Drones Help Oil Companies Survive Downturn

Drones – unmanned aerial vehicles – have been in the headlines a lot lately.

Unfortunately, it’s been for all the wrong reasons: interfering with air traffic, obstructing firefighters from putting out wildfires, crashing into buildings…

There’s hasn’t been enough focus on the good news, which is that the commercial applications of drones continue to proliferate.

And there’s no better example than in the oil and gas industry.

Cut Costs With Drones

The use of drones in the oil industry isn’t exactly new…

  • In 2013, ConocoPhillips (COP) conducted the first drone flight in commercial airspace off the coast of Alaska. It used the ScanEagle, built by a subsidiary of Boeing Co. (BA).
  • In 2014, BP plc (BP) received Federal Aviation Administration (FAA) approval to use drones to monitor its pipeline network in Prudhoe Bay, Alaska. It’s using the Puma AE, built by California-based AeroVironment Inc. (AVAV).
  • Also in 2014, Royal Dutch Shell plc (RDS-A) began using drones from VDOS Global to inspect its flare stacks in the Gulf of Mexico.

Today, drones are becoming increasingly vital as energy companies use them to cut costs and stay competitive in the current, low price environment.

Drones are especially useful for inspecting and monitoring oil and gas companies’ vast array of infrastructure – from offshore oil rigs and pipelines to storage tanks and more – as they’re safer, faster, and more cost effective.

Inspection Drones Take Off

Imagine an oil rig miles out at sea in choppy waters. Roughnecks literally have to dangle from wires to inspect and then log any deterioration in the equipment. And they have to brave flare stacks that belch fire.

Helicopters are needed and ships stand by in case of an emergency. Rig operations are also shut down, costing a company nearly a million dollars per day.

Using this traditional technique, it takes about eight weeks to fully inspect just one rig.

But a small drone equipped with high-definition thermal cameras and a gas leak “sniffer” can do the job in just five days. And it only requires one engineer and a drone pilot. Rig operations can continue with no need for a shutdown, saving the company even more money.

The data captured by the drone allows a 3-D model of the rig to be built and any anomalies are mapped.

Drones are great for inspecting oil pipelines, too. BP says it takes a drone only 30 minutes to inspect a less than two mile section of its pipeline in Alaska. The same inspection takes nearly a week with an inspection crew.

Drone Inspection Players

There are a number of firms involved in this segment of the drone business. The list includes Britain’s Sky Futures and Scotland’s Cyberhawk Innovations. Demand for these companies’ services has more than doubled in the past year alone.

Also involved in the sector is PrecisionHawk of North Carolina. It has been mapping remote areas of Alaska for oil companies.

There’s also the aforementioned AeroVironment.

All of these companies benefit from the FAA relaxing its position on drones flying in U.S. airspace in early 2015. That effectively opened up the U.S. offshore rig market, the largest in the world. The Gulf of Mexico alone has a third of the world’s 10,000 offshore rigs.

The FAA move led Sky Futures Co-Founder and COO Chris Blackford to tell Bloomberg, “We will continue doubling, if not tripling, revenues over the next three to five years.”

Blackford may even be underestimating the potential annual revenue gains for these companies.

Oil and gas prices look to be set to be “lower for longer.” That will only intensify energy companies’ search for more cost savings. And drones are a perfect answer, especially as the technology improves year to year, allowing flying robots to do more and more of the dirty work humans once had to do.

Good investing,

Tim Maverick

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Drones – unmanned aerial vehicles – have been in the headlines a lot lately. Unfortunately, it’s been for all the wrong reasons: interfering with air traffic, obstructing firefighters from putting out wildfires, crashing into buildings… There’s hasn’t been enough focus on the good news, which is that the commercial applications of drones continue to proliferate....

Tim Maverick

, Senior Correspondent

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