Five Transformational Technologies Fueling Oil and Gas
We were in the early stages of architecting a refinery of the future incorporating internet of things (IoT) devices and sensors, but I was bewildered when I discovered he was recommending that my company sell the solution we had codeveloped for his company to its competitors. However, I quickly understood that this brazen vision for an industrywide approach would commit my company to a smarter, standardized solution while his company still had a head start.
I
mention this to frame the third part of this series on how five technologies
are transforming different industries because it’s the ideal new business model
for the highly verticalized and complex oil and gas (O&G) sector. As
transformational technologies such as IoT, artificial intelligence (AI),
blockchain, fog computing and 5G accelerate and converge, no single company can
put all the pieces together to solve their business problems.
This is a daunting paradigm shift. O&G ranks last of all industries in digital maturity, according to Deloitte. The study also noted that the industry loses $1.6 trillion in revenue by "failing to fully embrace digital." Nonetheless, the oil patch is catching up. According to a survey conducted by Ernst & Young (via Forbes), 70% of O&G companies plan on deploying IoT this year and next.
Let's
examine how these five transformational technologies are best applied.
Upstream
(Exploration And Production)
Technavio
believes the global digital transformation market in O&G will grow by $34
billion between 2019 and 2023, primarily in exploration. For example,
additional sensor-driven and IoT-driven data on the environment, equipment,
seismic activity and more — along with AI and machine learning (ML) — will
enable drillers to optimize operations and perform real-time predictive
analytics and maintenance.
I
have visited digitized oil rigs in the middle of the ocean that produce nearly
two terabytes of data daily from 100,000 sensors, measuring temperatures,
pressure, leaks and other anomalies. It's not practical and economical to send
such gushers of raw data to the cloud or onshore databases for processing. But
with fog computing, policies can be set on whether the data is indexed at the
rig or exceptions transmitted onshore to a data center or cloud. Such load
balancing helps AI/ML function more effectively networkwide, allowing multiple
parties to simultaneously analyze exceptions, optimize resources, remediate
potential safety problems, cut costs and even save lives.
Myriad
other use cases combining digital technologies abound. Shell sped processes and
saved $1 million at just one oilfield by replacing manual data collection, and
Apache extracted more accurate data more inexpensively on seismic mapping.
Consider the exponential value of scaling such examples globally.
Midstream
(Processing, Storing, Transporting)
According
to research conducted by Berg Insight (via IoT Business News), there were 1.3
million "wireless IoT devices" used in O&G in 2018, growing at a
compound annual growth rate of 6.8%. The most common applications are to
remotely monitor storage tanks, pipelines and industrial equipment in the
midstream and downstream. Imagine smarter and faster decisions with 5G to boost
the speed and accuracy of data transmissions, provide wider coverage and
facilitate IoT integrations.
Pipeline
fuel leaks (costing $10 billion yearly in the U.S.) and thefts are another
domain for these technologies. One partner I worked with reduced the cost of
detecting illegal pipeline taps, corrosion and leaks by 95% with smart foam
pigs with sensors linked to cloud-based analytics. Separately, digitization
dramatically lowered maintenance and operational costs for DCP Midstream and
enabled OSIsoft and BP to find and fix pump cavitation problems, boosting
production potential.
Downstream
(Refining, Distribution, Marketing)
A
report published by PwC (via AMEinfo) estimated that digitizing operations can
cut downstream operating costs by 20% and increase plant efficiency by 12%,
concluding, "Digitization is more than an opportunity, it is an
imperative." Another report published by Deloitte noted that more
efficient and effective maintenance through digitization could minimize
unscheduled refinery shutdowns, which cost industries worldwide 5% of
production annually.
From
my experience integrating these technologies in heavy industries, I believe
preventive maintenance is a major opportunity in the short term. Once you've
instrumented connected devices, avoiding mechanical failures through predictive
analytics and preventative maintenance can generate huge payoffs.
Blockchain
also holds enormous promise, especially as a distributed ledger in the
downstream. I led codevelopment of a blockchain platform, and I believe this
emerging technology can streamline, simplify and speed the accuracy of trades,
contracts, invoices, scheduling, settlements and other multiparty transactions
while ensuring product integrity and quickly detecting fraud.
Such
examples — from drill bit to gas pump — barely scratch the surface of how these
technologies can transform processes, efficiencies, performance, safety and
more. However, two key points are essential to capture their full potential.
First, their transformational value occurs when combined. As I've mentioned
previously, they collectively function like the human body. IoT and 5G (the
body) create and transmit data, sometimes executing on it. AI (the brain) turns
data into intelligence for smarter decisions. Blockchain (the antibody) makes
the system trustworthy, and fog computing (the vagus nerve) ensures key
functions are properly distributed.
Second,
companies must transform their cultures, roles and relationships. In what I
call the new "co-economy," companies must share and shape best
practices among ecosystems of horizontal and vertical players. Only broad
ecosystems have the know-how to help build, scale and "future-proof"
interoperable solutions based on open systems and standards.
With these caveats, I am confident O&G can gain more business value from these technologies than most other industries. According to a study conducted by the World Economic Forum, "digital transformation" in O&G had a total value of $1.6 trillion and could expand to $2.5 trillion if "existing organizational/operational constraints are relaxed" and "futuristic" technologies are embraced. Indeed, oil plus data could be the next global standard for value.