Welcome to our second article on IoT in Industry. If you want to start from the beginning of our series, take a look at our spotlight on Smart Manufacturing. This time we’ll cover the ways in which IoT is making a big impact on the titanic Oil and Gas Industry. Traditional, significant and controversial, this component of the Energy Sector is experiencing heavy pressure to become cleaner, greener, and more efficient. Smart Oil and Gas, enabled in-part by IoT, may just play a critical role in enabling all of that.
Whether or not you love the idea, Oil and Gas (O&G) makes much of our world go ‘round. Most of us have come to depend on the instant availability of oil and gas products. Like so many things, it doesn’t just end up in your kitchen stove or car magically. This brings us to ask, what problems or needs in this industry might IoT satiate? Where can IoT realize value? What’s on the current leading edge?
Integral to modern life
The Oil and Gas Industry is everywhere. Many significant industries, such as renewable energy production, smart grids, public utilities, manufacturing, and shipping and transportation (all of which we’ll detail in future Spotlights). This industry imparts far reaching and extreme impacts globally.
Reining in the scope in a bit, we’ll focus on the following major O&G application areas:
- Refineries
- Well-heads
- Pipelines
- Storage and Shipping
- Off-shore Rigs
Massive geography and scale
The scale of gas and oil extraction and delivery is immense. High volumes of raw and refined product are distributed over global infrastructures. The industry spans from resource extraction, to delivery through pipelines, to refineries and logistics. They ultimately reach end-points such as filling stations, home furnaces, utilities and factories.
Imagine operating a complex production facility that is physically located over 2,500 linear miles (~4,000 km) and over a dozen countries. The Druzhba or “Friendship” Pipeline is exactly that, and it runs from Eastern Russia to Central Europe. It is one of the world’s longest operational oil pipelines. [ 1 ] The pipeline supports numerous supply and delivery branches, extraction wells, integrated refineries, pumping stations, oil tanker terminals, and storage facilities. At least seven operators manage the pipeline over a vast Eurasian geopolitical landscape. [ 2 ] Now that’s a lot to juggle!
The industry has a mix of legacy and new equipment that literally keeps everything flowing. With this level of complexity it doesn’t take a genius to see that IoT can play a critical role in safety, preventative maintenance, efficiency, environmental protection, security, supply management and reliability. Take those goals and apply IoT powered solutions over the span of the entire Oil and Gas industry, and you have hundreds, if not thousands, of addressable pipelines and related infrastructure in the market. The opportunity is HUGE! [ 3 , 4 , 5 ]
Economic Impact
To drive that home in dollars and cents, according to a June 2019 BIS Research market report, “Global IoT in oil and gas market is expected to reach $39.40 billion by 2023, rising at a CAGR of 24.17% from 2018 to 2023.” [ 6 ]
According to experts, the behemoth O&G industry stands a significant global benefit from IoT upgrades, but it’s not without challenges. Complex geopolitical drivers, partnerships, jurisdictions, and environmental regulations all play against each other. Price volatility, macroeconomics and a herculean task of producing and moving massive volumes of product globally. [ 7 ] Demand is also very regional, so a great deal of intelligent logistics and timing is required.
Transition to Smart Oil and Gas
Due to the scale and maturity of the O&G industry, there is a large inventory of deployed legacy equipment that has yet to be IoT upgraded. The downtime, cost, risks and effort involved with transitioning these assets to IoT are not trivial. Equipment is oftentimes owned and operated by differing interests through varying jurisdictions along the geographically diverse supply-chain. Furthermore, depending on regional data privacy laws, the sharing of certain field sensor data with an overarching cloud business application may further complicate implementation. It’s clear that a one-size-fits-all approach will not work here.
O&G assets are often in remote or even off the grid locations, in which case upgrading to IoT requires establishing a reliable connection to the internet. Advancements in wireless RF technologies such as 5G and Low Power Wide Area Networks (LPWAN) like Lora integrated with IoT are making this cost-effective and feasible. Rugged industrial-rated products, like NetBurner’s ARM®-Powered System on Module, that easily convert legacy sensors and assets to securely connected IoT devices are also critical for this transition.
Localized O&G infrastructures frequently operate with legacy PLCs (programmable logic controllers) and MCMs (machine condition monitoring) that read and control in-situ sensors and instrumentation. These types of systems also tend to communicate via serial with RS-232 or RS-485. [ 8 ] The industry can quickly convert this to a capable IoT device by using products such as NetBurner’s O&G proven, industrial-rated, turnkey Serial to Ethernet devices and get important data to the cloud.
Going Greener with IoT
We all know there is significant CO2, greenhouse gases and other pollutants produced by the combustion of fossil fuels like oil and gas. There is also a very high environmental impact associated with O&G production and delivery. This includes elements such as powering the machinery and pumps, oil or gas leaks, as well as clear inefficiencies such as flaring off unneeded natural gas at the refinery.
