The oil and gas sector has faced many challenges in recent years, from rapidly changing market conditions to talent shortages.

Many companies’ plans for expansion have been put on hold as they figured out the best way forward. In fact, an estimated $620 billion in projects planned through 2020 were either deferred, canceled or abandoned entirely.

Savvy oil and gas companies, however, are not standing by and allowing these market shifts dictate their futures. Instead, they’re deploying innovative strategies to not only sustain their businesses but grow them.

The Internet of Things is allowing these companies to tap into data that was previously unavailable to maximize productivity and gain a competitive edge. In fact, a Cisco study recently showed that one oil and gas company with $50 billion in annual revenue had increased profits by nearly $1 billion through the use of IoT technologies.

The idea of tracking assets is not new to the oil and gas industry, but older technologies came with a high price tag, and for many companies, there was simply too much involved and the cost was too high. Technology today has evolved, which makes these capabilities not only more accessible but amazingly powerful for people who use them. But what are the major benefits, and how can they positively impact your company?

Why Oil and Gas Needs IoT

First, let us define IoT to understand this technology and how it fits into the oil and gas sector. At the core, any device that has an on/off switch and is connected to the Internet to communicate is leveraging IoT technology. Adoption of IoT and its many applications is growing rapidly. In fact, Gartner reports that by 2020 there will be over 26 billion connected devices.

Anything that can be connected will be in the future” is a common saying used when talking about IoT. But let’s get back to the oil and gas sector.

Why is this technology so important ? The oil and gas industry faces a number of specialized challenges, starting with the volatility of oil prices, the risk of slipping margins, and mounting pressure on the industry to rein in operating costs and reduce downtime. IoT holds the key to helping the business transform from one that is reactive to one that is remarkably proactive. But how? Here are four critical benefits of IoT from the oil and gas sector.

Greater Operational Safety and Control

The oil and gas industry employs thousands of workers. In the oil and gas extraction sector alone, it is estimated that 450,000 workers are employed. These crews are engaged in a variety of procedures, and each function has potential safety risks. 

In fact, statistically, oil and gas workers are seven times more likely to be injured than other kinds of workers. This statistic highlights the importance of safety and compliance, but what can be done to increase safety and operational efficiency?

IoT plays an essential role in improving safety with the evolution of new technologies. Smart sensors can be strategically placed and discover if critical pieces of equipment require replacement — even if it’s before the expected replacement date. 

As a consequence, production continues to move steadily, and the risk of accidental injury on account of maintenance issues is reduced. In fact, recent reports demonstrate that these kinds of operational benefits could be the largest opportunity of IoT applications.

In another example, the manager of global data solutions at Oceaneering International, which is a provider of oilfield engineering services and products, recently explained that pushing for greater communication with remotely operated vehicles helps decrease risk on offshore rigs.

IoT assists with improving communication and minimizing the need for high-risk, manned helicopter flights, greatly reducing overall costs. The technology bridges communication gaps between those working in the field and those working at office locations, enhancing overall safety.

A second example is the use of wearable technology such as smart glasses. These glasses are used to share data in real time and help enhance the communication of field employees with their office. For example, the employee armed with these glasses can display a list of EHS regulatory instructions inside the apparatus, which leaves his or her hands-free to safely finish the job.

Employees can also bring up protocols by means of these devices and even record what they’re seeing, then transmit that data to colleagues that reside at another location. Using these technologies can further save resources and reduce costs through remote supervisors.

Key Takeaway: IoT empowers employees to improve safety and security when working on-site by enabling more accurate and effective communication. When armed with the right tools, employees can be partners in preventing employee and environmental incidents and lower the costs associated with these events.

Enhanced Equipment Health and Greater Productivity

The oil and gas industry is capital-intensive, with large price tags associated with much of the gear, making breakdowns highly pricey. And it’s not only the cost of the equipment but also the cost of lost opportunity and productivity risk. This is especially true at refineries that suffer severe losses when an unexpected equipment failure occurs.

In fact, between 2009 and 2013, there were more than 2,200 unscheduled refinery shutdowns in the U.S. alone. Add to that the fact that shutdowns cost global process industries about 5 percent of their total production, which adds up to about $20 million annually.

It’s estimated that a single pump failure can cost a company $100,000 to $300,000 per day in lost productivity. The bottom line? When production stops, large amounts of money are on the line, so getting operational quickly is paramount.

Oil and gas companies have created schedules and proactive measures to avoid this costly downtime, yet there is still waste. For example, refiners routinely pull devices into the workshop for inspection and overhaul based on preset programs. Before pulling equipment into the shop, however, they don’t have much data about its current condition. A valve pump replacement may be scheduled every 12 months, regardless of the health of the part — even though the part may be perfectly fine.

This process creates incredible amounts of waste because the data being used is historical instead of real-time. In the example above, historically most pumps were found to need replacement every 12 months, so that was the routine schedule. IoT changes this because you’re no longer dependent on historical data, but are instead using real-time data.

If the pump needs replacement early — it is replaced and an unexpected shutdown is avoided. But if that pump doesn’t need replacement until the 14th month, the waste is eliminated.

Nonintrusive smart devices are strategically placed within equipment, which allows for a shift away from time-based preventative planning to condition-based predictive maintenance strategies.

Key Takeaway: IoT allows oil and gas companies to tap into data that was previously unavailable. Educated guesses are no longer the basis for costly decisions, but instead, companies are using only accurate up-to-the minute data and predictions. As a result, equipment is replaced just at the moment of relevance, virtually eliminating all waste and potential risks associated with the last procedure.

Robust, Accurate and Timely Supply Chain Management

Multiple site locations and equipment are tracked easily through IoT sensors. For example, geolocation capabilities allow oil and gas companies to know precisely where expensive equipment resides. They can carefully track that gear, such as valuable drill bits at fracking sites, to better understand the exact location of particular assets and minimize risk for loss.

Geolocation systems can also be used for collecting and analyzing data to help determine if any environmental or operational safety hazards exists. Remote sensing capabilities capture crucial pieces of data that are critical to understanding the big picture.

Key Takeaway: The oil and gas sector has a massive opportunity with the Internet of Things to maximize the management of their gear. No longer must they rely on human input to understand equipment location, which is prone to error. Instead, companies can get the precise location of any piece of equipment with real-time accuracy.

Empowering Real-Time Decisions

The above examples show the value of real-time data and the way it helps businesses make more accurate and less expensive decisions. But equally important, it helps enable real-time decision-making, which instantly increases performance, optimizes processes and maximizes productivity.

Having this ability creates new opportunities for the whole industry. For example, in the past, it is estimated that only 1 percent of the information gathered was made available to oil and gas decision-makers. The outcome? The majority of data (99 percent) is locked awayout of sight and unavailable to those who need it most.

Unlocking that data has the potential to save oil and gas companies millions of dollars. In fact, it’s estimated that unplanned outages can decrease crude output by as much as 10 percent over a two-year period. In contrast, setting critical data free — which could effectively predict these kinds of outages — helps managers use real-time information to make higher-quality and more proactive decisions.

Capturing the Competitive Advantages of IoT

The Internet of Things has the potential to transform the oil and gas business. In fact, today most companies in this industry are digitally immature compared to other industries.

On a scale of one to 10, with 10 being the most mature, the oil and gas business is rated 4.68, according to a study conducted by MIT Sloan Management Review and Deloitte.

The data has always been available, but simply out of reach. IoT places that data within reach and in the hands of those who need it most — staff and the decision-makers. As a result, they can save thousands and even millions of dollars by minimizing and eliminating unplanned and costly events. This leads to a distinct advantage over the competition and a more powerful position for future growth.

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