Northern Sky Research

Energy Markets and O3b: A Niche of a Niche

Apr 29th, 2013 by Brad Grady   More from this Analyst | Profile

As O3b’s first set of satellites arrives in French Guiana, there exists a small, but high-end market segment awaiting the arrival of ‘fiber speeds with satellite coverage.’ This segment (Exploration & Production, and Mining operations) is where O3b’s larger ground infrastructure requirements will find themselves deployed across the energy markets- the highest end of an already high-end market.  However, actual fiber deployments are likely on the roadmap and will affect O3b’s build out in this segment.

According to NSR’s Energy Markets via Satellite, 3rd edition, which assesses the market opportunity for satellite services across the oil and gas, mining, and utility segments, O3b will generate less than 200 in-service units by 2022 – out of more than 460,000 In-service MSS and VSAT in-service units in the Energy Markets by 2022.  Concentrated in the Exploration & Production segment who have clear bandwidth demands and latency remains a critical concern, end-users in both the E&P and mining segments will provision their networks to a combined total over 2.75 Gbps.  But, the story does not end at fiber deployments, as an O3b solution moves from the primary communications path to a full-backup redundancy solution. 

With decade-long investments, and daily revenue intake from the extraction of oil, gas, or minerals upwards of tens of millions of dollars, these large operations can easily justify the expense of deploying terrestrial fiber – even to locations far offshore – and they have requirements for robust, redundant communications design.  However, fiber deployments take time –five years or longer from planning to pinging depending on the location, and with millions of dollars on the line, O3b could be poised to enter the market at the right time, with the right offering.  Even once fiber is deployed at the site, multi-path redundancy and network resiliency become key design features of a hybrid O3b-fiber network architecture.

Although oil prices continue a relative decline, due in-part to increased shale gas production across the globe, corporations are only further incentivized to deploy sophisticated cost-controlling workflows to the most remote corners of their operations: data-intensive logistics solutions, real-time HD video conferencing and remote diagnostics drive bandwidth demand on the enterprise side.  The ever-present shortage of highly skilled workers willing to go to the corners of the earth continues to diminish, and those willing to go refuse to leave their IP-enabled devices at home.  And, in a post-Macondo world, remote monitoring and oversight through company or government policy is almost a given.  Together, these all drive the needs for bandwidth at the largest of E&P or mining locations beyond the capabilities of all other satellite connectivity solutions.

Also, in the age of the cloud, SCADA and near-time data transitioning to real-time data latency is increasingly a concern of the high-end O&G and mining end-users.  As perhaps its real long-term competitive advantage against other satellite services, O3b’s MEO-HTS network promises to deliver low latency, high bandwidth and competitive prices to these demanding end-users.  Combined, O3b’s big pipes and low latency can significantly alter the perception of satellite connectivity to the highest-end energy market segments.

Bottom Line

The next few years will bring revolutionary changes to the amount of satellite bandwidth available to end-users across the Oil and Gas and Mining sectors.  Amongst large, remote sites, O3b is likely to see good adoption rates; however, these sites remain a niche of a niche where fiber is almost a given - it is just a matter of when.  Going forward, O3b will need to continue their development of smaller, compact ground infrastructure to deploy their low latency, high throughput service at smaller end-user locations and thus increase their addressable market.

Information for this article was extracted from NSR's report Energy Markets via Satellite, 3rd edition.