pump collect data at station level is aggregated and securely sent to a cloud platform. Enablement by IoT the collation and storage of real-time data from hundreds of sensors at retail stations allows each player across their supply chain to perform their function more efficiently. Essentially, these are reports on the functioning of the equipment, inventory of fuel, consumption rates, and analytics to predict when they needed to perform preventive maintenance, replenish supplies, etc. This drives significant productivity and cost savings.
Though it’s still early days to predict, the oil companies are planning to expand the project across the globe, with potentially hundreds of sites coming online in the next few years.
The way forward for Oil and Gas Industry
Investment on IoT applications is important in the current economic scenario. To optimize returns from their investments, companies must have both short-term milestones and a long-term IoT vision.
Short-term milestones for Oil and Gas companies are:
• To ensure that the momentum being created through IoT permeates through a formal learning curve across the oil and gas value chain and various stake holders.
• To examine very clearly the future costs and complexities associated with retrofitting and interoperability of applications that would be required in moving on to IoT enabled, cloud based platform.
• To assess security shortcomings in light of new developments of IoT and its vulnerabilities
Long-term vision for Oil and Gas companies are:
• To move the insight from the current fuel level to ultimately the “hydrocarbon molecule” level.
- To widen IoT’s reach from just deriving cost optimization to capital efficiency of supply chain to project management of mega-projects.
- To create business models that enable new information value chains to converge with traditional supply chain and extend it across the integrated enterprise.
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i. January 2017, World Economic Forum Report, “Digital Transformation Initiative, Oil&Gas Industry in collaboration with Accenture.
ii. December 4, 2017, Microsoft Corporate Blogs, “Fueling the Oil&Gas Industry with IoT”
iii. June 19, 2015, IBM Big Data & Analytics Hub blogs, “5 ways IoT technologies are enabling the O&G industry, by Dan Bigos & Tammy Kulesa