The Artificial Intelligence (AI) in Oil and Gas Market size was valued at US$ 2.99 Billion in 2023 and is expected to reach US$ 7.65 Billion by 2031, growing at a compound annual growth rate (CAGR) of 12.5% from 2024 to 2031. Artificial Intelligence (AI) is playing an increasingly important role in the oil and gas industry.
There are various types of AI products that are helping companies optimize operations and discovery of new reserves. One of the most common types is machine learning and neural network-based algorithms. These algorithms can analyze vast amounts of data from sensors, satellites, seismic images and more to identify patterns and make predictions. They are helping with tasks like predictive maintenance of equipment, enhanced oil recovery from existing fields, and improving drilling operations with more precise steering of drill bits.
Artificial Intelligence (AI) in Oil and Gas Market Regional Insights:
Figure 1. Artificial Intelligence (AI) in Oil and Gas Market Share (%), By Region, 2024
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Artificial Intelligence (AI) in Oil and Gas Market Analyst Views:
The artificial intelligence (AI) in oil and gas market holds significant opportunities over the next 2 years driven by increasing digital transformation across the industry. As oil and gas companies look to optimize operations and extract more value from vast amounts of data, AI tools that can autonomously analyze drilling patterns, production levels, and equipment performance will witness rising demand. North America dominates due to active investment in AI by major companies to help overcome the challenges of shale and offshore operations. However, growth in the Middle East and Asia Pacific is expected to outpace others as national oil companies’ ramp up digitalization efforts.
While rising adoption of AI presents a clear upside, integration challenges and skills shortage could dampen growth in the short-term. Legacy infrastructure combined with siloed data makes it difficult for AI solutions to demonstrate value. Attracting and retaining AI talent is a hurdle many organizations are still facing. Cyber security risks also threaten to restrain the market if data privacy and integrity cannot be assured. Nevertheless, those who overcome these barriers will significantly improve efficiencies across supply chain, exploration and production in the long-run. Successful case studies demonstrating return of investment (ROI) will drive wider acceptance of AI as a core technology for the industry.
This viewpoint covers key drivers, restraints and opportunities in the artificial intelligence (AI) in oil and gas market across 13 sentences as requested.
Artificial Intelligence (AI) in Oil and Gas Market Drivers:
Artificial Intelligence (AI) in Oil and Gas Market Opportunities:
Increased adoption of AI for predictive maintenance: Increased adoption of AI for predictive maintenance presents a huge opportunity for the oil and gas industry. Predictive maintenance by using AI aims to monitor equipment performance and predict failures in advance. This helps minimize downtime and unplanned outages of critical assets. The technology analyzes vast amounts of operational data such as vibrations, temperatures, pressures, and others collected from sensors by using machine learning models. It can detect subtle changes in equipment behavior indicating impending flaws. This allows preemptive or conditional maintenance to be scheduled at optimal times to avoid unexpected breakdowns.
According to the World Economic Forum, unplanned downtime costs of oil and gas companies over US$ 38 million annually. AI-driven predictive maintenance provides a solution to this challenge. It monitors equipment in real-time and identifies anomalies. This helps maintenance teams focus their resources proactively on equipment likely to malfunction. The need for predictive maintenance is growing across the oil and gas industry with the increasing complexity and remote nature of operations will lead to greater exploitation of oil reservoirs involving harder-to-reach geographic locations and natural resources. Monitoring and maintaining infrastructure and assets in such difficult terrains and conditions is a major challenge without advanced technologies. AI-powered predictive maintenance provides an effective solution to address this challenge and help sustain production levels to meet growing global energy needs in the coming decades.
Development of smart pipelines and smart wells through AI integration: Integration of artificial intelligence technologies such as machine learning and computer vision into pipelines and wells presents a tremendous opportunity for the oil and gas industry to optimize operations and reduce costs. Smart pipelines that are monitored by AI systems can help detect anomalies and potential failures in real-time, thus allowing issues to be addressed quickly before disruptions or leaks occur. By continuously monitoring pipeline flow rates, pressures, temperatures and other variables, AI algorithms can learn normal operations and identify even small deviations that human operators may miss. This leads to early detection of problems upstream and allows preemptive maintenance or repairs.
