SAN LUIS OBISPO, CA.–Oil and gas companies need reliable and low-risk ways toboost profitability and stimulate growth. By taking an enterprise-level approach toinformation access and sharing, smart organizations can streamline their business processes,achieve greater operational efficiency and ultimately extract greater value from assets.Industry volatility, financial upheaval and slashed budgets are forcing oil and gas

companies to make tough choices about the strategies and investments that will keep themcompetitive, both today and in the future. What is the most effective approach to addressthese challenges?The options may include drilling for new wells or “drilling on Wall Street” through a

merger and acquisition strategy. But both of these approaches, while potentially lucrative,also come with high risks.Alternatively, an organization can drill into its core enterprise processes and systems to

achieve greater operational efficiency, reduce information technology costs, and improvesupply chain performance. It is this form of “drilling” that offers the greatest opportunityto maximize the value of existing assets. In fact, a company that increases operationalefficiency by 10 percent should be able to realize a return equivalent to expanding wellcapacity by the same amount, but at a fraction of the cost and at far lower risk. There arethree key steps that companies can take that will lead to a leaner, more productive andmore profitable oil and gas enterprise.

“Drilling” into core enterprise processes and systems offers the greatest opportunity to maximize the value of existing assets, enabling oil and gascompanies to achieve greater operational efficiency, reduced information

technology costs, and improved supply chain performance.

Enterprise-Level ApproachTo Information Access, SharingDrives Value Creation Process

By Steve Robb

The “Better Business” Publication Serving the Exploration / Drilling / Production Industry

JANUARY 2010

Reproduced for CygNet Inc. with permission from The American Oil & Gas Reporter

The first step is to consider provenoperational models from other industries.Many manufacturing industries (includingautomotive, consumer packaged goods,high-tech/electronics and retail chains)have recognized that optimizing opera-tional and supply chain processes arecritical to thriving in the face of financial,industry and market challenges.

For example, Walmart owes its lead-ership position in retail to its operationaland supply chain management practices,which have delivered better customerservice and lower costs. Dell, a pioneerin the personal computer industry, droveefficiencies that allowed it to hold lessthan four days’ worth of inventory at anygiven time compared with more than 30days for many competitors, giving thecompany a huge cost advantage.

Oil and gas companies can realizebenefits similar to those achieved in otherindustries by studying proven operationalmodels such as the supply-chain operationsreference model–a cross-industry processreference model for supply-chain man-agement developed by the Supply ChainCouncil–and by applying comparable ITapproaches for streamlining operationaland supply chain processes at the enterpriselevel. But to do so, oil and gas companiesalso will need to change the way theythink of themselves.

Team Approach

That leads to the second step: Rethink-ing the company culture and recognizingthat today’s industry is about collaborationand partnerships. Companies that want tosurvive can no longer cultivate a culturethat encourages individual departmentsto “go it alone.” All too often, key specialistssuch as geologists, accountants, schedulers,and sales and marketing professionals op-erate within their own silos, working in-dependently and routinely handing offinformation to each other instead of trulycollaborating. In an environment whereindividual contributions are valued aboveshared progress, operations are seen as aminor facilitator at best, necessary butnot really important to how the companyaccomplishes its strategic goals.

However, today’s modern manufactur-ers–and an ever-growing number of oiland gas companies–have adopted muchmore of a “team sport” mentality. Insteadof simply rewarding individual departmentsfor their achievements, smart organizationsmeasure success based on the contributionsthat players make toward moving the ballforward for the entire enterprise. Afterall, a company can have an excellent salesand marketing team, but if the geologistsare underperforming (or vice versa,) thebig-picture objectives of maximizing prof-itability, growth and competitive advantage

are not going to be met.In a collaborative enterprise culture,

operations function more like the teamcoach, playing a vital role in helping allthe players do a better job of working to-gether to achieve the same common goal.And once the team of internal departmentsis collaborating efficiently, the companyis in a position to work with upstreamand downstream partners more effectively,essentially broadening the collaborativenetwork to include the extended supplychain.

Oil and gas companies that have adopt-ed this team approach report significantreturns on investment, but creating a col-laborative culture depends on having toolsin place that enable easier informationaccess and sharing. And for that, compa-nies need an enterprise operations platformthat can do far more than is possible withtraditional supervisory control and dataacquisition systems.

Enterprise Operations Platform

The third step is to change technologyfrom SCADA to an enterprise operationsplatform (Figure 1). To collaborate effi-ciently and optimize relationships withpartner organizations, every departmentwithin an oil and gas company needs im-mediate access to usable informationdrawn from field data and other sourcesystems throughout the enterprise.

