Massimo Russo, Boston Consulting Group
Let’s go back in time to 10 years ago. It was a time without smartphones, Internet access was relatively expensive and Wi-Fi technology was just starting to flourish. Now let’s fast forward to today. We currently live in a world full of innovation where everyday objects have network connectivity, allowing them to send and receive data instantaneously. This is known as the more popular term the “Internet of Things (IoT),” which we’re all familiar with as consumers. If you own a Fitbit®, iPhone or Smart TV, you’re already using the IoT. But when it comes to the oil and gas industry, the “Industrial Internet” is beginning to impact it significantly, helping refineries, offshore oil platforms and petrochemical plants run more economically, efficiently and safely.
Massimo Russo, senior partner and managing director of The Boston Consulting Group (BCG), has helped industrial companies build competitive advantages through technology for more than 20 years. He is the North America leader of BCG’s Technology Advantage practice. According to Russo, the Industrial Internet allows for full interoperability of equipment.
“If you’re an equipment manufacturer specializing in the oil and gas industry, the Industrial Internet allows you to monitor your equipment better than ever and potentially provide new levels of customer service,” Russo said. “Equipment manufacturers are developing algorithms to better predict when pieces of equipment need maintenance, allowing them to dispatch service technicians before outages even occur. Not only that, the Industrial Internet can lead to new business models. Instead of selling the equipment, a company can rent it to a refinery on a power-by-the-hour basis.”
According to experts, 25 billion assets will be connected by 2020, working smarter, faster and more efficiently than ever. The oil and gas industry is beginning to experience this convergence of analytics, big data and intelligent systems.
“Five years ago, an offshore oil platform had approximately 5,000 sensors,” Russo explained. “Today, there are approximately 40,000 sensors on a platform. But if you compare the oil and gas industry to others when considering the integration of sensors, this industry is lagging. For example, the modern locomotive has approximately 300,000 sensors on it.”
According to Russo, monitoring new data streams and analytics can also improve the efficiency of oil recovery.
“If you can improve oil recovery by 1 percent from a well that’s producing 100 million barrels, that’s 1 million more, which translates to millions of dollars in additional revenue,” he said. “The Industrial Internet can also reduce labor costs. There’s no need to repeat the tasks of checking tanks, flowlines or gauges. If the equipment is all connected and can be monitored remotely, a site can have better workforce planning and scheduling. Maintenance schedules can be optimized based on the usage of the equipment.”
As next-generation smart assets are deployed, the oil and gas industry will have to evolve operations and processes to accelerate the rapid growth and volume of data from the Industrial Internet. According to Russo, the costs of connectivity, storage and processing have all decreased significantly within the past few years. But looking ahead, how will connected smart equipment impact operations of a refinery, plant or equipment provider in the short and long term? For example, in the airline industry, an engine manufacturer can coach a pilot on how to fly, generating fuel savings for the airline. With an airline, fuel is 60 percent of its cost structure, so this provides a lot of value to the engine manufacturer’s analytics.
“More and more oil and gas companies will have to figure out how the Industrial Internet will impact their businesses,” Russo said. “How can these companies control the connectivity of the Industrial Internet to improve their operations?”
For more information about the latest industry trends and updates, visit BICMagazine.com.
