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Driving Operational Excellence Through Digital Transformation in Oil & Gas

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Marcel Cappetti

Guest Blog by Marcel Cappetti, Managing Director, Oil and Gas, Global Enterprise Theater

I’ve just returned from CERAWeek in Houston—an international event that could be described as “Davos for the energy industry.” It’s a gathering of the power elite, including industry, finance, technology, and government leaders from around the globe. For me, it was the perfect sensing post for all the angst and opportunity that pervades the industry today.

It was my privilege to participate in a panel on “Leveraging Operational Excellence to Drive Margin Expansion”—a key concern of oil and gas (O&G) executives following the crash in oil prices. Too often in previous downturns, companies have relied heavily on deep cost cuts—including massive layoffs and cancelled projects—to keep margins afloat. But this time seems different. There is general agreement in the industry that we will not be returning to $100-a-barrel oil prices any time soon. So it’s time for more than a course correction. It’s time for digital transformation. Digital transformation will drive operational excellence and, yes, margin expansion.

Marcel at CERAWeek

During my talk last week, I shared highlights from a new Cisco study discussing the new reality in O&G and the opportunity for digital transformation through the Internet of Everything (IoE)—the networked connection of people, process, data, and things. Key findings include:

  • “Operational efficiency of existing projects” and “maintenance of assets and infrastructure” will be the top two areas of increased investment over the next 24 months.
  • O&G leaders clearly understand data’s potential—they named “data analytics for faster, better decision-making” as the No. 1 driver for IoE investment.
  • Business transformation—including breaking down organizational silos and converging IT and OT people, processes, and technologies—is essential for digital transformation. According to Cisco’s study, 59 percent of respondents do not believe their IT and OT organizations are aligned.
  • Companies that transform will have a significant bottom-line impact. Analysis by Cisco Consulting Services shows that by implementing a range of IoE-empowered solutions, oil and gas companies can capture their share of $600 billion of Value at Stake between 2016 and 2025. For a $50 billion firm, this translates into an 11 percent bottom-line (EBIT) improvement.

Cisco can help O&G companies in their journey to digital transformation through the investments we have made in key technologies—such as analytics, data, sensors, wireless, and mesh—and through solutions developed with key partners. For example:

  • Remote Operations—Developed with GE, our Connected Oilfield solutions increase personnel safety and improve asset integrity with predictive maintenance; real-time analytics at the edge and virtual expert support enable faster and better decisions.
  • Pipeline Automation—In partnership with Schneider Electric, Cisco’s Connected Pipeline solution uses analytics at the edge to improve security and environmental protection with predictive detection of pipeline intrusion, leakage, and deformation.
  • Wireless Operations—Developed in partnership with Honeywell and Emerson, this Connected Processing Plant solution improves personnel safety and process efficiency with wireless real-time tracking, video analytics, and automated incident response.
  • Secure Operations—Industrial cybersecurity solutions improve security and risk management to combat new and evolving cyber security threats, specifically in the process control domain. A good example is a project for Royal Dutch Shell that provides remote proactive monitoring and SLA-driven management of security, applications, and infrastructure. We are working with industrial control system delivery partners such as Yokogawa Electric and Rockwell Automation to support this solution, which Shell plans to deploy at all upstream, downstream, and lubricant sites.

When the price of oil stood at more than $100 per barrel, the need for oil and gas companies to improve operational efficiencies was primarily driven by the competitive marketplace—and many firms took no action at all. Read More »

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Manufacturing Customer IoE/IoT Globe Trotting: Part 1

From my home in North Carolina to San Diego, to Atlanta and all the way to Greater China—Shanghai, Shenzhen and Taipei—throughout April, I am presenting at several Manufacturing industry, Supply Chain executive, and Internet of Things (IoT) regional events, along with visiting all types of manufacturing customers. Earlier this month, I was at a customer advisory where we met with industrial thought leaders eager to share experiences (see Tony Shakib’s blog, “The Digital Factory: Real Solutions and Real Outcomes”). In the meantime, several of my colleagues exhibited Cisco industrial solutions this past week at Hannover Messe in Germany. Across the globe, manufacturers are wrestling with how to capture the opportunity and value associated with IoT and Internet of Everything (IoE) strategies. The good news is that the industry is thriving, alive and well and at the forefront of IoT adoption.

At the IoT Regional Forum in Atlanta last week, I had the opportunity to meet some manufacturing companies from the region and hear first-hand the challenges and address questions they had regarding automation and networking and the convergence of IT and OT, from technology to culture to organization. What I hear repeatedly are questions on how to tie together the various islands of automation and information that exist throughout most factories and across manufacturing enterprises. In addition, the lack of one integrated view results in delayed decision-making and responses to issues and problems that arise, and inhibit the introduction of new products and business models.