As reported by the Stanford University News “…in 2015, nearly 9,000 oilfields in 90 countries produced greenhouse gases equivalent to 1.7 Gigatons of carbon dioxide – roughly 5 percent of all emissions from fuel combustion that year. [ 9 ]
Here’s some low hanging fruit with massive potential. According a May 2019 Forbes article, the O&G industry’s massive fleets of legacy pumps along the production line are only 10% efficient. And here’s the kicker… they also consume approximately 10% of the world’s electricity production! [ 10 ] Can IoT help us out here? You betcha!
Oil field data is often inaccessible over the internet. [ 11 ] This hinders the potential CO2e (CO2 equivalent) reduction benefits from optimizing pump cycling or performing informed maintenance. It adds up over the entire geographic network of pumps. For example, with IoT we can better monitor numerous distributed smart pumps and determine if a particular unit is running hot, is producing excess noise, or has low flow all from the back office. We can then ask operations to repair it so as to bring it back to full capacity. Hopefully you can see how IoT can identify problems sooner. When multiplied over numerous pumps, it is possible to significantly reduce emissions or leaks while increasing productivity and reliability.
Safer and more reliable with IoT and data analytics
Fleets of operational O&G legacy equipment are capable of logging sensor data, but in over 50% of those systems the data is not connected to the internet! [ 12 ] For example, a single oil rig may have its own safety and control PLC (Programmable Logic Controller) and stored sensor data, but it cannot be shared or easily analyzed and compared with measurements from other rigs and oil fields. What a waste!
IoT coupled with data analytics is pivotal. Forbes’ quote of Tor Jakob Ramsøy of Arundo Analytics says it all:
“If the O&G sector can capitalize on the insights it already has into operations on the ground, and consolidate the knowledge that exists at each site into a collective data analytics platform, the sector, and the planet, could be much better off.”
Just imagine the value towards site safety and reliability alone if we could better perform proactive improvements and predictive maintenance across such a vast system and data set! According to OSHA, from 2013 to 2017, 489 oil and gas extraction workers were killed in the USA [ 13 ]. Whether the cause is human error, faulty equipment, or geological conditions, IoT has an important role to play proactively, in real-time and retrospectively. In many cases, the same monitoring that supports safety systems can also be used to enable predictive maintenance, which can further prevent accidents related to equipment failure and decrease operational downtime.
Reducing business risk
The benefits of IoT technology won’t just support the giants in the O&G industry. The advent of improved O&G exploration and extraction techniques has yielded drastic increases to reserves and supply. Following the teachings of macroeconomic theory, the market has shown a corresponding slump in the price per barrel of crude oil or unit of natural gas.
While cheap oil and gas is great for consumers, it introduces great risk, especially for smaller producers who currently experience small profit margins. Cash constrained, these interests could find they don’t have the resources to ride out the industries’ frequent tragedies, delays and costs ranging from work-site accidents, to equipment failures to spills and leaks. The implementation of Smart Oil and Gas infrastructures has potential to improve sustainability and regulatory compliance in tandem with operational optimizations and efficiencies that improve overall value.
IoT in Oil and Gas Use Case
Take a look at a few interesting use cases in the real world O&G industry:
- In Nigeria, the world’s 13th largest producer of oil, Shell Oil has recently implemented a Digital Oilfield (DOF) or a “Smart Field” with IoT. Now engineers and analysts have significant improvements in their ability to monitor and control distributed well-heads and pipelines in real time from anywhere in the world. The company undertook a strategic retrofit with highly improved connectivity of field sensor data, optimized communications methodologies, cloud storage and analytical software. According to one Shell senior engineer, “You can make decisions or solve problems in a day, whereas before they might have taken a week and have slowed production down.” [ 14 ] Shell’s investment in the project has more than paid off with one report showing a $1MM return on $87K in IoT investment. [ 15 ]
- Circling back to our discussion on pumps used in O&G exploration and production, Texas based Apache Corp. has recently invested in IoT and data analytics. They can now better monitor their submersible pumps, improve their performance and presumably reduce CO2 emissions. Furthermore, they can now use the data to better predict oil field performance which helps them to better prioritize and manage extraction. [ Ibid 15 ]
- Enbridge, TransCanada, and PG&E are working together with advanced multimodal sensor fusion to see, feel, hear and smell hydrocarbon leaks over massive pipeline infrastructure. Sensor data, which is obtained from inside and outside the pipeline, is also used to prevent leaks or failures. Here again the benefit is manifold with improved environmental and safety performance as well as production efficiency and profitability. [ 16 ]
If you’d like to add a favorite example or use case relating to IoT in Oil and Gas please comment below. Next time we’ll cover the other end of the energy sector with a Spotlight on renewable energy and smart grids.
Cover photo credit: Donald Giannatti