The Hottest, Smartest Oil & Gas Investment: M2M

Smart grid technology had everyone excited a few years back but 2010 and 2011 were rather anticlimactic. The problem was that it wasn't smart enough - it was all over the place, suffering from an identity crisis. Last year, though, it started to get smarter by getting bigger and combining forces.

But by far the hottest arena in the smart grid world is machine-to-machine (M2M) technology - an industry worth $1 trillion!

Here's why: It is relevant to nearly every sector and used by everyone from the oil and gas industry to private home owners.

And it's about to get bigger because 1) the cost of sensors used to make M2M possible has fallen so much that they are BEYOND commercially viable; and 2) wireless networks are now cheap and everywhere. 

The forward-looking investor will certainly see the opportunity here - and now. And there is no lack of support - from mobile network operators to the US government, which is keen to promote any form of smart grid investment.

It also helps that when M2M tech succeeds in connecting everything in the average home via the internet, it could result in a reduction of CO2 emissions by 7.1 gigatons by 2020.

The phenomenon of the connected home - or machine-to-machine networking (M2M tech) - will be THE foundation of new smart grid technology over the next 7-10 years.

We can't get enough of it. Sensors are the next frontier in technology and networked machines that can exchange data without human intervention boost productivity. Some predict that by 2020, over 30 billion things will be connected and over 200 billion things intermittently connected.

We can't live without it, just ask anyone who uses a GPS navigation system in their car.

In the health care sector, M2M is also breaking down walls we didn't even know existed - it can save lives and reduce healthcare costs. There are even "smart pills" that record body changes, measure the effects of medication and keep a record of intake.

The Oil & Gas Industry - The Biggest M2M Potential

M2M device use in the oil and gas industry is set to more than double, as these technologies (including SCADA Telemetry - supervisory control and data acquisition) emerge as key differentiators in expediting oil and gas exploration and accelerating operational efficiencies.

Adopting M2M early on enables remote monitoring and allows for more flexible control of assets from wellhead to pipeline. It also enables fiscal metering, drilling monitoring and fleet management, as well as worker safety and accident response.

It means higher productivity and eventually, lower costs for the oil and gas industry.

This is the important part: The number of devices with cellular or satellite connectivity deployed in oil and gas applications worldwide is expected to rise more than 20% over the next several years. So right now we're in a strong growth phase that should see M2M devise delivery to the oil and gas industry triple by 2016: from 164,000 at the end of 2011 to 435,000 by 2016, according to Berg Insight.

The top two applications? In-land pipeline monitoring and onshore well-field-equipment monitoring.

The drivers are new regulations, rising operating costs (think unconventional drilling) and increasing competition (a lot more players on the field, and the rising ranks of the juniors).
"Advanced SCADA and wireless M2M solutions can help stakeholders to comply with regulations and meet the high demands on security and efficiency that come with oil and gas operations. "Wireless M2M, remote automation, control and monitoring are also key ingredients in order to make it cost effective to extract, transport and distribute emerging oil and gas products, including LNG and unconventional resources such as shale gas and heavy oil," Berg Insight notes.

And here's where renewable energy comes in: analysts predict that by 2020, some 27,000 off-grid remote sensing power systems (including oil and gas industry SCADA) will be deployed using renewable or alternative energy.

Because these off-grid power systems for remote sensing applications often need to be self-contained for months at a time - and for the oil and gas industry often in remote environments - renewable energy may be more viable. Right now powering these remote systems for a long period of time is a key focus. So far, the options are trickle-charging the battery or replacing the battery in the hopes of keeping things operating autonomously for at least a year.  Now industry leaders are examining how we can use renewable or alternative energy to keep these remote sensors online without interference.

We're sure M2M is set for amazing growth, and supporting this growth will be the focus on unconventional oil and gas plays and the particular penchant for new, risky frontiers and remote locations.