Why Does Oil & Gas Need IIoT
Thank you, Justin, for coming over. To get started, why don’t you tell me a little bit about yourself and what you’re doing right now at Everactive. Also very interested in your history in oil and gas.
Currently, I am the Everactive Regional Sales Manager based in Houston, Texas, covering the South-Central United States, as well as the Western United States up through Western Canada. Lots of oil and gas chemicals or specialty chemicals throughout those regions, for sure
I’ve been with Everactive about a year now. Prior to that, I was a longtime Rockwell Automation and Honeywell guy. I worked at those two companies combined for about 15 years. I did a variety of things, always in sales and account management. But when I was with Honeywell, I was here in Houston and had a strong focus on the Gulf.
When I went to Rockwell, I was focused on the oil and gas play in the Northeast: the shale plate in the Marcellus and Utica region, which is Ohio, Pennsylvania, and in West Virginia. Then I eventually moved back to Houston with Rockwell and took a role as the Chevron Global Account Manager. I had Chevron and Chevron Phillips, worldwide, and had about 70 folks on a dotted line to me – local account managers around the world in Thailand and Singapore, Africa, and all over. They called on the local assets. I managed the overall account strategy as well as large projects. I would travel to those sites around the world if they had a big project going on and help support that local account manager. I was very focused, obviously, on oil and gas at that point, particularly on a super major.
That’s tremendous experience on oil and gas and instrumentation. We’re glad to have you here. My next initial question is: have you recently observed adoption of digital or connected IIoT solutions in the chemical and oil and gas industries?
They’ve been trying to do it for a long time. Back in my Honeywell days, Shell had a vision for a global command center. They wanted to collect data from all of their sites around the world and bring them to this central command center if they could. They had a bunch of big screens – it was a huge room. The concept was already there for this “digital oilfield,” which is the phrase oil and gas used for IIoT in the beginning. That was a long time ago – they started that probably 13 years ago. Since then, oil and gas has been trying to figure out how to do IIoT – how to do the digital oilfield.
They’ve looked at things like third party cloud. Originally, security was a big concern. But as they themselves moved to a lot of cloud, like Microsoft Azure or Amazon AWS, they opened up a bit on the security side to say: third party clouds – those are okay.
Then they expanded even further and said: the idea of us hosting all the data doesn’t make a lot of sense with this cloud infrastructure. It actually makes more sense to allow third parties to host data when it’s non-control-related – if it’s not critical to the control of an asset – such as a temperature, vibration, or flow reading. For something that is not controlling an asset, they decided to let the third party vendors host that in their cloud and do a cloud-to-cloud transfer or push the data to their system in some way. They’ve moved definitely more in that direction.
They also started looking at things like digital twins. Creating a digital twin of assets has been big for years now. Making sure that they could test things before they do it: that’s the idea of the digital twin. You have an asset that looks just like yours, but it’s in a virtual realm. You can run different process variables through it prior to actually doing something on the real physical asset. That’s become more popular.
And they’ve started moving into adopting different protocols too. LoRaWAN became pretty big. For a lot of the remote stuff, they wanted to look at how they could do long-range wireless. And MQTT became popular and is still growing as a popular method of communication, a way to send the packets. They see a lot of benefits to MQTT: like there’s a heartbeat at birth and a death certificate. It allows you to do some pretty interesting things when you combine that with the cloud infrastructure and some of the new resources that are out there around that. You could technically bring assets completely online, create HMI graphics, and create all the tag connections – do everything almost automatically that used to require a physical integrator. In the past, you’d hire an integration company. They’d connect your PLCs, your HMI. They’d do all that communication stuff and then they’d build your screens. Now you could do that with a flick of a switch, if you wanted.
It’s interesting that they already had the vision of where they needed to go maybe 13 years ago. Regarding that vision or the overall state of IIoT in oil and gas, is it a growing trend, an exciting opportunity, or a terrifying threat?
It’s growing, because there’s a lot of stuff they aren’t doing. A good example is the space that we’re in – the sensing space. It’s something they’ve always wanted to do. And they tried a bunch of different stuff: Let’s try LoRaWAN to see if we can get some long range stuff. Let’s see if we can use battery powered sensors. There’s lots of assets even in a refinery, which is more of a confined space, that they would like to get data from. They can build a better analytics model. They can build AI and ML models. They can do digital twins. They can get more into the IIoT space.
The problem is, it’s expensive to do sensing. Most sensors cost a lot. For wired sensors, you have to run wire or trenching, run conduit – all kinds of stuff. They haven’t been able to get a lot of the data they want to get. That’s a perfect example of where they have a vision, but they’re trying to figure out: What are the tools that will let us do this pretty seamlessly, where we don’t need twenty different companies doing things for us? They are asking themselves: Can we streamline this somehow so that we have one company handling sensing, one company handling our AI models, or whatever the case may be?