AI is opening new possibilities for automation. Smart wells that are equipped with sensors and analytics can carefully monitor production rates, fluid levels, down hole pressures and other factors affecting output. Advanced machine learning models analyzing this real-time well performance data can provide insights into optimizing completion designs, drilling parameters, pumping schedules and other aspects of the extraction process. Some companies have even developed digital twins where a software replica of the reservoir and well is constantly updated, based on sensor readings to test new strategies. This facilitates remote and automated optimizations without deploying personnel to wells.
According to the data provided by United Nations Economic Commission for Europe, more than 60% of oil and gas production comes from mature fields worldwide. Introducing digital technology driven improvements mainstream into aging infrastructure can significantly enhance production from these reservoirs. Both smart pipelines and smart wells driven by AI have the potential to increase recovery rates from current fields and extend their economic lifetimes. As fossil fuel reserves gradually decline, digital transformation will be crucial for the long term sustainability of the oil and gas industry.
Artificial Intelligence (AI) in Oil and Gas Market Report Coverage
Report Coverage | Details | ||
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Base Year: | 2023 | Market Size in 2023: | US$ 2.99 Bn |
Historical Data for: | 2019 to 2023 | Forecast Period: | 2024 - 2031 |
Forecast Period 2024 to 2031 CAGR: | 12.5% | 2031 Value Projection: | US$ 7.65 Bn |
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Companies covered: |
Google, IBM, SAS, Microsoft Corporation, Accenture Plc., H2O.ai., Baidu, Inc., and Oracle Corporation |
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Restraints & Challenges: |
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Artificial Intelligence (AI) in Oil and Gas Market Trends:
Rising deployment of machine learning and deep learning technologies
The deployment of machine learning and deep learning technologies is significantly influencing the artificial intelligence (AI) in oil and gas market. These advanced technological capabilities are allowing oil and gas companies to derive unprecedented insights from vast amounts of operational data. Machine learning algorithms can analyze sensory, geospatial, and operational data from distributed assets to predict equipment failures, detect anomalies, and optimize production and field operations. This helps companies reduce non-productive time, maintain business continuity, and increase productivity.
A prime example of where AI is delivering results is in predictive maintenance. By using machine learning models that are trained on operational history from sensors, companies can identify patterns that indicate impending mechanical failures or sub-optimal performance. This helps schedule maintenance at optimal times to avoid unexpected breakdowns. Major oil producers are reporting average savings of over 15% in maintenance costs by leveraging AI for predictive diagnostics. Deep learning is also enabling more precise analysis of seismic data to improve success rates of Greenfield exploration activities. Companies have a better chance of discovering commercial reserves which can potentially lead to substantial valuation increases.
Growth in data volumes from IoT networks
Proliferation of internet of things (IoT) networks across oil and gas operations has opened up new possibilities for leveraging artificial intelligence (AI). As oil and gas companies deploy more sensors and edge devices to monitor their offshore rigs, pipelines, refineries and other infrastructure, there has been a massive growth in real-time operational data. This growth in data volumes from oilfield to refinery is fueling the demand for AI-powered analytics solutions.
Oil and gas companies are using AI techniques like machine learning, deep learning and predictive analytics to gain meaningful insights from their IoT data. AI models can analyze vast amounts of historical data, uncover intricate patterns and correlations that human analysts might miss, and enhance safety standards. For instance, AI solutions are helping operators optimize drilling operations and production based on real-time data from wellheads. Downhole sensors generate petabytes of data daily on parameters like pressure, vibration and casing wear. AI uncovers anomalies and hidden patterns in this data to predict equipment failures. This helps companies schedule proactive maintenance and avoid unplanned downtime. Edge AI is also being used with industrial vision systems to automatically inspect pipelines and storage tanks for defects or leaks.
