Internet of Things in Oil & Gas – Thematic Research
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The global IoT revenue in the energy sector was valued at $37.7 billion in 2020. The growth of the IoT market in the energy sector is steady. However, as the sector recovers from pandemic hardships, capex and opex will remain focused on core business, and investment in technology will remain minimal. The cost of sensor technology, which is embedded in connected devices, will continue to decline, prompting an uptake in IoT technologies within the O&G sector.
What are the market dynamics in the IoT in Oil & Gas?
The declining cost of IoT hardware makes digitalization an attractive option. The oil and gas (O&G) industry is becoming a more enthusiastic adopter of digital technology as it struggles to cope with several significant trends. These include fluctuating oil prices, expanding sources of supply, and increasing regulatory requirements. Many O&G companies are reducing capital expenditure to focus on their core business. As a result, they must weigh up the cost of adopting IoT technology with what many perceive as an unnecessary risk of overspending. However, IoT use cases in the sector show how instrumental digitalization is to the O&G sector.
IoT can be the backbone of digital transformation in the O&G sector. Connected devices drive more sophisticated use of other technologies, namely artificial intelligence (AI), in the automation process. It creates a tech ecosystem that eases the difficulties of working in remote, dangerous conditions and working with aging, precarious assets through cross-functional collaboration. The rise of the IoT has come about through improvements in the individual technologies within the IoT ecosystem. With internet connectivity being available on a larger scale and the hardware costs decreasing, the technology is a more attractive prospect for O&G companies.
What is the value chain framework of IoT?
Device layer: In the device layer, we find the makers of connected things, including sensors, embedded chips, and their components. Connected things can include connected cars, smart thermostats, fitness bands, smart light bulbs, or a parcel in a delivery truck. The essential electronic components include microcontroller chips, AI chips, communications chips, and sensors. The difficulty in picking winners at this stage is that we are in the midst of a battle to determine the winning communications standard for IoT. Qualcomm, Arm, Intel, and Broadcom are some of the contenders.
Connectivity layer: In the connectivity layer, providers of network connections are the key players, including major telecom operators and networking equipment vendors. We also find in this category makers of edge devices (e.g., routers and gateways), which provide entry into the communications network. Cisco, Huawei, and Ericsson are the leaders here. Cloud and edge computing service providers such as Amazon, Microsoft, and Google also play an important role. IoT is likely to change the way they make money: today, most users of connected devices are humans; tomorrow, most users will be machines. So, the future of many operators in an IoT world may well depend on the business model they adopt to monetize M2M traffic.
Data layer: In the data layer, the information collected from connected things is stored, cleansed, integrated with other systems, and analyzed. Much of the analytics, security, and management is provided by companies offering infrastructure as a service (IaaS). Leaders in this space include Amazon, Microsoft, Google, and IBM. Various big data service providers such as SAP, Oracle, and Salesforce are also leaders in this segment.
App layer: In the app layer, we find the smart hubs that control and monitor connected things. This is where the long-term value resides. Apple and Google are leaders in consumer IoT, while GE, Honeywell, PTC, and Bosch are leaders in the Industrial Internet. This layer is also where start-ups are most active.
Services layer: In the services layer, we find the technology service providers who provide system integration, consulting, and other data services related to the development and maintenance of IoT ecosystems. IoT services have become a necessary addition to the IoT value chain over the last decade because many IoT adopters lack the design, technical, integration, or data analysis skills to be able to deliver a successful IoT implementation. Accenture, Deloitte, Cognizant, and IBM are some of the players in the IoT services market.
What are the challenges in the Oil & Gas sector?
O&G managers should invest in IoT technologies to tackle some of the biggest challenges facing the industry:
Aging infrastructure, built decades ago with negligible regular check-ups or updates, is one of the main issues facing O&G companies. Decommissioning old oil platforms is costly. According to a 2020 US Bureau of Safety and Environmental Enforcement report, it would cost $1.6 billion to decommission all 23 platforms in its federal waters. This takes into account the process of capping wells, dismantling platforms and pipelines, and disposing of waste. However, the consequences of old, faulty equipment and poor management are severe. The International Tanker Owners Pollution Federation (ITOPF) estimates that between 2010 and 2020, 164,000 tonnes of oil were lost from tanker spills of 7 tonnes or above. This not only costs O&G companies in wasted product, but also causes significant, long-lasting environmental damage.
While oil and gas remain the mainstay of energy in the short term, developed and developing nations are planning for the long term. In OECD countries, demand for crude oil is increasing more slowly than in developing nations, whose attention is turning towards cleaner energy. As the trend towards decarbonization grows stronger, all companies will need to digitalize to reduce emissions and break into cleaner energy markets. While it may not be a priority across the board of leading O&G countries, decarbonization efforts will impact all markets. Consequently, the future of O&G companies is uncertain, and digitalization is necessary. This means smarter investments in technology solutions to reduce unnecessary emissions and meet regulatory demands.
What are the companies operating with IoT in the Oil & Gas sector?
China National Petroleum Cooperation (CNPC), ConocoPhillips, Equinor, ExxonMobil, Gazprom, Repsol, Shell, TotalEnergies, and Woodside Petroleum are the companies operating with IoT in the Oil & Gas sector.
Market report scope
Market size (Year – 2020) | $37.7 billion |
Base year for estimation | 2020 |
Key companies | China National Petroleum Cooperation (CNPC), ConocoPhillips, Equinor, ExxonMobil, Gazprom, Repsol, Shell, TotalEnergies, and Woodside Petroleum. |
This report provides a comprehensive analysis of the IoT in the Oil & Gas sector. It provides:
- Overview of the emergence of the Internet of Things (IoT) as a theme and its potential applications in the oil and gas industry.
- Review of the recent technological advancements in IoT that could set the tone for its adoption across diverse industries.
- Assessment of the strategies and initiatives adopted by oil and gas companies to gain a competitive advantage in this theme.
Reasons to Buy
- Understand the importance of IoT in oil and gas operations.
- Identify the key challenges facing the power sector, and how IoT technologies help to tackle them.
- Highlight important use cases for IoT in the oil and gas industry.
- Identify and benchmark key oil and gas companies and technology providers based on their exposure to the IoT theme across the value chain.
Table of Contents
Frequently asked questions
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What is the global IoT revenue in the energy sector in 2020?
The global IoT revenue in the energy sector was valued at $37.7 billion in 2020.
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Who are the key companies operating with IoT in the Oil & Gas sector?
China National Petroleum Cooperation (CNPC), ConocoPhillips, Equinor, ExxonMobil, Gazprom, Repsol, Shell, TotalEnergies, and Woodside Petroleum are the companies operating with IoT in the Oil & Gas sector.
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