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of digital
Realizing loT &
value in O&G The changing oil and
gas landscape affords
opportunities for improving
operational efficiency
The imperative of Oil & Gas digitization

The Oil and Gas (O&G) industry has benchmarks against their own sensor-
been focused on increasing production, covered cars, helping them learn
recovery, and throughput for years. lessons for future engineering and
New market realities are now forcing design. GM also digitized test tracks
operators to shift focus from top line to to gleam insights from how the car
bottom line growth, towards improving handles on various surfaces. Airlines
cost structure and margins in order to widely use digitization to reduce
be competitive in current conditions operating costs, employing systems
and prioritizing efficiency gains over that can enable real-time resource
production growth. While various planning to drive greater utilization
digitization initiatives over the last of their planes. For example, smart
decade have attempted to address engines notify maintenance and
these issues and led to gains by operation centers of performance
reducing inefficiencies, they require issues while an aircraft is still in the
heavy capital investments, have air, and request that a replacement
extended pay-back periods, and face part be waiting when it lands.
several internal operational barriers
that have prevented O&G firms from
realizing full value.

One challenge is that the oil and

gas industry, especially in upstream
and midstream, has been very
conservative in implementing smart
field technology. Until recently, market
factors did not incentivize or create
an existential crisis large enough
to require full scale adoption/
implementation. For instance, the
automotive and aviation industries
implemented several enterprise-wide
digitization initiatives to increase
efficiency and tackle costs when they
faced their own upheavals during the
many crises that have plagued them.
GM, for example, now uses 3D
scanning to generate models of
competitor vehicles to run simulation

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Digitization involves physical devices communicating
directly with each other – machine-to-machine – with
little or no human intervention. To the O&G business,
digital includes smart elements such as sensors,
measuring devices, and actuators embedded in drills or
wellheads exchanging data in real time. Such exchange
enables expansive monitoring, integrated operations,
remote configuration and optimization, and even self-
management. Wireless networking connects these
elements, and through use of purpose-built applications,
sends their combined and integrated data to servers for
processing, storage and analytics.

Millions of smart elements sending real-time data 24/7

results in huge datasets and data flow. A single drilling
rig can generate one terabyte of data each day, bringing
the total amount of data passing through an oilfield to
potentially one petabyte (10^15 bytes) or more per day.
In a control room, personnel see and interact with an
accurate virtual representation of the field and all its
components. Field data can be processed continuously
in real time, with applications automating decision-
making, performing predictive analyses, reacting to
alarms, and monitoring and controlling production
process – with or without human intervention.

All of these technological advances enable streamlined,

more efficient field operation. The resulting outcomes
include reducing costs and achieving efficiency gains
that are required to survive the foreseeable low-price
era. Oxford Economics predicts that increased digital
adoption by the O&G industry could result in global
real (inflation-adjusted) GDP increase by somewhere
between 0.5 percent and 0.8 percent (or $552 billion
to $816 billion) by the end of 2025i.


According to a market research report published by
MarketsandMarkets, “Internet of Things (IoT) in Energy Market
by Systems & Solutions (Predictive Asset Maintenance,
Connected Logistics, Security, Energy Analytics, IoT
Platform, Energy Management), by Application (Oil & Gas,
Mining), by Services & by Regions - Global Forecast to 2020”,
the IoT in Energy Market is expected to grow from USD 7.59 Billion
in 2015 to USD 22.34 Billion by 2020, at a Compound Annual Growth
Rate (CAGR) of 24.1% during the forecast period.

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The unrealized opportunity for Oil & Gas digitization

Almost all major and independent O&G companies have facilities embedded with smart sensors with integrated
some sort of digital initiative underway, some for more models run and managed by engineers/experts in
than ten years. collaboration centers; wearable technology brings the field
closer to the office; field automation technologies have
The downstream sector, frequently plagued by long provided real-time work scheduling; near-ubiquitous
periods of low margins, shifted from a top line to a asset tracking and condition monitoring occurs via
bottom line mindset and embraced digitization earlier wireless sensors over a network backbone; 3D scanning
than the upstream counterparts. O&G plants and technology is used to create virtual asset representations
refineries are now some of the most automated facilities in for construction optimization, maintenance planning,
any industry. Every piece of equipment is under constant operator training, and simulation. Now a new fleet of
surveillance, control loops adjust themselves, and whole drones and smart robots armed with video analytics and
process analytics and simulations enable operators to artificial intelligence are inspecting pipelines, flare stacks
predict the effects of changes in the system. Embedded and going places not safe for humans. A relatively new
smart sensors in vessels, tanks, compressors and turbines technology in upstream is flow composition analysis;
send real-time data to control rooms where a handful of extending this through full lifecycle digitization will
experts can monitor processes and provide diagnostics enable the stream to be more accurately valued.
for issues. Additional opportunities exist in connecting
biometric data to improve operator safety and materials
movement within facilities.