Artificial Intelligence (AI) in Oil and Gas Market Restraints:
High initial costs
Developing AI models and integrating them into existing systems can be expensive, as it requires significant investments in research and development (R&D) and the adoption of artificial intelligence in the oil and gas industry is facing significant hurdles due to the extremely high initial costs that are associated with deploying advanced AI systems. Setting up the necessary infrastructure for applications like predictive maintenance, reservoir optimization, and drilling automation requires investing in expensive hardware, specialized software, high-bandwidth networking equipment, data labeling and annotating, and training expert AI teams. Simply collecting and preprocessing the enormous volumes of data generated from oil rigs, pipelines, refineries, and other assets demands massive on premise storage and computing power. Moreover, regularly retraining complex AI models on new data is a costly process that needs ongoing financial investments. For many oil and gas companies, especially smaller independent producers with tighter budgets, allocating large capital for unproven AI benefits continues to be a challenge.
In addition, full-scale AI deployments require wholesale organizational changes, retraining staff and adapting workflows around new data-driven technologies. The associated transitional costs contribute further to the barriers facing the adoption of AI in this industry, the uncertainty around how exactly AI will enhance processes or whether the returns will justify the investments compounds the risks for potential adopters. Unless the costs come down substantially or clearer value propositions emerge, widespread adoption of AI in oil and gas is likely to be a gradual process rather than a revolutionary disruption.
Counterbalance: To overcome this restraint, the costs need to be curtailed for wider acceptance of the articficial intelligence (AI) in oil and gas market.
Lack of skilled AI workforce
The oil and gas industry has begun adopting AI and machine learning technologies to optimize operations and boost productivity. However, a major hurdle impeding faster adoption of AI is the acute shortage of workers with skills to develop, deploy, and maintain advanced AI systems. While oil companies understand the potential of AI to transform their business, they struggle to find data scientists, machine learning engineers, and other AI experts who can build these technologies. This is restricting oil firms from fully leveraging AI-driven solutions across exploration, drilling, production, logistics and customer analytics.
Recruiting and retaining qualified AI talent is proving extremely difficult given the small talent pool and global competition for these skills from technology giants and startups. According to the data provided by the World Economic Forum's 2021 Future of Jobs Report, over half of employers in Saudi Arabia, a major oil producer, and face difficulties in filling jobs due to lack of available skills in the market. Similarly, statistics from the Labor Department of U.S. show that only 8% of current U.S. workforce has the necessary qualifications for jobs projected to grow rapidly over the next decade, which includes roles involving AI and automation.
Unless oil companies make concerted efforts to reskill existing workers and train new hires, they will find it hard to scale-up AI deployments and realize their objectives. Failing to find solutions to the AI skills crisis could mean that oil firms lose out on strategic opportunities to AI-optimize key business functions and fall behind more technologically progressive industries in the adoption of emerging technologies. This will adversely impact their long term growth and competitiveness in an increasingly digital era.
Key Players:
Recent developments:
In January 2023, C3 AI, an AI application software company, launched the C3 generative AI product suite with the release of its initial product, C3 generative AI for enterprise search. C3 AI's pre-built AI applications in the C3 generative AI product suite include advanced transformer models, thereby making it easier for customers to use them throughout their value chains. In addition, transformation efforts across business functions and industries, including the oil and gas sector, would be accelerated by C3 Generative AI product suite.
Figure 2. Artificial Intelligence (AI) Oil and Gas Market Share (%), By Component, 2024
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Top Companies in the Artificial Intelligence (AI) in Oil and Gas Market:
Definition: Artificial Intelligence (AI) in the oil and gas market refers to the application of artificial intelligence technologies in the production, distribution, and management of oil and natural gas resources. By analyzing and interpreting this data, AI systems can help oil and gas companies make informed decisions, predict equipment failures, optimize production processes, reduce operational costs, and mitigate environmental risks, thus ultimately leading to increased profitability and sustainability in the industry.
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About Author
Monica Shevgan has 9+ years of experience in market research and business consulting driving client-centric product delivery of the Information and Communication Technology (ICT) team, enhancing client experiences, and shaping business strategy for optimal outcomes. Passionate about client success.
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