Digital Disruption: The digital oilfield offers remedy for slumping oil and gas prices

It has been talked about for years, and tentatively adopted by some companies for a select number of projects, but the digital oilfield has remained largely untapped as oil and gas companies concentrated more energy on solving unconventional shale and tight oil and gas plays during the last boom cycle.

With the persistence of the bust in oil prices that analysts are now predicting will last longer, with lower prices, than originally thought, the time could be ripe for greater adoption of digital oilfield technologies—where they can be shown to create efficiencies and cut costs.

A survey of Canadian oil and gas industry professionals conducted by JuneWarren-Nickle’s Energy Group, GE and Accenture found that while barriers remain, overall they see an assortment of digital oilfield technologies as offering a greater return on investment than investment in other areas.

In addition to a survey of 160 oil and gas industry professionals, 25 one-on-one executive interviews were conducted to gather quantitative and qualitative data for digital oilfield technology adoption trend analysis. Survey results will be released during the Canadian Energy Technology Forum at the BMO Centre in Calgary October 27.

Technologies considered in the survey ranged from remote asset monitoring, inspection and operations to predictive maintenance, biometric monitoring and fleet management.

The fact the adoption of such technologies is seen as a good investment in today’s low price environment indicates executives see them as a means to become more efficient and reduce costs.

That finding is backed up by studies showing the potential for cost savings derived from the use of digital technology and the Internet of Things (IoT), in both oil and gas and in other sectors, is potentially large. A McKinsey Global Institute report released in June, The Internet of Things: Mapping The Value Beyond The Hype, found the potential economic impact of the IoT, including consumer surplus, could amount to US$11.1 trillion per year in 2025.

The study examined nine “settings” across the economy, including the worksites setting that includes oil and gas, mining and construction. The worksites setting alone could be worth US$160 to US$930 billion per year in 2025, it estimates. “This value would come from cost savings, productivity improvements, increased uptime and new revenue opportunities (extending the productive hours each day at a mine, for example).”

The most significant impact would come from improvements in operating efficiency, followed by condition-based and predictive maintenance practices. Lesser impacts are derived from improving worker safety and health, using wearables and employee location systems to increase productivity, including through job redesign, and improved equipment performance through remote monitoring.

MGI says a dynamic industry is evolving around IoT technology and that digitization is blurring the lines between technology companies and other types of companies; “makers of industrial machinery, for example, are creating new business models, by using IoT links and data to offer their products as a service.”

GE refers to the enabling technologies as the Industrial Internet, a tight integration of the physical and digital worlds that takes in big data and analytics and the IoT in the context of industries.

Dan Brennan, director of the Industrial Internet for GE’s $20-billion oil and gas division, says he believes the industry can realize cost savings of 10–15 per cent by shifting to the widespread use of the technology. “The Industrial Internet allows for connectivity all along the value chain,” he told New Technology Magazine. “The upstream oil and gas industry spends $800 billion a year. Just a one per cent improvement a year in cost savings could lead to many billions of dollars in cumulative savings.”

Cisco Systemsthe networked connection of people, process, data and things. It too believes it has the potential to bring tremendous savings to the energy sector. “I believe there’s the potential for a 25–50 per cent reduction in costs on the operational side; that’s the opportunity that exists,” says Brad Bechtold, the Calgary-based director of oil and gas industry transformation with Cisco Canada.

“The problem for the Canadian industry isn’t the price [of the commodity], it’s their costs,” he told NTM. “It is the most expensive [oil and gas] resource in the world. If they don’t resolve that, they don’t grow.”

Producers large and small stand to benefit from digital oilfield technology, they say. At large oilsands operations, remote asset operations technology, for example, could enable three people in a control room to do the work of a dozen workers in the field, says Bechtold.

A Cisco case study of the implementation of a communications network at the busy construction site of the $8-billion North West Redwater Partnership refinery northeast of Edmonton indicates it could produce millions of dollars in productivity improvements.

In the past, each contracting company would provide their own connectivity infrastructure, which would need to be integrated into the NWR Partnerships’ network and the costs charged back to the project. Cisco worked with Redline Communications to create a unique solution encompassing all aspects of communications throughout the construction site. It was able to provide highly reliable, high throughput transport of telemetry, telecontrol, data, video and voice to each contracting company.

While he agrees that large oilsands projects are one of the most logical places to look for big cost savings, Brennan notes that small and intermediate-sized oil and gas producers are also showing a great deal of interest in digital oilfield technology. “We think they’ll be the first to move because they don’t have their own [digital] resources,” he says.


Judging digital oilfield technologies as a good investment, however, doesn’t necessarily lead to actual investment and implementation—particularly at a time when companies are slashing spending, postponing or cancelling projects and shrinking their workforces to deal with the collapse in prices.

In addition to budgetary constraints, and the often-cited concerns about cybersecurity, respondents to the survey said technical hurdles remain, such as the ability to consolidate disparate data, to ensure data is of high quality, and to create the capacity to effectively analyze it in order to derive actionable information.

There is certainly room for improvement in the area of data gathering and analysis, studies suggest. In fact, most data collected by IoT applications today is not used at all, or is vastly underutilized, according to the MGI report. Where data is collected, it is most often used for anomaly detection or real-time control rather than for optimization or prediction, which could produce the biggest gains, it says.

“In one oil platform application we studied, less than one per cent of the data being gathered were used, largely because most of the data were never transferred from the rig. IoT should be a key source of big data that can be analyzed to capture value, and open data, which can be used by more than one entity,” it states.

The offshore oil rig studied had about 30,000 data gathering sensors. About 40 per cent of the data they collected was never stored, and the remainder is stored locally offshore. Just one per cent of the data could be streamed onshore for daily use.

It found that data could not be accessed in real time, enabling only ad hoc analysis, and that reporting was limited to a few metrics, which were monitored in retrospect. “No interface is in place to enable real-time analytics to capture offshore data,” the report states. “Maintenance is still conducted at manufacture-recommended intervals.”

While the digital oilfield offers plenty potential for creating more efficient operations, there also remains plenty of scope for digital technology to be more effectively applied to oil and gas industry applications, which involve more diverse operations than a typical industrial or factory setting.

In order to derive the full benefits of digital technology applications, more robust data analytics, and lower costs, are needed, according to MGI. So is a degree of culture change, it suggests, noting that in most organizations, “taking advantage of the IoT opportunity will require leaders to truly embrace data-driven decision making.”

To learn more about digital oil, plan to attend the Canadian Energy Technology Forum (CETF), a unique industry event that explores the technological and operational foundation of the digital oilfield. The forum features innovation leaders who have increased revenue, improved operating margins and enhanced asset efficiencies by leveraging digital oilfield technology. CETF takes place October 27 at the BMO Centre in Calgary. Visit for more information.


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