Oil and gas industry turns to IoT to increase efficiency
September 17, 2017
The global IoT in oil and gas market is expected to reach $30.6bn by 2026, growing at a CAGR of 24.6% from 2017 to 2026, according to BIS Research.
After a period of fluctuation in crude oil prices, approximately priced at $100 a barrel, they decreased significantly in 2014, primarily due to the advanced forms of extraction technologies, which opened new sources of supply leading to a higher supply as compared with demand. This downturn in crude oil prices has affected the profitability of the oil and gas industries and if this scenario continues for a prolonged period, it will not be a major surprise if companies are compelled to declare bankruptcies or reduce their number of mergers and acquisitions.
Low prices of crude oil, growth in the demand for electric vehicles, increased production of shale oil in the USA, decreased demand rate of crude oil in China, and the prospect of an increased supply from Iran are driving the oil and gas industry to focus on increasing operational efficiencies, improving asset performance and management, and increase capital productivity.
Using IoT technologies can enable the oil and gas industry to overcome these challenges in an effective manner. The collected and analysed data can benefit oil and gas industries with various operational processes such as production optimisation, asset maintenance, business operations and supply chain, among others. There is an impending need to monitor these business operations and optimise them to increase the efficiency of the process and reduce operational costs.
It has been witnessed that there is a large fuel loss throughout the supply chain, that is upstream, midstream and downstream, which results in financial losses. Moreover, shortage of skilled labour in the near future and an increasing number of cyber attacks are expected to drive the market for IoT in oil and gas industry.
Privacy and security concerns related to data, coupled with the lack of technical expertise and awareness are some of the constant challenges for the effective implementation of IoT projects in the oil and gas industry globally. The growing interconnection of IoT devices actively provides various channels for the hackers to peep into the other systems through various decentralised entry points.
Moreover, different layers of software, application programming interfaces (APIs) and M2M communications create more complexity as well as risk in terms of security. Owing to this, oil and gas companies are reluctant to invest in IoT projects. This has created a viable opportunity for service providers, consultants and niche analytics players to make profits from the oil and gas industry.
Furthermore, next generation devices such as wireless networks, edge computing and digital core platforms, among others, are expected to revolutionise the oil and gas industry in the coming future.
"Reduced crude oil price per barrel has compelled the oil and gas industries to improve operational efficiency which is expected to drive the need for IoT at a high growth rate of 24.65%,” said Ankit Agarwal, an analyst at BIS Research. “Recent partnerships between many companies and new product launches are expected to expand and diversify the product portfolio for the oil and gas industry.”
For instance, Hitachi in 2016 launched an open and adaptable software architecture, Lumada, which created IoT products for a range of industrial applications including oil and gas.
“With increasing levels of interest of oil and gas companies towards analytics, platforms and analytics together will be the major focus area for investment in the nearby future," said Agarwal.