What is driving the need for IIoT? What is driving that growth?
A couple things for them. The first thing that’s always been driving the growth is that a long time ago they could see that they needed to get more lean. They needed their margins to improve. Oil and gas has always been a cyclical business. It goes up to $120 a barrel, and the price of natural gas in BTU shoots through the roof. And then they both crash and come down to $10 a barrel and $1 BTU. it’s cyclical and they need to be able to ride those times out.
But also, there’s been more pressure on the business as things have changed – as solar and wind come along, and electric vehicles come along, and power plants change to gas-fired power plants instead of coal-fired, for example. They’ve had to shift their business. They need to get better or they won’t make money.
The other thing now over the last handful of years is green initiatives, which have been pushed hard by political forces. Governments regionally around the world, activist groups that are in the boards of a lot of these companies – they found their way into these boards and boardrooms and have started pushing hard. Now they need to do stuff to get better at that. That’s data they didn’t always necessarily have. They weren’t necessarily always monitoring all the things that affect their environmental footprint. Now they have to address that, too.
That’s great. It’s a way to be more nimble with all the changes that are happening. It’s a cost or savings play. And then, whether they like it or not, it’s a way to become environmentally-friendly in their operations. They’re looking at these technologies as drivers to potentially help in those three areas, right?
Yeah, for sure. Refineries have always had tight margins. That’s a tight margin business. They always have been pretty conscious. Upstream oil and gas, on the other hand – like on-shore drilling or offshore drilling – the days of building $6, $7, or $8 billion oil rigs left and right all over the ocean are just gone. We don’t see that like we used to when oil was $130 a barrel.
What is working well in providing value when it comes to the utilization of IIoT solutions for oil and gas?
The things that they’re looking for are: something that’s a cost-effective solution. Again, cost cutting measures are in place. The days of just spending money left and right are over. There were times in my past where it was easy as a salesperson to hit quotas, make numbers, and increase every year. There were times where selling wasn’t that hard, They were buying everything. But that has changed. They are a lot more streamlined in the way they look at things now. It’s got to be cost effective.
They want it to be easy to integrate. They’ve been burned a lot of times. Oil and gas has tried a lot of technology over the years. They’re not new to this space. They’ve done tons of pilots and tried to integrate every new cool toy that’s come on the market. And they’ve been burned by the integration process. If it’s difficult to work into their day-to-day, to install, to maintain, or to connect to other systems, then it’s not valuable to them.
They also want something that is that scalable – something that isn’t going to work just at this one particular site. They’re looking for IIoT solutions that they can roll out across their entire infrastructure that will scale quickly. If it’s easy to integrate and easy to install, that goes towards scalability. If it’s cost-effective, that goes towards scalability. Essentially it allows them to get through the deployment process with less barriers.
Have there been any particular IIoT solutions that have been winners so far in achieving that for the oil and gas industry?
There are not a lot of modern IIoT solutions where I would look across oil and gas and say: yeah, everybody uses this. Traditional solutions, of course, have made their way in. Historians like OSI-PI – it has moved across all of oil and gas, and it’s pretty much the common Historian used. On the digital side, in contrast, there are so many companies doing it. If you look at sensors, analytics, or AI and ML, there are all these different packages. There’s a IloT of different companies. I haven’t seen anything that has been wholly adopted across the board in oil and gas.
What are the use cases you have seen, where you have seen the best benefit or value for IIoT in the oil and gas industry?
Historically – and this is probably still true – assets that are geographically dispersed, they’re far apart, remote assets, are always a good use case. If you can help them get better visualization into those assets, run them more effectively, and have less truck routes to those assets, that is always good.
Assets are remote in: onshore, upstream drilling; onshore, upstream processing or light processing; and pipeline – so midstream companies or the pipeline sector. These assets are spread all over. They’re lightly manned or unmanned. Those are perfect targets for IIoT solutions, because there isn’t a lot there.
On the plant side, like if you look at a refinery or chemicals specialty plant, they’re generally pretty wired up. They have a DCS system, like a Honeywell Experion system. They have PLCs all over. They have wired instruments all over. Those are harder cases, generally. You’re looking at things like what Everactive does. Can you provide me more sensing, sensing on things I didn’t run wires to because it costs too much or just wasn’t efficient? Can you provide me with more data? Can I get more data from the stuff that I already have here without interfering with my process? That’s the primary use case, when you get to those more confined environments.
