Proving the Business Case for the Internet of Things

Oil and gas companies increasing smart technology spend, finds Accenture and Microsoft

Steve Rogerson
March 15, 2016
 
As upstream oil and gas companies scrutinise every dollar invested, they’re spending smarter today on digital technologies, seeking to drive value and reduce costs amid low oil and gas prices, according to a joint survey by Accenture and Microsoft of international and national oil companies, independents and oilfield services firms.
 
Over the next three to five years, 80 per cent of upstream oil and gas companies plan to spend the same, more or significantly more (30, 36 and 14%, respectively) on digital technologies as they do now, according to the survey, now in its fifth edition. This continued investment in digital is due to respondents’ confidence that digital technologies can continue to help them drive leaner, smarter organisations.
 
More than half (53 per cent) of respondents said digital was already adding high to significant value to their businesses. Cost reduction was identified as the biggest challenge that digital technologies could most address today, respondents said. In addition, respondents reported that making faster and better decisions was the greatest benefit digital technologies could deliver (56 per cent) and that one of the biggest barriers to realising value was the lack of a clear strategy or business case, not the technology itself.
 
Today’s digital investments focus more on mobility, with almost three-fifths of respondents (57 per cent) reporting having invested in mobile, compared with 49 per cent of the respondents in last year’s survey. Next is investing in the IoT (44 per cent) this year versus 25 per cent in 2015 and the cloud (38 per cent), up eight per cent from last year. Over the next three to five years, these investments are expected to shift more to big data and analytics (38 per cent), IoT (36 per cent) and mobile (31 per cent).
 
“In the current challenging environment, the upstream oil and gas industry is focusing digital technologies on areas that help them work smarter and deliver significant efficiencies and savings in the short term while enabling them to make better decisions faster,” said Rich Holsman, global head of digital in Accenture’s energy industry group. “So, in the short term we expect these companies will continue to invest in areas that help lower operations costs through technologies like increased worker productivity with mobility, lower infrastructure costs through the cloud and drive better asset management through analytics.”
 
Respondents said digital’s biggest impact to date on the upstream oil and gas workforce had been increased employee productivity and engagement followed by better training and reskilling opportunities. They see the greatest impact from the IoT in enabling connected field workers, with 60 per cent of respondents planning to have field workers and assets digitally connected with smart devices.
 
The use of the cloud, respondents said, had shifted from being used primarily for infrastructure to an enabler of mobile tools. This trend is expected to increase in the next three to five years as companies keep using the cloud to get faster and more value from other digital technologies.
 
“By taking advantage of the intelligent cloud, greater use of analytics and the IoT go hand in hand with what we are seeing in our business today – the advent of the industrial internet enabling the power of digital across the oil and gas landscape,” said Craig Hodges, general manager of the Gulf Coast district at Microsoft. “You can see this trend gaining traction from connected wells and intelligent pipelines to highly efficient digital refineries.”
 
While two thirds (66 per cent) identified analytics as one of the most important capabilities for transforming their company, only 13 per cent felt their firm’s analytical capabilities were mature. Almost two-thirds (65 per cent) plan to implement more analytic capabilities in the next three years to help address this need.
 
The 2016 Upstream Oil & Gas Digital & Technology Trends Survey, sponsored by Accenture and Microsoft and conducted by PennEnergy Research in partnership with the Oil & Gas Journal, surveyed upstream professionals worldwide, including engineers, geologists and mid-level and executive management.