A Crude Awakening for the Internet of Things

I can’t stress enough how much the oil market has improved over the last few years.

No, don’t quote the current Baker Hughes rig number, and don’t check the current oil price — both are at multi-year lows, I know.

But the truth is that amid that massive drop, the oil industry has made some major gains. The very technology has recently changed in a big way.

And just as I know we’re in a low-price glut, I also know this is only the beginning of the growth we’ll be seeing in the industry.

A Crude Awakening for the Internet of Things

Now, when I say “technology,” I don’t mean it as I’ve described it in the past as larger, faster, more efficient drills.

Although those advancements have made unimaginable strides in the industry over the decade, today I’m focused on the more futuristic aspect of oil and gas tech: the growing use of the Internet of Things (IoT).

That’s right, dear reader — the same technology that can monitor your water use, alert you to energy savings, and learn your preferred room temperature is being used to significantly improve oil and gas operations.

Tech companies providing the software for this kind of service call it the “Connected Enterprise,” which simply means that every aspect of the oil industry, from the first day of drilling to the purchase of the refined product, can be connected as one unified process.

According to a survey by Microsoft and Accenture, between 86% and 90% of oil companies were interested in using IoT technology to increase their business’s value.

The International Data Corporation (IDC) estimates that the IoT market could grow to be worth $8.9 trillion by 2020. That’s only five years from now — the blink of an eye in market investing terms.

And yet another estimation was made by Oxford Economics on the adoption of IoT technology into the oil and gas industry. This calculation found that the global GDP could rise up to 0.8% or $816 billion in the next decade.

Just think of how quickly people began integrating smart devices into their homes… Not only are smartphones found everywhere now, but they can also connect to almost everything in your home with new hardware installations and software downloads.

Granted, the oil and gas industry doesn’t need a wireless light switch. But there are a plethora of other uses for the IoT in the industry…

Taking Advantage of the “Connected Enterprise”

Let me be clear: The Internet of Things is not a tool with which the oil industry can better manage its assets directly. No smart device is going to automatically raise a drill’s production rate or increase a refinery’s capacity.

What the IoT can do is offer a company insight and in-dept information on its own operations. The company then has to use that data to its own advantage.

Let’s take a look at how the Connected Enterprise could work…

First, companies can find optimal places to drill by collecting physical data on the land. This data could come from sensors on other drills and rigs in the surrounding area or from geological data collected on the earth itself.

Data could also be collected during the drilling process, taking stock of both the status of the well and the efficiency of the drill.

Once the well is finished and production begins, the sensors stay on the rig and keep records of production, use of fracking materials, and any problems with the machinery. IoT technology can help reduce downtime of drills and rigs by determining what needs to be repaired before actual breakage, and consequent loss of revenue, happens.

Continuing to the midstream phase, companies can collect data on pipeline efficiency to determine if a pipe can be expanded or if its full capacity is being used. Infrastructure inspections could be infinitely more accurate and more cost-efficient than when done by employees alone.

Finally, refineries connected to all of these processes could predict incoming crude oil supplies to optimize capacity.

And more connected supply also means the ability to market the refined products virtually.

Community of Connection

In March 2014, IBM, GE, Cisco, AT&T, and Intel founded a group called the Industrial Internet Consortium (IIC). The group’s goal is to “coordinate vast ecosystem initiatives to connect and integrate objects with people, processes, and data.”

One of the aims of this initiative is spreading the use of the IoT in industries like oil and gas.

The streamlining of data collection and increased efficiency is becoming a must. Like I said before, the market is at a low point right now and may stay there for a while longer. It’s in the best interests of the entire oil industry to get with the times and get connected.

Already, partnerships of tech companies are putting together systems for integration.

Rockwell Automation (NYSE: ROK) is making use of a cloud service called Azure by Microsoft (NASDAQ: MSFT) to develop an industrial web application for oil companies. The app can be monitored on laptops and any kind of smartphone, offering the convenience of constant connectivity.

Likewise, energy giant Repsol S.A. (OTC: REPYY) has teamed up with IBM (NYSE: IBM) to optimize its upstream operations. Two main applications are in the works: one to evaluate possible new drilling locations, and one to optimize the actual drilling process.

Now, you have to realize there is no one-size-fits-all system for every oil company out there; the Internet of Things has innumerable resources for increasing the value of a company and its operations, but each company has to pinpoint its own needs and solutions.

But to be sure, the connection of industrial technologies is happening now and will spread quickly as more companies search for new ways to save cash in the low-price market.

Now is the time to invest, not only in oil’s bottom, but also in the burgeoning industrial Internet of Things.

I’ll have more for you on this story soon.

Until next time,

Keith Kohl

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A true insider in the technology and energy markets, Keith’s research has helped everyday investors capitalize from the rapid adoption of new technology trends and energy transitions. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital, as well as the investment director of Angel Publishing’s Energy Investor and Technology and Opportunity.

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