So there’s this other world of “between premises” or premises that are far away. If we were to have an Evernet around the country or in all these locations, we could potentially serve those customers?
Those remote cases, a lot of times, they don’t put all the same controls and monitoring that they would put in a refinery, where people are at it every day, walking around, and it’s all confined to one location. In those remote spots, there’s lots of assets that are just not monitored. They have minimal visualization into how those assets are performing. They’re getting whatever the little Murphy panel on the engine is sending to them, or whatever small fraction of data a PLC can pull from the onboard sensing that’s already on the engine or the compressor or the pump. Especially if it’s small equipment, like smaller pumps or smaller motors, often they just didn’t take the time, because they didn’t deem that it was worthwhile in the beginning.
Are there applications or breakpoints that IIoT solutions can provide? Are there benefits that have not been implemented yet?
There’s lots of applications where IIoT could provide a benefit. Everactive is trying to address some of those today. Steam traps are an asset that hasn’t been monitored, for example. We didn’t have sensing for that. Balance of plant equipment are another: all the pumps, motors, fans, and compressors that are running, but are not today being monitored, because they weren’t deemed “critical” – they weren’t the super expensive motor or pump. They’re all the ancillary equipment around it. Those are good targets.
There are other applications that haven’t been addressed, like gas or leak detection. There’s stuff out there but it’s a little cumbersome. It’s not very easy. It hasn’t been fully adopted across all of oil and gas. That’s a good target application.
Then, of course, on the high end, there’s lots of stuff they’re trying to do when you get into analytics and AI, ML, and digital twin stuff. On the top end, there’s tons of different applications that they’re still exploring. Do they need their own full data science team? Is there something that can help them if they’re not the size of a Chevron? How can they do what Chevron is trying to do when Chevron has 25,000 employees, and they have 5,000 employees?
What are the challenges you have observed when it comes to the adoption of IIoT solutions in the oil and gas industry?
The biggest challenges are always that you have to get everybody on board. You have to get folks to agree that this makes sense. That includes any of the old hats that are still around, the old school folks that have done things a certain way. They always want to pilot technology, which makes sense. You have to get through that process, which means showing them that this is easy to install, easy to adopt, easy to scale, and easy to integrate. So far, there hasn’t been a lot that does that.
In my Rockwell days, they were trying to develop a solution, and it was very good. It used Microsoft, MQTT, Kafka, Cassandra – all these new tools for storing and passing data. This digital oilfield solution would allow Rockwell to deliver a digital package to a new compressor station, new onshore or upstream facility. They plug it in, they turn on the power, and it does everything. It recognizes all the equipment that’s on the site. It builds the database for the tags and associates the tags to the equipment in the right way. It builds graphics for your HMI. It connects from their cloud to the Chevron cloud or Exxon cloud, or whoever’s. It did everything.
The problem was, it was like a hundred different moving pieces. It was expensive. And it took a lot of people to develop it right. It wasn’t: here, I’m going to give you this. It wasn’t a SKU that you could just look up in Rockwell and say, give me that digital oilfield. And that’s what folks are looking for.
That’s one of the barriers and challenges when deploying or testing the solutions: can we do it easily? A project that I’m working on with Everactive – is a good example. They want to roll this thing out across a lot of sites. They want to be able to do it themselves. They want to be able to install it themselves – thousands of sensors across a large geography. They want it to connect to their systems via API or direct MQTT. So that they can integrate it into their workflow: how they issue and store data about their work orders, how they do their analytics, and how they mesh that data with what they’re getting from PI or their PLCs. They want that to be easy. So far, there haven’t been a lot of easy IIoT solutions. Most of them are expensive. They’re hard to integrate. And it takes a lot of man hours.
Assuming that an IIoT solution makes it through the testing stage and has been adopted, what new challenges are these technologies creating for the oil and gas industries?
Obviously, security is always a challenge for them. They have generally very high security standards, some of the toughest I’ve seen outside of industry power generation. Security is always a top concern.
Then maintaining that asset is a top concern, as well. If it’s something that requires a lot of feed and care, or babysitting, that’s not a great solution for companies in oil and gas when they roll it out. The little guys will say that, for sure. Your tier two and tier three oil and gas players that only work upstream and only work in the US, they’ll say that’s a concern. But as you scale that becomes even more of a concern. When you get to your Kinder Morgan pipeline companies, your ExxonMobil’s that are worldwide – they don’t want something that takes a ton of people on their end to maintain and a ton of involvement from the vendor to maintain. They don’t want to have to have, as they did in the old days, vendors embedded in their refineries, in their upstream. They would like to try to avoid embedding more contractors if they can.
Switching gears a little bit, how do you see the role of government regulators in relation to the adoption of IIoT solutions in the oil and gas industry?
