The current and planned investment in IIoT-based solutions by energy respondents points to a higher level of maturity than witnessed in all of the sectors in this report, with 80 per cent of respondents falling into the IIoT progressive or IIoT leader category. Respondents expect to invest an average of $4million in IIoT initiatives over the next three years, amounting to a not insignificant 9 per cent of their overall IT budgets.

There are, however, clear differences in the planned spend on IIoT at a subsector level. Energy distributors expect to devote 12 per cent of their IT budgets to IIoT over the next three years, around double the amount of those involved in extraction and exploration (6 per cent respectively).

HOW WILL THE ENERGY SECTOR INVEST IN IIOT? (%)

Laggards
Starters
Progressives
Leaders

HOW WILL THE ENERGY SECTOR INVEST IN IIOT? (%)

Laggards
Starters
Progressives
Leaders

Respondents expect to invest an average of $4million in IIoT initiatives over the next three years, amounting to a not insignificant 9 per cent of their overall IT budgets.

However, there are clear differences in the planned spend on IIoT at a subsector level. Energy distributors expect to devote 12 per cent of their IT budgets to IIoT over the next three years, around double the amount of those involved in extraction and exploration (6 per cent respectively).

WHAT PROPORTION OF YOUR IT BUDGET DO YOU EXPECT TO SPEND ON IIOT OVER THE NEXT THREE YEARS? (%)

Energy distribution
Energy extraction
Energy exploration

WHAT PROPORTION OF YOUR IT BUDGET DO YOU EXPECT TO SPEND ON IIOT OVER THE NEXT THREE YEARS? (%)

Energy distribution
Energy extraction
Energy exploration

While smart grids will fundamentally change the way that energy is consumed, there is significant opportunity for IIoT further upstream at the point of production. This disparity in spend therefore suggests that those involved in extraction and exploration are limiting the scope of their transformations.

 

This plays out in the data when we look at how respondents expect IIoT technologies to impact their revenues.

Distribution companies expect their investments in IIoT to deliver an additional 11 per cent to their turnover over the next five years; extraction companies by contrast expect to increase their revenues by 8 per cent during the same timeframe. While this is still a respectable figure, this does beg the question what these companies could achieve by upping their investments in IIoT.

WHAT OPERATIONAL COST SAVINGS AND TURNOVER INCREASES IS YOUR ORGANISATION LIKELY TO ACHIEVE THROUGH ITS USE OF IIOT? (%)

Average cost savings
Average turnover increase

WHAT OPERATIONAL COST SAVINGS AND TURNOVER INCREASES IS YOUR ORGANISATION LIKELY TO ACHIEVE THROUGH ITS USE OF IIOT? (%)

Average cost savings
Average turnover increase
9%

increase in turnover expected
over the next five years due to IIoT

Cost savings are also high on the agenda, and energy respondents expect to shave around 19 per cent off of their operating costs from their use of IIoT within the next five years. Such a saving could be a boon for oil companies in particular, enabling them to streamline their operations and insulate themselves from the impact of commodity price shocks in the sector.

Upstream energy businesses should look beyond cost savings and follow the lead of their downstream counterparts, investing in IIoT to develop new revenue streams

The high level of cost saving that the energy industry expects from its IIoT deployments reflects the key drivers influencing the development of IIoT solutions. Improving resource efficiency ranked as the highest-rated driver for IIoT deployments (60 per cent), with reducing costs in business operations (48 per cent) also motivating many energy businesses to develop and deploy IIoT.

While the potential for IIoT to improve the efficiency of operations and cut costs is well understood, energy businesses should also be investing in this potentially revolutionary technology to develop new streams of revenue. Energy businesses cannot go on operating as they have before, with the price of oil unlikely to reach the heady days of $140/barrel, so new streams of revenue will be essential.

However, just 3 per cent and 6 per cent of energy extraction and exploration businesses are using IIoT to generate new revenue streams, while 27 per cent of distribution business are doing so. This perhaps explains the lower expectations in the upstream for turnover increase due to IIoT, while also reflecting an inability to analyse the data they have.

FOR MORE INFORMATION ON THE RESEARCH, DOWNLOAD THE REPORT - INDUSTRIAL IOT ON LAND AND AT SEA: ENERGY

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