Much like their downstream brethren, midstream

companies’ portfolio of gathering systems, pipelines
and storage facilities leverage vast digital components
and ecosystems. Advanced measurement devices such
as electronic flow metering technology, data-intensive
Pipeline Inspection Gauges (PIGs), SCADA and digital
sensors are prevalent industry-wide. The opportunity
for midstream companies lies within future use of drones
to perform pipeline flyovers and the collective ability to
distill massive amounts of data collected into meaningful
information for safety, pipeline integrity and asset
management. The opportunities are seemingly endless,
but until this point in time only a few organizations have
captured meaningful value from their digital investments.

In the upstream sector, companies vary vastly in terms

of digitization. They span from very sophisticated,
unmanned, automated, robotic drilling platforms to fields
where sensors and communications barely exist and
operations are still paper based. Analytics are widely
used in seismic data processing, beyond-bit drilling,
and predictive maintenance, sometimes through
crowdsourcing of expertise. Digital Oilfield initiatives have
combined intelligent, self-monitoring wells, reservoirs and

PwC | Unrealized potential of digital 4

Ultimately, all these companies are looking for whole-asset
management across the lifecycle to maximize returns.
Digitization initiatives have come a long way towards
realizing efficiencies, however, in pockets. The biggest
obstacle preventing full scale success and adoption of
enterprise digitization is the time the initiatives take to
reach full deployment. Other factors which contribute to
these extended durations include the combination of
fragmented implementation, often in silos, and preference
to buy COTS (commercial off the shelf) versus developing
in house standards.

Most O&G companies often view anything IT, data,

or digital as activities not related to core business. Each
department turns to their preferred suppliers to develop or
bring in expertise and solutions that help their immediate
needs. Siloed digitization does not provide the cross-
functional cross-asset insights needed to drive efficiency
at the enterprise level. Technology implemented in this
manner provides value in a specific area but does not
enable end-to-end data flow. Financial and organizational
information is rarely integrated into any of the digital
solutions. Additionally, each initiative has to “start from
zero” in terms of building the business case, gaining
stakeholder buy-in, mobilizing a team, setting up
infrastructure, and addressing data quality. While
there is a lot of innovation across sectors, there are
no end-to-end digital solutions common to the
industry and no clear leaders.

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In fact, we see five major trends in the industry propelled
by digitization thus far (Fig xx). (i)Prevalence of data
from increasingly connected devices enables further
analytics to drive higher ROI from investments;
(ii)Market conditions dictating lower CAPEX spend
across firms are resulting in alliances being formed
to create and deploy end-to-end digital technologies;
(iii)Companies working together in turn is driving
increased simplification and standardization of processes
and equipment across the full industry lifecycle,
(iv) which in turn is enabling optimized relationships
between end-users and their suppliers when sourcing
technology (and data); (v)Enhanced collaboration and
knowledge transfer across the industry is leading to
efficiencies that further bring down digitization costs.

Falling digitization costs & Reduced M&A appetite drives desire

operational data prevalence for packaged end-to-end solutions
drive the network of “things“
Internet Increasing
of things alliances

Oil & Gas
Reduce costs, Knowledge trends Standardize processes
spread risks, and transfer and equipment
enable quicker ROI across entire Simplification across regions
due to consolidated value chain while streamlining
expertise across maintenance, repair &
OFS/IOCs/NOCs operations costs


Companies shifting from discrete services to

solutions-based buying, mitigating risks by
eliminating disparate interfaces and data

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Value capture – Digitization’s time to
deliver for Oil & Gas

