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Unrealized
potential
of digital
Realizing loT &
digitization
value in O&G The changing oil and
gas landscape affords
opportunities for improving
operational efficiency
The imperative of Oil & Gas digitization
The Oil and Gas (O&G) industry has benchmarks against their own sensor-
been focused on increasing production, covered cars, helping them learn
recovery, and throughput for years. lessons for future engineering and
New market realities are now forcing design. GM also digitized test tracks
operators to shift focus from top line to to gleam insights from how the car
bottom line growth, towards improving handles on various surfaces. Airlines
cost structure and margins in order to widely use digitization to reduce
be competitive in current conditions operating costs, employing systems
and prioritizing efficiency gains over that can enable real-time resource
production growth. While various planning to drive greater utilization
digitization initiatives over the last of their planes. For example, smart
decade have attempted to address engines notify maintenance and
these issues and led to gains by operation centers of performance
reducing inefficiencies, they require issues while an aircraft is still in the
heavy capital investments, have air, and request that a replacement
extended pay-back periods, and face part be waiting when it lands.
several internal operational barriers
that have prevented O&G firms from
realizing full value.
ihttp://www.rigzone.com/news/oil_gas/a/138503/Study_Low_Oil_
Price_Gives_Industry_Chance_to_Pursue_Digital_Transformation/
?all=HG2
According to a market research report published by
MarketsandMarkets, “Internet of Things (IoT) in Energy Market
by Systems & Solutions (Predictive Asset Maintenance,
Connected Logistics, Security, Energy Analytics, IoT
Platform, Energy Management), by Application (Oil & Gas,
Mining), by Services & by Regions - Global Forecast to 2020”,
the IoT in Energy Market is expected to grow from USD 7.59 Billion
in 2015 to USD 22.34 Billion by 2020, at a Compound Annual Growth
Rate (CAGR) of 24.1% during the forecast period.
Almost all major and independent O&G companies have facilities embedded with smart sensors with integrated
some sort of digital initiative underway, some for more models run and managed by engineers/experts in
than ten years. collaboration centers; wearable technology brings the field
closer to the office; field automation technologies have
The downstream sector, frequently plagued by long provided real-time work scheduling; near-ubiquitous
periods of low margins, shifted from a top line to a asset tracking and condition monitoring occurs via
bottom line mindset and embraced digitization earlier wireless sensors over a network backbone; 3D scanning
than the upstream counterparts. O&G plants and technology is used to create virtual asset representations
refineries are now some of the most automated facilities in for construction optimization, maintenance planning,
any industry. Every piece of equipment is under constant operator training, and simulation. Now a new fleet of
surveillance, control loops adjust themselves, and whole drones and smart robots armed with video analytics and
process analytics and simulations enable operators to artificial intelligence are inspecting pipelines, flare stacks
predict the effects of changes in the system. Embedded and going places not safe for humans. A relatively new
smart sensors in vessels, tanks, compressors and turbines technology in upstream is flow composition analysis;
send real-time data to control rooms where a handful of extending this through full lifecycle digitization will
experts can monitor processes and provide diagnostics enable the stream to be more accurately valued.
for issues. Additional opportunities exist in connecting
biometric data to improve operator safety and materials
movement within facilities.
Major
Oil & Gas
Reduce costs, Knowledge trends Standardize processes
spread risks, and transfer and equipment
enable quicker ROI across entire Simplification across regions
due to consolidated value chain while streamlining
expertise across maintenance, repair &
OFS/IOCs/NOCs operations costs
Solution-based
buying
Some of the
technology
and digitization
examples discussed
to this point can best
be understood in the
context of relevant
case studies.
A case of applying digital high value workflow-enabled enhanced decision making enabled
technologies to enhance efficiency activities while improving by optimized surveillance permitted
very typical for the upstream surveillance quality. Time spent the operator to move to 75% of
sector over the last 5-10 years is on surveillance reduced by 60% alarm-driven surveillance services
the establishment and usage of while adding 240 new surveillance within 24 hours, 88% in less than
Integrated Operations Centers activities per month. Predictive 48 hours, and 99% in less than
(aka Collaborative Work monitoring was built upon the 72 hours. Further enhancements
Environments or Asset Decision exception based foundation to would be to incorporate additional
Environments). One company identify potential risks, resulting real-time field data through
combined offshore control and in a substantial reduction of wearables and drones, as well
onshore asset engineer collaboration unscheduled deferment related to connect this process to the supply
rooms to create a “Digital Trauma trips, equipment performance, and chain/field logistics process.
Center” that focused engineers on corrective maintenance. Ultimately,
A large IOC was spending $100B The key was monetizing the value solution. Future enhancements
for their Material Management by addressing gaps in data/BOMs, planned include 3D printing of
process. Production control centers orders and workflows. To scale, parts, increased robotic automation
were being updated with newer the solution needed to work for actual parts movement, RFID
maintenance sensors/models, yet with partners and departments tracking, and adding fleet operations
maintenance reliability and materials systematically e.g., create “BOM to this IoT ecosystem.
management delays affected 60% of factories” and rewire ERP to reduce
assets. A multi-year program to “generic orders”. An IoT connecting
digitize the broader materials orders to equipment to materials was
management process was launched, the key catalyst to taking an end to
targeting $1.6B in efficiencies. end process view and scaling the
4. Control centers
10. Critical spares
3. Advanced
sensors/equipment
6. Advanced analytics 11. Surplus
2. Global ERPs
We see several ways for companies to play as the Refer to “A Strategist’s Guide to the Internet of Things”
O&G Digitization market evolves – an Industrial IoT (Winter 2014 issue of strategy+business) by Frank
ecosystem consisting of Enablers, Engagers, Enhancers, Burkitt, a senior executive with Strategy& leading the IoT
and Embedders will emerge where each plays a critical and Digital services business, for a broader perspective.
role in the end-to-end digitization required for full
value realization and survival in a low-price, In an O&G context, the marketplace is currently full of
high-efficiency market. companies which play these roles partially but as stated
previously, rarely do they connect in a manner which can
Enablers provide the technology, applications, and help develop a conducive ecosystem. Owner-operators
services that underlie the IoT offerings, from endpoints to typically take on the role of engager (more specifically
network and cloud services. Engagers use the Enabler’s their IT or R&D department) and work with numerous
hub to produce services for consumers and businesses, supplier offerings, trying to create value for their business.
providing the direct link between IoT and the market. Software firms are primarily enablers, but have started to
Enhancers provide integrated services that leverage and move into the enhancer role as well. Similarly, service and
repackage products and services of the Engagers, finding consulting firms are primarily enhancers, but have started
new ways of creating and extracting value from the data, to act like enablers. OEMs are embedders, building
relationships, and insights generated from IoT activity. “smart” into their equipment. The larger, broader OFS
Embedders apply sensors, monitors, and other devices firms cover all of the above in many cases, with primary
to improve their own operations and optimize their focus on being enablers of IoT. In addition, large tech
own businesses. firms that previously only provided network and
infrastructure connectivity are moving into the
enabler space.
?
planning to enter the market need to understand that
while financial prospects are large, so are the associated
risks. Clear identification of a “way to play” is critical to
mitigating those risks.