Often, we will assist our industrial customers with this IT/OT convergence by recommending a pilot or proof of concept approach to adopt wired-and-wireless networking architectures for use cases that demonstrate quick results and impact, and then more broadly adopt the technology across that and other plants within the enterprise. Interestingly, ARC analyst Greg Gorbach recently wrote up a blog proposing a “Let’s Just Try it” approach in profiling our customer Stanley Black and Decker.

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20 Years Hence – What Do Oil, Dating, Digital, and Analytics Have In Common?

How often do you think about the linkage of today’s digital Internet technologies with the gas that we put into our cars and the fuels that heat our homes? Probably not very often. In fact, for many years, I envisioned them as two separate worlds. Here’s why…

Back in 1995, when I met my wife and we were first dating, I distinctly remember talking with her father (now my favorite father-in-law!) Bill Dalgetty about his career at Mobil Oil. Like most senior Mobil executives, Bill started his career at a Mobil gas station and worked his way up over many years, eventually serving as the General Manager of Environment, Health and Safety for Mobil’s operations around the world. Read More »

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No matter how harsh is your work environment, Cisco has you covered

Cisco_IndustrialEthernetSwitches_2 27 14“Neither snow nor rain nor heat nor gloom of night stays these couriers from the swift completion of their appointed rounds.” – Popular US Postal Service motto

Many of my US colleagues have told me that they grew up hearing the phrase above and thinking how reliable their mail service is, even under the harshest conditions, they always got their mail. We in Cisco think that your network should be as reliable and resilient, and work under all conditions, particularly now when the Internet of Things (IoT) requires a level of resiliency at a scale never imagined before, and under conditions beyond what the traditional datacenter or wiring closet can offer.

These days, one of the challenges that the Internet of Things has to deal with is that it “…is already connecting the physical world today, but the real world, unlike the digital world, is much more uncertain and variable. We have to connect objects in unpredictable environments, often subject to Mother Nature or just the movement of our earth and its inhabitants…”

In fact Cisco defines the Internet of Things as “the intelligent connectivity of physical devices driving massive gains in efficiency, business growth and quality of life.”

In order to establish intelligent connectivity to physical devices, networking equipment have to be able to coexist in the same environmental in which the physical device are operating.

Very often, these physical devices are operating in harsh environments both from a temperature prospective (like in a smelting furnace or in a mining field located in Siberia), from a dustiness prospective (like in a cement production plant), from a vibrations prospective (like on a train or on a mining truck) etc.

To properly operate in these environments networking devices have to be specifically designed with highly ruggedized casing to protect the device’s internal components, and with specific connectors to avoid any possible water penetration or to get unplugged because of hard vibrations.

We’re excited to announce today an extension of our Industrial Ethernet portfolio adding a new series of IE2000 IP67 switches! Read More »

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IoE and KFC – The Possibilities are Endless

Well, 2013 was a whirlwind and the first month of 2014 has flown by with hypersonic speed.  We are definitely living in very unique and interesting times.  As I reflect on the past year, one obvious theme or revelation always comes to the forefront…..technology and the use of it is the common fabric that enables change in our lives, whether its social, economic or environmental. The use of or the abuse of technology has always been the underpinning foundation for change.

The beginning of the New Year is always interesting and fun for me.  I’m always intrigued, fascinated and often times amused by the pundits, prognosticators, “experts”, fortune tellers and the like who have never been shy about offering their viewpoints and perspectives on the trends and movements of the coming year.

Predictions:  Do You Hunker or Bunker Down?

In fact a very interesting….amusing story came out during the end of last year about a gentleman named Norman Feller, kfc3who went into a bunker for 14 years over the fears of the fallout from the Y2K virus.  Mr. Feller emerged from his bunker absolutely sober and of sound mind. In fact, Mr. Feller had the wherewithal to visit his local KFC restaurant and be absolutely amazed by the innovation of KFC’s “Double-Down” sandwich. The combination of putting together bacon, cheese and chicken fillets was earth…”bunker” shattering for Mr. Feller .  Now, I’m not sure if this story is actually folklore or true, but I do know that people and societies have various emotional responses to technology trends, predictions and/or “hype”

2014 Manufacturing Trends and Predictions

Manufacturing is no exception.  There are no shortage of predictions and trends being applied to the manufacturing industry.  One of the common technology trends being cited is the Internet of Everything’s impact on the industry. My colleague Chet Namboodri wrote an outstanding blog entitled, “Predictions 2014: Wager on the Internet of Everything”   He leverages the expertise and research from Bob Parker,  IDC Group Vice- President, to provide insights and predictions on how IoE will have a profound impact on manufacturing markets and industries.

I think we can all agree that we are living in amazing times with wonderful possibilities.  The world is “smaller” and more connected.  The changes we promote and execute against will affect not only our next-door neighbor, but our trans-continental neighbors.

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