Industries and organizations who are Many impactful technologies are

thriving in the digital era (i.e. Apple, here already and in broad use
Amazon, Google, etc.) have shown (refer to graphic/table), while others
that differentiation from competition will take several years of testing and
is achieved through the use of an refinement. The ecosystem needs
ecosystem that enables data-driven to be set up in a manner so that it
insights. This has recently shifted can accept these technologies into
the perspective in the O&G industry the fold to provide full realization
to view digitization as a critical of the original digital vision, as well
component of core business. as overcome some of the challenges
The iPhone is a technology that in that companies face when
and of itself had incremental value undertaking large enterprise-wide
over what was already available on transformation initiatives. Both
the market. However, by being a providers (data, tech and service
technology platform that enables companies that help develop & create
developers to create value-add the ecosystem) and adopters (the end
applications, it has become a user O&G companies) must take into
game/world changing ecosystem. consideration the following success
In upstream for example, the Digital factors as the ecosystem enabled
Oilfield concept and associated by the Industrial IoT becomes
initiatives have been around for 10-15 more mature:
years, and so far we’ve only laid the • Encompass many connected
foundations for the upstream players and machines through
platform that will enable the a broad ecosystem
next generation of value-add • Align a clear value proposition to
developments. While there have been company strengths, management
some additional steps taken, such as requirements, and the ways to play
introducing Internet of Things (IoT) (see next section or insert graphic)
initiatives, we have not made all of • Create service offerings which assist
the Operating model changes (People, in preserving and maximizing value
Process and Technology) needed to of operations
maximize value from having data and
• Provide a complete view across
information. The O&G industry is in
the lifecycle, inclusive of sensitive
need of an end-to-end digitization
company data (financial, HR,
platform, or ecosystem, where silos
asset), to enable quicker adoption
do not exist; one in which anyone can
and better decision making
develop value-add applications and
services. This is increasingly possible • Provide better tracking of value
with falling digitization costs, and throughout the project lifecycle
the existential imperative exists through connectivity, enabling
for evolution due to market/ better enforcement of governance
industry drivers. to monitor progress and means to
adjust course as needed real-time
• Treat the ecosystem comprehensively
across the enterprise

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Digitization in Oil & Gas
Upstream Midstream Downstream
High-impact • End-to-end digitization • Remote surveillance/monitoring • Biometric monitoring
solutions enabled by IoT of pipelines, plants, storage
• Automated control-loop
facilities (drones)
• Workflow enabled processes systems
(inclusive of smart advisors) • Fleet optimization through
• Real-Time Dynamic
tracking technologies
• Self-optimizing Quantitative Risk Assessments
equipment/assets • Need input
• Remote plant, value and
• Virtual & Augmented Reality pressure controls via
mobile technology
• Drill floor and bit robotics/
automation • Predictive maintenance
monitoring system. System
inputs on device
Medium- • Analytics in the cloud for • Drone Monitoring of contractors • Fire Protection digital
impact issue detection video surveillance for
• Monitor control with a
solutions smoke detection
• Wearable computing centralized maintenance
and operations system • Computational Fluid Dynamics
• Simulation
for: Flow & Heat Transfer
monitoring in pipes
• ASPEN Plus Separator

Some of the
and digitization
examples discussed
to this point can best
be understood in the
context of relevant
case studies.

PwC | Unrealized potential of digital 8

A large IOC developed
a centralized
capability for deep
Case study
water Oil And Gas

A case of applying digital high value workflow-enabled enhanced decision making enabled
technologies to enhance efficiency activities while improving by optimized surveillance permitted
very typical for the upstream surveillance quality. Time spent the operator to move to 75% of
sector over the last 5-10 years is on surveillance reduced by 60% alarm-driven surveillance services
the establishment and usage of while adding 240 new surveillance within 24 hours, 88% in less than
Integrated Operations Centers activities per month. Predictive 48 hours, and 99% in less than
(aka Collaborative Work monitoring was built upon the 72 hours. Further enhancements
Environments or Asset Decision exception based foundation to would be to incorporate additional
Environments). One company identify potential risks, resulting real-time field data through
combined offshore control and in a substantial reduction of wearables and drones, as well
onshore asset engineer collaboration unscheduled deferment related to connect this process to the supply
rooms to create a “Digital Trauma trips, equipment performance, and chain/field logistics process.
Center” that focused engineers on corrective maintenance. Ultimately,

Digitization of production operations

Seconds Minutes Hours Days Weeks Months Years Field life

Real time Well and reservoir

operations performance

Exception based surveillance

“Digital Trauma Center”

Operations Analyst Specialists Asset Engineer

Alarm Engine “911”
“First Responder” “ER Doctor” “The Surgeon”

