MARKET STRATEGY: Refuelling the oil and gas sector

05 January 2016 | Gareth Willmer


How are carriers finding new ways to deliver ubiquitous connectivity to oil and gas customers across the world? Gareth Willmer investigates.

oilandgas1The global oil and gas industry – an inherently cyclical and unpredictable market – is undergoing a period of plummeting prices amid an oversupply of resources. Oil prices are reported to have crumbled by more than 60% and gas prices halved in the past 18 months. At first glance, such circumstances might suggest that carriers supporting the telecoms needs of oil and gas companies would take a knock-on hit because of less money floating around in that sector.

However, the need for energy companies to be more cost-effective and ensure that the technologies they use are cutting edge so they generate more business value actually creates major opportunities for innovation among carriers. This is particularly true in an age of big data and the internet of things (IoT), when companies are seeking to extract the maximum they can from the wealth of data they produce to retain a competitive edge.

In a survey from April that seems to reflect this perspective, Microsoft and consulting company Accenture found that almost 60% of professionals they surveyed in the oil and gas industry actually planned to invest the same amount or more in digital technologies in the near term – a figure that rose to 80% when considering the next three to five years. “Organisations are looking for ways to leverage technology so they can innovate and change the way they run their businesses,” says Mike Brander, director of the energy and utilities practice at Verizon Enterprise Solutions.

Brander says energy customers have been involved in activities such as using Verizon platforms to gain real-time access to information from drill sites, and its network and engineering expertise to provide coverage in challenging or remote locations. He emphasises that in rolling out an array of sensors and other technologies, a key concern in every conversation is how to ensure the safety of employees and security.

AT&T is another carrier that sees the opportunity in this time of declining prices. “We cannot predict where the price of crude or natural gas will be, although most are pretty certain it will be well below the high prices we saw in 2014,” says Dan Walsh, senior vice president and managing director of the energy business solutions segment at AT&T. “The IT departments of oil and gas companies are working to be more agile in delivering value to the businesses they serve.”

Walsh says that achieving this involves the provision of more flexible and higher-speed connectivity, the mobilisation of business processes, and the transfer of applications and services to the cloud to improve efficiency and reduce costs. AT&T is seeking ways to improve communications in hard-to-serve regions, through methods such as a deal it signed with Shell last year to migrate 150,000 employees and contractors to a global unified communications platform.

 

Data pipeline

Walsh adds that IoT “plays a really important role in this industry. Everything from vehicle-tracking, tank and pipeline monitoring to wearables for lone workers are important solutions we are working on with our oil and gas customers.” Such technologies also hold the promise of gathering data from many different machines on multiple aspects of energy businesses. “This industry now and in the future relies on real-time, or close to real-time data to be available for decision-making,” says Vikram Gupta of Arthur D. Little. “Often this has to move from harsh offshore environments to onshore decision centres.”

BT is another carrier seeking fresh ways of connecting up to the sites of energy providers to draw value from IoT and big data. As explained by Andy Rowland, head of customer innovation, energy, resources and automotive, BT has been looking into how to effectively extend out its network into the last few miles in challenging environments while capturing this type of information.

With a view to this, the company struck a deal in September with US-based Rajant, a provider of wireless mesh technology that works in locations that may be hard to cover with standard wireless networks. The aim is to provider “deeper” coverage for BT’s global network into the industrial operations of corporate customers, bringing more equipment and devices online and enabling data to be gathered from a wide variety of devices, including sensors, machinery, autonomous vehicles, high-definition cameras and VoIP systems.

Rowland explains that the technology consists of a “robust mesh” of nodes that is fast to set up and dynamically routes data via the best available traffic path, with multiple access points meaning it has no single point of failure and is “self-healing”, a factor that could be critical in harsh environments.

Industrial wireless services that can be quickly rolled out may meanwhile be attractive to customers such as one of BT’s that is conducting an overhaul of many of its refineries and sites. “While those sites are inactive, that’s costing them a lot of money,” says Rowland. “Anything you can put in place so you can get get up and running super-quick is of great interest.”

He says that energy customers have also been seeking to reduce storage spend. Apart from moving applications into the cloud, BT has helped them through the use of analytics tools for big data to see where inefficiencies lie through platforms such as the Enterprise Data Hub of partner Cloudera. “We’re seeing that can drive your costs down by 25% or 30%,” says Rowland. He adds that BT is putting a lot of work into security, which can be a headache in the oil sector when integrating IT and operational systems.

