How the Internet of Things Is Powering Oil and Gas Industries
IoT applications in the oil and gas industry are predicted to increase GDP by as much as 0.8 percent over the next decade.
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The Internet of Things (IoT) is transforming the oil and gas industry at a rapid pace, with industry experts projecting that IoT solutions could eliminate unplanned well outages, boost crude output by 10 percent over a two-year period, and increase profits by nearly $1 billion for large O&G companies.
In fact, IoT applications in this industry are predicted to increase GDP by as much as 0.8 percent, or $816 billion, over the next decade. With so much potential, it makes sense why 62 percent of oil and gas executives are developing a digital strategy to transform their business.
In this article, we’ll explain how IoT technology has delivered value for upstream, midstream, and downstream oil and gas companies. While this value can be achieved in a variety of different ways, we’ll examine major IoT use cases for each of the main parts of the oil and gas value chain.
Upstream — Preventative Maintenance For Remote Oil and Gas Equipment
A typical large oil and gas company may find itself monitoring more than 50,000 wells and multiple pieces of equipment (small and large) per well. The costs of equipment malfunction tend to cascade. A single malfunctioning machine can slow production, and result in regulatory non-compliance.
Thankfully, IoT technologies are helping businesses protect valuable in-field assets. By examining oil and gas extraction practices, we can see how IoT technologies stand to revolutionize equipment maintenance. Extraction sites are filled with highly complex and expensive equipment. Traditionally, that equipment was safeguarded solely by infrequent and imperfect in-field inspections. Due to their scale and complexity, even minor technological malfunctions can result in reduced efficiencies and significant financial losses.
Now, an inexpensive IoT device can be deployed to remotely monitor equipment, track maintenance schedules, and prevent malfunction. If a piece of equipment begins to malfunction or underperform, the IoT device will instantly issue an automated alert. Doing so will limit losses caused by inefficiency and help prevent full-scale failures and equipment damage. In this way, IoT devices help transform equipment maintenance from a responsive process into a proactive one.
Midstream — Environmental Monitoring and Regulatory Compliance
IoT-powered sensors can also allow oil and gas operators to adequately monitor environmental conditions and ensure compliance with regulations on emissions and waste. In the past, an oil and gas field agent would need to physically inspect an extraction or processing site to ensure regulatory compliance. Now, an IoT device can be deployed in the field to remotely monitor essential compliance metrics, such as oil leaks and gas emissions.
Not only does this functionality reduce the costs associated with field monitoring, but it is also much more responsive. Whereas a field agent may only be able to visit a given site once a quarter, an IoT device can provide constant, up-to-the-minute data in real time. This responsiveness helps limit the extent of penalties when non-compliance does occur. In the case of leaks and emissions, regulatory penalties are often proportional to the number of materials released. IoT devices could, therefore, limit an oil and gas company’s exposure to penalties by allowing them to respond to leaks proactively.
Downstream — Enabling Distributors with Real-Time Supply Chain Data
In 2017, nearly 6 million Americans still use home heating oil (HHO) to heat their homes. This oil is typically stored in giant oil tanks and is periodically refilled by licensed oil distributing companies. For consumers, this process of monitoring oil levels, ordering, and refilling is not only inefficient but also cumbersome. However, TankClarity has created a smart sensor that notifies homeowners and delivery companies when fuel levels are low, which saves both parties time and money.
With Particle’s Device Cloud, TankClarity can provide this data to oil distributors, which has become a primary revenue driver for them. Distributors are also using this information to help predict consumer consumption in future weeks, months, and years. Real-time data has helped TankClarity improve their relationship with oil distributors and create an ecosystem that is valuable to customers and suppliers.
The Bottom Line
The biggest takeaway for oil and gas operators is to examine how IoT can help solve problems in your daily operations. Examine your process from end-to-end, identify inefficiencies, and start to think of ways IoT can help solve them. IoT can be used for some much more than what is laid out here in this article. The great thing about IoT is that IoT operators are that they can build a customized IoT solution that works for their business and delivers continuous recurring value.
Starting your own IoT project may seem challenging or near impossible (as a matter of fact, nearly three-fourths of self-initiated IoT projects are considered a failure, while a third of all projects were not seen as a success). The two biggest contributors to the failure rate are lack of internal IoT expertise and platform (hardware/software) reliability. Developing your own connected device has a few key benefits. First, you can easily customize and tailor a solution to meet your organization’s specific needs. You will not be tied to a rigid system that cannot adapt to your fleet’s evolution and shifting requirements. Second, you can scale new revenue channels by having open access to any business or performance data you need, and integrate these data streams into your existing analytics platforms.
To get started, start looking into IoT platforms and business partners and see which ones are best suited to help you deliver your own customized connected solution.
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