Low-power sensors already help monitor oil and gas operations, but the true benefit of this real-time visibility will lie in data-driven decision-making throughout the supply chain.
If there’s one rule in the oil and gas industry, it’s that companies must be ready for anything — from price changes and politics, to bad weather and worn-out equipment. At every level, companies must have accurate insight into their operations in order to make proactive and cost-effective decisions. At the same time, what defines “cost-effective” is always changing. While the price-per-barrel of oil has recovered since the staggering lows of 2016, it’s down again from earlier 2019 highs, and may not reach $100/barrel any time soon.
The obvious lesson here is that companies must be ready to adapt and innovate to stay as efficient as possible. Lately, that innovation has relied on specific technology — the increasingly ubiquitous and affordable sensors and devices that make up the Internet of Things (IoT). This IoT tech is capable of gathering, transmitting, and utilizing data — and it’s already making waves in the oil and gas industry. IoT-enabled insights are proving useful for predictive maintenance, remote monitoring, and risk mitigation. But in these uncertain times, the industry must adapt further in order to digitally transform. It’s time to leverage real-time data for optimal decision-making throughout the supply chain.
How IoT is Already Benefiting the Oil and Gas Industry
The oil and gas industry hasn’t necessarily been quick to adopt digital technologies and data in the past. But as profit margins narrow, there has been a bigger internal push to deploy IoT devices. Here’s how the use of low-power sensors and edge computing is already boosting visibility and efficiency:
Equipment management and predictive maintenance.
Given their complex operations, oil and gas companies have a lot of critical — and costly — equipment in play. Real-time data insights can dictate how that equipment is used, ensuring that resources are allocated efficiently. If there is an unexpected gap in available machinery, a plan can come grinding to a halt. Overall, using sensors to track the current location and use of resources provides much-needed visibility.
Perhaps even more critically, better data can support a more pinpointed approach to diagnostics and repairs. It’s cheaper to maintain equipment based on predictive measures — a crack is less expensive than a total break. Preventing downtime pays off quickly. For instance, if the pump fails it can cost up to $100K per hour. By using IoT sensors to monitor pump condition, these costs could easily have been mitigated. At the same time, sensors can also assure you when equipment is running well, helping you avoid unnecessarily swapping parts or making costly repairs too far in advance.
Real-time, remote monitoring and tracking.
Another key capability of IoT devices that specifically benefits the oil and gas industry is remote monitoring. Companies have already begun to take advantage of this ability to manage operations across a range of hard-to-access and low-connectivity environments, like offshore rigs and cargo ships.
Today, many facilities do have real-time sensors that track issues like tank levels, pressure, and flow rates, allowing for faster troubleshooting. The advantage of remote IoT devices in particular is that you can simultaneously monitor many assets, without increasing manual labor. Operational efficiency goes up without requiring more hard-to-find talent. What’s more, having a real-time overview of all this data — along with automated alerts on key changes — allows companies to flag relationships between incidents and perform more effective forecasting analysis. (Think of multi-factor, cumulative issues like liquid loading, which can shut down well production if not caught early.)
Safety and environmental risk reduction.
Oil and gas companies spend a lot of money and effort managing risk, and for good reason — the list of safety and environmental risks associated with production is sobering. But using IoT sensors to track equipment conditions can also benefit companies when it comes to mitigating risk, preventing injury, and lowering corporate liability.
Many human safety issues — like explosions, fires, and machine hazards — could potentially be avoided with greater insight into current equipment conditions. The right IoT data could signal workers that it’s too dangerous to enter certain areas. And the ability to more accurately track certain processes, like deep-water drilling, could help avoid circumstances that lead to human injury. If you have real-time data on drilling errors, for instance, you can halt production before causing an incident.
Similarly, accidents from pipeline leakage to oil spills can incur large fines and significant reputational damage. Smart companies are investing in proactive monitoring through the IoT, replacing intermittent manual checks on pipelines, pumps, and filters with more efficient and accurate automatic checks.
What Oil and Gas Companies Can Gain from Digital Transformation
Oil and gas companies are already realizing many of the individual benefits associated with the IoT. Deploying equipment sensors can improve monitoring and mitigate risks, leading to more efficiency and cost-savings overall. However, there are still a huge number of opportunities to achieve the kind of innovation that can reshape a challenging industry.
The oil and gas industry is already gathering reams of data. But it isn’t yet optimizing how it actually shares that data among stakeholders. There is tremendous opportunity to actually activate data in real-time, which would turn newfound visibility into optimized decision-making. While the use of IoT technology represents a step towards digital transformation (DT), a full DT would mean effectively unlocking the power of these insights to make them actionable throughout the company. By undergoing a true DT, partners up and down the supply chain could work together seamlessly, maximizing profit and benefits across the board.
One of the top benefits is seamless collaboration. A large number of partners need to collaborate in order to successfully extract, ship, and deliver oil and gas. Producers, wellhead service companies, refineries, shipping companies, and many other players are all part of the overall industry. It has always been difficult to optimize inventory planning (and execution) between these branches, but IoT data can offer current, relevant information about everything from barrel type and location to rig breakdowns. This information can aid in successful preparation and decision-making, and in turn, enables visibility that makes it easier to forge strong, productive relationships.
Key operational IoT data also offers those partners the awareness they need for effective real-time decision making. Better data points delivered in real time can allow companies to make smart production decisions based on current conditions. For instance, Bain & Company suggests that drilling data of surrounding wells could help determine drilling strategy on new wells — potentially improving production by 6-8%. Broader and deeper data insights make it easier to make the right call in the moment, as well as catch long-term overall trends that signal it’s time to walk away from unprofitable assets.
Of course, that also relies on configuring purposeful data analytics — you don’t want reams of stored data that no one sees. Since oil and gas production is often located in limited-connectivity areas, that might mean leveraging edge computing to analyze data as it is collected. That can include analytics tools that are configured to optimize production — based on factors like field conditions and the current price of oil — allowing for in-context production that more accurately calculates profit opportunities. In fact, McKinsey suggests this kind of smart tech could lead to $50 billion in savings across the supply chain.
The Missing Piece
Despite increasing deployments of IoT sensors at the operational level, it’s not a given that oil and gas companies are maximizing their investments. Taking efficiency and innovation to the next stage means bringing data, visibility, and communication into one channel. Internal teams and external partners need to get on board with software solutions that are purpose-built to streamline the supply chain. The right software can actually connect and activate data, give all stakeholders visibility, and allow for rapid, in-context decision making. That means drilling down on opportunities with profits all but guaranteed.
When it comes to choosing software, look for tools that enable workstream collaboration, which can offer a persistent communication workspace for your teams. Geospatial location features and seamless integration of IoT devices allows for all the right information to live in one place. By enabling players in the supply chain to make decisions with key contextual information, the oil and gas industry can truly make the most of digital transformation.