 

Energy focus

One challenge that telecoms carriers face in the oil and gas industry is acquiring the all-round expertise in the sector when it is only one part of their overall portfolio. Gupta refers in particular to doing this in offshore environments, but believes carriers might hone their focus on this in the future. Indeed, telcos already have strategies to more directly align themselves with the oil and gas industry. In AT&T’s case, Walsh says the company created a vertical segment early last year within its Enterprise business organisation to focus solely on energy customers. “AT&T is uniquely positioned to serve this sector. We have the assets to provide services that connect the hard-to-reach locations where many oil and gas companies currently operate,” he says.

Gupta meanwhile cites Orange as being well-placed because of its presence in many remote and less-developed areas of the world, and its long-term involvement in oil and gas in such regions.

“This is really our DNA,” says Amr Shaker, director of the satellite business unit and international business development for network services at Orange Business Services. “We are recognised in the market for being one of the most efficient operators worldwide in really difficult countries.” Shaker points to markets in the Middle East, saying that Orange benefits from being able to serve oil and gas companies in countries with political instability. Orange is focussing on integrating different services into a one-stop-shop offering for the oil and gas sector in 2016 to simplify access for customers. This will be similar to a service it launched in late September for the shipping industry and is already technically available for the energy sector called Maritime Connect, which delivers VSAT technology, voice, VoIP, data and internet access in a single box.

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“Usually these services are provided to our customers separately,” says Shaker. “This is now being integrated into one box, and it is a big advantage for customers to control their total cost of ownership and get a similar quality of service throughout the different offerings.”

Martin Denari, global director for the oil, gas and mining vertical at Orange Business Services, explains further, saying that on a short-term offshore drilling rig for exploration purposes, it would probably make more sense to favour satellite over fibre. In contrast, he says, “if you’re talking about an oil production platform that you know is going to be there for 10 to 15 years, it makes all the sense in the world to install a combined solution with fibre-optics and VSAT”.

 

Satellite revolution

Orange believes that the new generation of high-throughput satellites coming out will help to provide more options to energy customers and start bringing costs down for the industry, with the company in partnerships with a range of satellite providers, including Intelsat, Eutelsat and SES. And Gupta believes that fresh approaches to satellite will help “revolutionise” the oil and gas market, providing higher-bandwidth and lower-cost services closer to what fibre offers.

O3b Networks is a satellite provider that has sought to shake this market up in the last couple of years through the launch of satellites in an orbit much closer to the earth than traditional ones, with the aim of providing lower latency and faster connectivity at a competitive cost. This has clear applications for the oil and gas industry, in which getting communications to offshore platforms can pose a major headache.

With this in mind, O3b has just teamed up with RigNet, a specialist provider of communications services to the oil and gas industry, to bring offshore services to operations in the Gulf of Mexico in what the two describe as a “breakthrough” for the sector. O3b describes the service as providing “fibre-like broadband”, with a spokesperson saying that it can cost energy companies “hundreds of millions” to alternatively roll out fibre if they want to run sophisticated data-analytics programs at an offshore drill or production site.

 

Sector specialists

Companies such as RigNet and Harris CapRock could meanwhile provide competition for mainstream telecoms carriers through their position as communications companies that specialise in the energy sector. “Our field experts are all oilfield personnel,” says a spokesperson for RigNet. “I think there’s definitelyan advantage in being a dedicated provider to the sector because it forces you to be that much more aware and educated on what their specific needs are and address them accordingly.”

He describes how RigNet is flexible in the types of infrastructure it deploys, using a variety of options that account for customers’ specific location and performance needs, including microwave, fibre-optic and wireless technologies such as WiMAX and LTE, or VSAT when distance or terrain make these impossible. RigNet also works with an array of satellite companies, thus avoiding being tied in to a single provider or system.

Apart from potentially ramping up their own expertise in the energy sector, Gupta believes that traditional telcos could seek deals in the form of mergers and acquisitions or partnerships to improve their foothold in the oil and gas industry.  Separately, Gupta says that carriers often face a challenge in being able to scale up to ensure that their footprint overlaps with that of international energy players such as Shell, ExxonMobil and BP, although carriers like Orange again have an edge here through their extensive global reach.

Orange’s Denari himself refers to the need of carriers to cater for an “exponential” rise in demand for bandwidth and the massive amounts of data to analyse in the oil and gas sector. “In the past, sensors would produce linear data,” says Denari. “Today we are talking of array data, which multiplies the volume by a factor of three, four or five, or even more. So the big challenge is to be able to efficiently move this data – which network, which technology we are going to be using to move this data.”

At the same time, harnessing this wealth of information appears key to unlocking the full potential of the energy market – so carriers that can achieve this look set to win out in the end.