Global Oil & Gas Market Growing with Population
IIoT allows industry to remain safe and environmentally friendly while remaining profitable.

oil barrels

Global markets have responded to and met a surge in demand for oil and gas over the past few decades. Driving this demand is an exponential growth of the global population. We are quickly approaching 8 billion people worldwide, and formerly low-income countries are rapidly industrializing and populations are increasing in wealth and energy consumption. As much of the world population expands use of energy to converge with countries that are part of the Organization for Economic Cooperation and Development (OECD), energy demand is skyrocketing.

The supply of energy has kept up with the growing demand, allowing energy prices to remain low. Enabling this response is a slew of new technologies that have increased production and enabled an unprecedented integration of the global oil and gas supply markets. In the United States, Canada and a few other countries, hydraulic fracturing (fracking) stimulated the boom in production that has turned the U.S. into a net energy supplier rather than consumer. Similarly, technological improvements in liquefaction and transportation processes enable natural gas to be transported over long distances worldwide by ship as well as pipeline, creating a single global market for natural gas for the first time in history.

The reality of technological advancement in the industry is the advances that have occurred on the production and distribution side have not been matched by data sophistication on the operations and management side. The challenge in this much larger and more complex global market is now multifaceted. Because gas markets are now global rather than regional, taking on many similarities to the single world oil market, volatility is up and regional disruptions and conflicts such as those recently in the Straits of Hormuz, between Iran and the Arabian Peninsula, can have a global effect on prices. Increased energy consumption and new technologies lead to new challenges that encompass environmental issues, safety challenges, pollution, use of public lands and resources, and crises of public confidence. Climate change and the transition to lower emission energy technologies offer both opportunities and threats to the traditional energy industry, but ones that must be faced as these issues are not going away.

To meet these challenges, a smarter approach is required, and that smarts comes in the form of better data. For decades, supervisory, control and data acquisition (SCADA) systems and other sensor technologies have allowed for tight remote management of large, concentrated oil and gas fields, refineries, and large, well-equipped pipelines. However, as the oil market becomes more distributed into smaller and more remote production sites, and as the gas market becomes more integrated worldwide leading to concern about what happens farther and farther from home, these large “mainframe” types of data monitoring implementations are not enough.

While many high-production locations have expensive data monitoring, lower productivity sites are still monitored and managed the way they were in the early 1900s—with drivers on “milk runs,” checking a set of locations daily to ensure safety and identify when tanks should be emptied by putting long dipsticks into crude oil tanks or visually checking gauges. This creates a slew of vulnerabilities and inefficiencies, ranging from the potential for leaks going undetected for long periods, to inaccurate readings, to high operational costs. A case in point: Measuring methane, the main component of natural gas, is notoriously difficult. Leaks of the colorless, odorless gas may go undetected until well after they begin.

In the past few years, lightweight industrial internet of things (IIoT) technologies have entered the marketplace to offer suppliers an alternative approach with greater flexibility and responsiveness along the value chain. These are enabled by a combination of improved edge computing technology, better connectivity worldwide over new satellite and cellular networks, ongoing electronics miniaturization following Moore’s Law, and an explosion of cloud computing and sensor options.

Lightweight IIoT enables suppliers to unlock new revenue opportunities. For example, liquefied natural gas (LNG) presents a prime opportunity for cleaner energy sources and formerly discontinued production sites can be rejuvenated for low-level production. And when it comes to LNG, there is significant demand for lightweight IoT sensors, optical imaging and drone technologies that can detect leaks over larger areas. These IIoT sensors, devices and networks provide a targeted approach to sync critical operating technology and information technology domains, so suppliers can implement solutions in days—not months—and realize a return on investment (ROI) much faster. This is critical in a volatile market environment—when the difference in unit production cost between a large, well-instrumented, high productivity site and a small, lightweight IIoT instrumented, lower productivity site is slight, effects on small scale operators with large quantities of low productivity assets is much lower in a global economy.

More importantly, leading economic studies are showing that, under the right circumstances, corporate profitability and green economics are not mutually exclusive, but rather work hand-in-hand. In fact, many institutional investors are using their influence to call out companies that are falling behind the environmental sustainability curve.

One recent study evaluated sectors including oil and gas, utilities, mining, finance, food, and auto manufacturers and found that while many large companies are falling behind, others were well ahead of the trend. A 2018 U.S. Sustainable and Responsible Investment (SIF) Foundation report on Sustainable, Responsible and Impact Investing Trends found that one in four dollars (or $12 billion) under professional management in the U.S. were dedicated to these initiatives.

But more interesting is how these companies are able to focus on the triple bottom line—environmental, social and governance—and remain highly profitable. What they actually discovered is that these successful environmental policies are positively correlated with healthy profit margins when leveraged off a well-defined (and purposeful) corporate charter. Industry sectors are beginning to realize the long-term economic value proposition through adoption of viable environmental sustainability strategies.

It is inevitable that as global demand for energy continues to grow, the diversity of our energy sources will also increase, and the need to provide energy to the planet in a cleaner and less impactful way will only become more acute. At the same time, fossil fuels remain at the center of today’s modern economy, and the technology push to create more production combined with the application of those technologies to more locations will not stop. For all of the world’s known reserves, new sources of fossil fuels continue to emerge with ongoing technological innovation and exploration—deep water drilling and fracking are just two examples.

So, how do we bring together these twin trends of energy diversification to add renewable resources, and the continuing expansion of fossil fuel production, against the backdrop of growing concerns about climate change, good environmental stewardship, and growing regional geopolitical friction that threatens newly global markets?

One part of the answer is information, data, knowledge and efficiency. With better data, producers can show that fossil fuel operations are being performed safely and cleanly. With better data, insights can be gained about which types of operations provide more safety and environmental risk than others. With better data, cost efficiencies can be improved for lower productivity operations, reducing the impact of global price volatility. With better data, leaks and inefficient operational practices can be curbed. With better data, the runway can be lengthened for the transition to a more diverse energy economy so that global population and wealth can be accommodated in the context of a healthy ecosystem and a verdant planet.

Many other technological innovations have started centralized and spread to more decentralized, lower cost and highly accessible items. Lightweight IIoT technologies are just the latest to follow that trend. What was once costly and only available for high-value sites is now becoming more affordable, distributed and capable. Just like the automobile, the computer and mobile connectivity, so is lightweight IIoT revolutionizing what we can do to understand and optimize business operations. With the leverage these tools offer, LNG and related energy industries are able to stretch the expansion and the benefits of economic growth much further than simple economic data would indicate possible. As this next economic revolution expands, companies have the opportunity to use it not only to increase profits, but also increase the health of our society. That can only be good for everyone involved.