Times were good when oil traded hands for ~$100/barrel and companies only needed to produce more oil to make more profit, but those days of plenty have since drawn to a close. The dual forces of overproduction from the Organisation of the Petroleum Exporting Countries (OPEC) and increasing competition from shale and renewable energy sources, have seen prices nosedive, currently hovering at around $50 per barrel. At this price, being profitable relies not on volume but on optimising operations to maximise returns.

Oil producers are no doubt feeling the bite from this downturn and, as all market indicators suggest that the industry will remain uncertain for some time to come, they are left with two options: tighten their belts and wait out the storm, or innovate. While there is little they can do to influence the price of oil, there’s ample opportunity for cutting waste from production and the supply chain. Encouragingly, many appear to be striving for the latter and innovating their way out of the downturn.

These pressures are not confined to oil and energy producers across the board are feeling the pinch in some way. A number of governments have begun to withdraw subsidies in the renewable sector, creating new imperatives to cut costs from unit production and maximise efficiencies in transmission and distribution; shale has encountered health and safety and environmental challenges; and although coal still dominates the industry, its dominance is being challenged by newer, cleaner alternatives. Technology will not be the answer to all of these ills, but it can at the very least get energy producers fighting fit to counter the challenges that lie ahead.

Faced with a competitive, globalised market, in which there is little appetite nor requirement to accept higher rates, energy companies have little choice but to get intelligent about how they use and maintain their assets and cut costs from production.

This fact has not escaped the energy respondents in this research, a significant proportion of whom are experimenting with new technologies in a bid to find efficiencies, maximise returns and achieve a competitive edge. Today, roughly a quarter (24 per cent) have partially or fully deployed IoT-based solutions, though it’s expected that 84 per cent will have done so to some extent within the next two years. Similarly, overall spend on IoT is set to increase significantly, from an average of 2.4 per cent today, to around 8 per cent by 2022 (second only to agritech), demonstrating the confidence and faith that energy companies are placing in IoT.

Which of the below statements best describes your organisation's current status when it comes to deploying IoT-based solutions? (%)

22% We have fully deployed IoT-based solutions
2% We have partially deployed IoT-based solutions
25% We plan to deploy IoT-based solutions within 6 months
23% We plan to deploy IoT-based solutions within 12 months
7% We plan to deploy IoT-based solutions within 18 months
5% We plan to deploy IoT-based solutions within 2 years
16% We are in the process of developing IoT-based solutions

22%

The percentage of respondents who have the skills to make the most of IoT on a strategic level

Moreover, the scope for improvement, enabled by new technologies such as IoT, is considerable. One of the primary benefits is the ability to digitalise previously mechanical processes, which enables energy producers to derive greater intelligence from their operations, become smarter about how they deploy their Capex, improve safety and streamline production costs. This is clearly an area of focus for our respondents. Almost four in ten are exploring machine learning capabilities and 32 per cent are pursuing robotics initiatives.

 

In addition to IoT, what other areas is your organisation exploring as part of its digital transformation activity?

32%

32%

Machine learning

37%

37%

Robotics

36%

36%

3D printing

18%

18%

Next generation security

18%

18%

Cognitive AI

7%

7%

Virtual reality

7%

7%

Augmented reality

26%

26%

We are not exploring any other areas

The oil and gas sector in particular remains very mechanical and there’s a lot of scope for digital integration. This is important on several levels. Extracting oil from the ground can be risky business, for the staff manning oil rigs, the environment, and, indeed, the financial backers, and mistakes can have grave consequences. Digitalising processes removes much of this risk. Moreover, regulatory pressures are increasingly driving operators to seek full visibility across the entire length of the pipeline as well as the ability to remotely manage the pipelines.

However, for IoT initiatives to be useful and effective, the right skills need to be in place to manage deployments and exploit the data that they generate. Like companies in every sector, future success hinges on the ability to attract the best possible talent, and increasingly-technology dependent energy companies are finding themselves competing with the likes of Silicon Valley for skilled staff.

Transitioning away from the more hands on mechanical work at productions sites to programming work at centralised locations is seen by many as a way to engage with Millennials entering the workforce.

Yet despite these efforts, the data indicate that large capability gaps remain. Fewer than three in ten respondents are confident that they have all of the skills they need to manage IoT strategy, management and delivery. If they are to be successful in their innovation efforts, a heavy recruitment drive will be in order.

 

To what extent does your organisation have the skills to make the most from IoT at the following levels?

Strategic level

Management level

Delivery level

We have all the skills we need
We would benefit from additional skills at this level to augment those we have
We are lacking the skills we need at this level
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