That’s part of the pressure that I mentioned before. Like steam trap monitoring, which Everactive does – it’s the reason that offering is able to get traction at some places. BP is a good example. When I showed it to them, they didn’t even care about the ROI workbook and the cost savings in dollars. They only cared about the number we produce that says “CO2 savings,” because they’re a European company and the European governments have been pretty strong on their climate change stance. Being European, they’ve said: we have to be carbon neutral by 2030. They’ve got to move. That matters to them. In the States, we see the same thing.
There’s other applications where that becomes relevant, like leak detection. That’s a big one.
There are inherently leaks throughout a lot of places in the oil and gas supply chain. It’s just part of how the process works. It leaks everywhere. It’s hard to capture all the gas and all the products.
That, for sure, is being driven a lot by environmental guidelines in the US and abroad. It’s been tougher abroad. There’s a lot of places like Europe, where they’re very strict. And the US is probably heading in that direction, too. There will definitely be cases where in the future these companies approach folks like us at Everactive saying: Look, we have to do this. We don’t have a choice. I’ve got to generate this governmental report and turn it in by x date.
On the other side of the coin, how do you see the role of oil and gas employees in relation to the adoption of IIoT solutions?
Oil and gas has become a lot more open to it. They’ve had a lot of changeover. There’s a lot of younger folks coming in and mid-career folks, like myself, who saw the old way, then the push from governments and everybody else. We see the new way. And they’ve really jumped on board and said: okay, we need to find solutions to address these environmental issues, to address the fact that we have less resources. I can’t have Bob take three weeks to generate this environmental report. It’s just not possible. I need him for other tasks. I need something else that can help me do this much more quickly by clicking a button. I think they’ve jumped on board. The employees, at least in cases that I’ve seen, are a lot more supportive than they have been in the past.
Who is the target audience or roles that will be more receptive to implementing IIoT solutions in oil and gas?
It depends on the solutions that you’re delivering. In general, if you’re looking at upstream facilities – onshore upstream or even offshore – you’re going to want to talk to operations management. You’re going to want to talk to whoever the operations manager is or to a maintenance manager for certain solutions. Those will be the folks in charge of things like steam traps. Plant managers are the equivalent when you get to refining and specialty chem.
At the higher levels, there will be the folks looking at IIoT. They’ll have groups like an innovation hub or digital infrastructure team. Conoco, Chevron, Exxon – a lot of them have these groups. They’ll be looking actively. Their job is to test, prove, and find technology that they can roll out to the sites that are usable.
It’s never as easy as: this innovation hub said Everactive’s amazing – everybody take it. Usually it doesn’t work like that. They usually prove everything, which gets you on something like an approved vendor list. You then have somewhere you can point where you can say, look, it’s been tested, and your guys say it’s good. Then you have to go to those plant managers, operations managers, to maintenance directors and sell it at that local level.
What are the roles that might be most skeptical of adopting IIoT solutions?
Ironically, IT. Their one job is to be skeptical of everything coming in, so that it doesn’t affect their security posture. They’re not necessarily skeptical in that they don’t believe your solution will do the function that you say it will do. They’re skeptical of whether this will penetrate their security posture and create a problem.
The other folks sometimes are hard to see. It’ll be the old hats there again. You might have a guy whose job is to check and replace traps. If you provide a tool, that means they don’t have to go check traps all day. You’ve just taken a huge part of their job away.
I’ve run into that even in my Rockwell days. There’s that digital oilfield solution I mentioned before. It’s amazing. I have presented it to different companies. I remember at one, there was a SCADA guy. He was the SCADA system guy, and he was like two years away from retirement. And he wanted nothing to do with it. Because he had two years left until retirement, and this solution was going to eliminate a huge portion of his job. It was going to change the platform they were using, which was the only thing he knew. He didn’t know the Rockwell platform. There’ll be folks like that everywhere. But they’re not always easy to see.
Final question – the $1 million question, why will oil and gas need IIoT solutions?
Oil and gas will need IIoT solutions to improve their process, to run more efficiently, to gain better margins on their business, to meet the government regulations that get passed down – whoever’s in office here in the States but, more importantly, worldwide. There’s lots of places that are already very strict. They’ll need it to meet all of those requirements. They have to be more lean. They have to be more efficient. They need more data. They have to do more with that data. It can’t just sit in a Historian like it has traditionally in the past, and then pull out to do some Excel workbooks or whatever. They need to be able to do something with all of this information to make their process and people more efficient, safe, and environmentally friendly. And they can’t do that with the tools that exist today. It’s just not possible.
Want to learn more? See other Everactive IIoT case studies.