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A large IOC portfolio
digitized materials
management to
Case study reduce downtime

A large IOC was spending $100B The key was monetizing the value solution. Future enhancements
for their Material Management by addressing gaps in data/BOMs, planned include 3D printing of
process. Production control centers orders and workflows. To scale, parts, increased robotic automation
were being updated with newer the solution needed to work for actual parts movement, RFID
maintenance sensors/models, yet with partners and departments tracking, and adding fleet operations
maintenance reliability and materials systematically e.g., create “BOM to this IoT ecosystem.
management delays affected 60% of factories” and rewire ERP to reduce
assets. A multi-year program to “generic orders”. An IoT connecting
digitize the broader materials orders to equipment to materials was
management process was launched, the key catalyst to taking an end to
targeting $1.6B in efficiencies. end process view and scaling the

Digitization of materials management

7. Ordering policy 8. Inventory logistics

5. Equipment standards
9. Warehouse

4. Control centers
10. Critical spares

3. Advanced
6. Advanced analytics 11. Surplus

2. Global ERPs

IOT enabled 1. Governance 12. Mobile devices

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Holistic digital strategy is a means of survival

We see several ways for companies to play as the Refer to “A Strategist’s Guide to the Internet of Things”
O&G Digitization market evolves – an Industrial IoT (Winter 2014 issue of strategy+business) by Frank
ecosystem consisting of Enablers, Engagers, Enhancers, Burkitt, a senior executive with Strategy& leading the IoT
and Embedders will emerge where each plays a critical and Digital services business, for a broader perspective.
role in the end-to-end digitization required for full
value realization and survival in a low-price, In an O&G context, the marketplace is currently full of
high-efficiency market. companies which play these roles partially but as stated
previously, rarely do they connect in a manner which can
Enablers provide the technology, applications, and help develop a conducive ecosystem. Owner-operators
services that underlie the IoT offerings, from endpoints to typically take on the role of engager (more specifically
network and cloud services. Engagers use the Enabler’s their IT or R&D department) and work with numerous
hub to produce services for consumers and businesses, supplier offerings, trying to create value for their business.
providing the direct link between IoT and the market. Software firms are primarily enablers, but have started to
Enhancers provide integrated services that leverage and move into the enhancer role as well. Similarly, service and
repackage products and services of the Engagers, finding consulting firms are primarily enhancers, but have started
new ways of creating and extracting value from the data, to act like enablers. OEMs are embedders, building
relationships, and insights generated from IoT activity. “smart” into their equipment. The larger, broader OFS
Embedders apply sensors, monitors, and other devices firms cover all of the above in many cases, with primary
to improve their own operations and optimize their focus on being enablers of IoT. In addition, large tech
own businesses. firms that previously only provided network and
infrastructure connectivity are moving into the
enabler space.

Our perspective is that the latter two groups, large OFS

and tech firms, will be the drivers in developing the end-
Industrial IoT ecosystem framework to-end ecosystems in the near future, by partnering with
OEMs, software developers, and consulting/knowledge
service firms to continue developing capabilities that
enhance the overall O&G market.
Regardless of which category an organization might fit
into, the industry’s focus on sustainable efficiency (both
technological and operational) creates a “new oil field”
paradigm that will differentiate between those that
succeed and those that disappear. Speed of value delivery
is critical; analysis must be data driven (both structured
Enablers and meta), resulting in automated decision making and
controls. This will provide an ability to model best and
worst case business and operation scenarios automatically;
anytime- anywhere connectivity combined with cloud
infrastructure will drive core processes through mobility;
asset utilization will be vastly improved by combining
tracking technologies and sensor data with the supply
chain; analytics-as-a-service will be provided for
repeatable and scalable solutions. Several additional
factors must be considered, see Table xx.

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Companies already playing in one (or more) of these
areas need to determine if that is sustainable, or whether
they truly can span the entire framework. Companies

planning to enter the market need to understand that
while financial prospects are large, so are the associated
risks. Clear identification of a “way to play” is critical to
mitigating those risks.

Questions to help determine ‘Way to Play’

• How quickly can an org play/participate in
this space?
• What customer centric or business
engagement capabilities are needed?
• How will data be managed & used?
• What connections, relationships, and/or
partnerships with other IoT companies
are needed?
• What will distinguish one company
from another?
• What investments/skills are needed?

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