Despite the major spending cuts across the sector, the low price environment has created an impetus to invest in sensor innovations throughout the value chain
BOSTON, MA – The oil and gas industry is by far one of the oldest industries to use sensors, where sensors have been used upstream to find oil reserves, monitoring for gas leakage along pipes midstream and measure metrics such as temperature and pressure, according to Pallavi Madakasira, Lux Research Analyst and lead author of the report titled, “Sensor Innovation: Analyzing Investment Trends Across the $4.3 Billion Spend.”
“In the current low oil price environment, the driving interest in these sensor technologies is the need to reduce field personnel and budgets for maintenance and repairs,” said Madakasira.
Monitoring and optimizing wells remotely with sensors is a great way for the modern oilfield to deliver ever greater efficiency, driving down costs to remain competitive when prices are low, according to Mike Swihart, CEO of Production Lift Technologies based in Midland, serving the Permian Basin.
“With the automation services we offer right now, we can put eyes on any well where you have Internet or smartphone access and read that well data 24/7,” said Swihart.
Overall investment in innovative sensors tripled between 2006 and 2015, reaching $486 million in 2015. Over the past decade, sensor processing-related technologies received over $620 million in funding, while packaging solutions attracted just over $200 million and developers of energy harvesting got around $100 million.
“Despite the major spending cuts across the sector, the low price environment has created an impetus to invest in sensor innovations throughout the value chain; as such expect to see more such technologies get a boost and attract additional investment,” said Madakasira.
Costs have continued to decline for sensor technologies and service. Ten years ago, when Swihart was first investigating the automation business, systems could easily cost $20,000.
“That was just a tough number back then. Then the price dropped to $10,000 and then $5,000. And now we offer a complete automation package for $3,000. That includes equipment, installed in the field by a crew, you’re up and running,” he said.
New sensor innovations look to disrupt the incumbent landscape while allowing the oil and gas industry to still deploy sensors at the right price points, says Madakasira.
“For example, Shell has been exploring new seismic sensors from Innoseis which are geared towards on-shore drilling specifically identifying gravitational waves,” he said in an email.
“Technologies such as the ones from Innoseis or Intelligent Dots, will in fact allow upstream operators to find the sweet spots for oil reserves and to understand complex fractures. Other types of sensors are specifically targeted at identifying pipeline leaks and damages; Rebellion Photonics, for example, claims its hyperspectral camera can reduce costs by mitigating false alarms created by steam.”
The oil and gas industry is by far one of the oldest industries to use sensors, where sensors have been used upstream to find oil reserves to monitoring for gas leakage along pipes midstream and measure metrics such as temperature and pressure, according to Madakasira.
“Over the past few years, the slump in oil prices has caused a ripple effect along the entire oil and gas value chain – from operators to services companies taking a strong hit,” he said.
“Companies have slashed their overall capital expenditure avoiding projects that cost billions to develop and take up to a decade to bring online.”
Lux Research analysts evaluated the investment patterns in different types of sensor technologies from 2006 to Q1 2016. Among their findings:
- North America dominates. Over 340 companies in the Americas attracted nearly 80 per cent , or $3.4 billion, of the total investment in sensor technologies since 2006. Europe, Middle East and Africa accounted for over $950 million, while Asia got $200 million.
- Innovative sensors top acquisitions. In the period since 2006, 45 sensor developers got acquired for a total of $1.5 billion. An overwhelming majority of the companies acquired focus on innovative sensors, with less than a handful built around processing and packaging solutions.
- Corporates have big plans. Corporate commitment to sensors is at an all-time high. Samsung is investing $13 billion, while Sony is raising $4 billion to ramp up sensor production. Panasonic has invested $780 million for image sensors while IBM is investing $3 billion in sensor data and Ford has opened an R&D center on sensors for transportation.