The IoT will enable the gas and oil industry to cut production costs by up to $30 per barrel

No industry has as much experience or greater motivation to make the most of the Digital Transformation and the Industrial Internet of Things (IIoT) than the Oil & Gas industry

After decades during which the price of crude oil hovered around 100 dollars per barrel, the impact of the crisis in 2014 caused a crash that brought prices down by up to 60%. In this context, the emergence of new extraction technologies that use IoT has opened up a new horizon in the management of resources for gas and oil companies and in the search for a readjustment of prices, as these technologies could reduce production costs by 20-30 dollars per barrel of crude.

Using similar arguments, an analysis made by the Japanese bank Nomura claims that the use of IoT in the production processes of oil and gas sector companies (O&G) could lower costs by around 20% when the price of a barrel is at 70 dollars. Similarly, the McKinsey Global Institute states that ’the effective use of digital technologies in the O&G industry could reduce capital expenditures by about 20 percent.’ This source also notes that if the cost reductions promised by the industrial internet of things come to pass, other related sectors that currently appear unfeasible would also benefit.

Corroborating these theories, experts Andrew Slaughter, Gregory Bean and Anshu Mittal contend that the use of IoT will not only boost the processes of inefficient O&G firms but will also encourage those that are already operating efficiently to seek mechanisms that optimise and more effectively protect their processes and assets. At a time such as now, when every industry is trying to reinvent itself as a result of digitisation – a transformation that is going to continue for at least the next 5-10 years – the key to success will lie in knowing how to invest in the right technology at the right time, and in redefining business processes while empowering employees to perform their jobs more effectively.

In this respect, the key differentiating factor that will speed up the digital transformation process of the oil and gas industry in the short term will be the growth of the industrial internet of things, according to Dan Miklovic, an analyst at LNS Research and expert in IT manufacturing processes. ’The oil and gas industry is no stranger to digital technology, having undergone the first iteration of the ‘digital’ with the advent of the digitisation of geo-technical seismic data related to reserves/deposits.’ These digital computer systems have helped the industry to understand the value of data and learn how to use analytics to make sense of the wealth of information available with the onset of Smart Connected Assets. ’As the second wave of digitisation takes hold with the IIoT, no industry has as much experience or better motivation to take advantage of what the IIoT offers as the O&G industry, while physical extraction and transport equipment, including compressors, turbines and other systems, become smarter,’ contends the expert.

SaaS, drones, cloud computing and analytics: the four key ingredients for IIoT success for O&G firms

In a recent article published on the Schneider Electric blog, the world expert in industrial processes, Maurizio Rovaglio, called for the use of SaaS models in the Oil & Gas sector to increase management flexibility, innovate and reduce a number of IT costs. Rovaglio pointed out that IIoT solutions in the Oil & Gas industry mesh naturally with the processes of companies that make investments in CAPEX (CAPital EXpenditures). He also adds: ’If to this we add the use of drones through IoT for inspecting pipelines, the result is faster, more economic and more precise maintenance in comparison to traditional inspections involving manned helicopters with cameramen. From this point, cloud and analytics processes link up to save time and reduce costs throughout the process.’

The case of Northern Gas Networks

Northern Gas Networks is a gas distributor that supplies 2.7 million households in the United Kingdom via a network of 37,000 km of underground pipes; it also provides repair and connection services and infrastructure maintenance.

As part of its smart information management programme, Northern Gas Networks has integrated SAP Cloud Platform, SAP Analytics Cloud and SAP Digital Boardroom as the elements that will spearhead the optimisation of processes as well as providing data analytics and IoT infrastructure functions. Tom Pollock, Head of Information Management at Northern Gas Networks, explains that as these are cloud-based solutions, the SAP systems have been implemented in their on-premise data centre that houses the S4HANA suite.

When asked about the objectives of the gas company in the medium and longer term in terms of the IoT, Tom Pollock is very clear: ’The goal of this IoT integration in our infrastructure is to make the information available to the right person, in the right place and at the right time. Through this IoT system we will be able to establish communication with our colleagues and clients, simplify and consolidate our processes, and connect all new assets. Data integrity is a key pillar, as it is no use analysing or performing any other type of IoT initiative if the data are inaccurate.’

In the session entitled: ‘Major Utilities Deliver Operational Benefits and Business Results with IoT Enabled Solutions’, Tom Pollock will be speaking at the IoTSWC 2017 about the experience of a firm in the O&G sector in the use of smart data management as a key aspect of its Internet of Things infrastructure. Tom Pollock’s conference will take place on 3 October at 17.10 in Room 4 of Hall 5 at the Gran Via exhibition centre.

Testbeds

The IoTSWC 2017 congress programme will include around a dozen presentations focusing on the use of the industrial internet in a variety of industries involved in energy and utilities. In addition, the testbed zone will demonstrate an IoT project developed by ABB specifically for the oil industry. This is a submersible robot for inspecting transformers which is operated remotely and works with virtual reality. At present, the inspection of the internal transformer environment in search of data or to carry out routine maintenance tasks on oil or gas platforms can only be done by draining the oil from the transformer tank. This poses significant risks to the maintenance staff’s health, given their exposure to highly toxic environments, not to mention the downtime and inspection costs involved and the environmental risks entailed in oil drainage. This new solution considerably reduces those risks.

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