While the SCADA systems traditionallyused by the industry have helped organi-zations automate data collection, theycannot meet today’s more complex in-formation challenges. In a highly dynamicoil and gas market, operations teams needreal-time insight into what is happeningthroughout the enterprise and extendedsupply chain for planning, delivery andshipment. Marketing teams must be ableto capitalize quickly on every opportunitythat arises. And executives must be em-powered to make the best possible deci-sions in the face of increasing volatilityrelated to reserve evaluation and com-modity prices. Examples of specific, real-world questions that need to be answeredinclude:

• How much excess capacity is avail-able for sale right now?

• On a per-well basis, where is actualproduction versus designed or plannedproduction?

• What geographical issues, such as

Enterprise-Level Information Access and SharingFIGURE 1

Enterprise/Operational

Tech Trends 2010

right-of-way access, and environmentalissues are relevant to the troubleshootingevent?

• Have all the data been collected tofacilitate the monthly close process?

It is time for companies to break freeof the limitations of trying to adapt to thelatest generation of customized SCADAsolutions in order to meet today’s con-stantly changing industry requirements.Instead, an organization would do wellto adopt an enterprise operations platformthat centralizes data from multiple sourcesystems and presents real-time informationto users throughout the company. Incor-porating all major industry standards, theplatform must also provide real-timeaccess to this information from any stan-dard desktop or mobile device.

By implementing systems that collectinformation about standardized processesin a much more formalized way, oil andgas companies also can realize a sidebenefit: They are better positioned tomeet the challenge of a graying workforceand meet the “great crew change” headon. According to some reports, more than25 percent of the workforce will havethe option to retire within five years, andthat number jumps to 50 percent in 10years). In addressing this challengingtalent gap issue, it will become increasinglycritical to codify successful processes inan operational system so they can be re-peated by less experienced staff.

Finally, by centralizing data from mul-tiple systems and distributing usable in-formation throughout the organization,the architecture of the enterprise operationsplatform can directly support IT cost-saving initiatives such as server consoli-

dation, server virtualization and data centerconsolidation.

Making Data Usable

To make massive amounts of data col-lected from tens of thousands of geo-graphically distributed field devices un-derstandable to nonoperational users inmarketing, scheduling and finance, datamust be represented in a natural or nor-malized manner. For example, “register# 661, device FR_111 has a value of152.03” may be useful to operations, butit is likely meaningless to a marketingrepresentative who just needs to knowhow much gas is moving through a meteror station.

Based on a unified data model, an en-terprise operations platform develops astandard terminology so it can transformdata from any source system into usableinformation in any target system, providingbusiness users with the exact informationthey need for their particular tasks.

Over the years, large oil and gas com-panies have deployed an array of corporatesystems and operational devices basedon the evolving standards of the day, andtoday’s users access the information storedin a myriad of back-office systems throughdesktop computers, notebooks, tablet PCs,smart phones, Web browsers, instant mes-saging, wikis, and more. The informationalso is transferred across a wide range ofcommunication mediums using a multitudeof methods and protocols: local area net-works, wide area networks, virtual privatenetworks, the Internet, satellite, cable,leased lines, cell phones, XML, WebServices, .NET, ODBC, etc.

An enterprise operations platform sup-

ports all these enterprise standards and de-vices, and is able to adapt as the enterpriseand industry continue to evolve. By creatinga single, complete ecosystem backed by asingle vendor, the enterprise operationsplatform makes it easy for companies tokeep their technology infrastructure in tunewith their changing strategic needs andthe evolving industry. The highly scalableplatform includes all the SCADA featuresthat operations is accustomed to using (his-torian, alarms, notifications, calculationengines, etc.) along with new capabilitiesbusiness users want and need, such as:

• Enhanced gas measurement data col-lection;

• The ability to integrate geographicinformation system asset managementcapabilities with operating conditions andcore business management applications;and

• APIs so users can access the datafrom their custom applications.

As economic and market forces con-tinue to squeeze oil and gas companies,they will make critical investment andstrategic decisions that will reshape theirdestinies. They can drill for new wells,drill on Wall Street, or drill right into theheart of the enterprise itself. All threestrategies have value, but addressing en-terprise efficiencies is a low-risk, low-cost option that makes sense in today’schallenging business environment. Com-panies that are willing to learn from thesuccesses of other industries, which takea team approach to enterprise collaborationand deploy tools that enable real-timeprocess optimization and informationsharing, will be best positioned to meetthe challenges ahead. r

STEVEROBB

Steve Robb is vice president of business development at CygNet. In this role, he oversees thecreation and execution of key strategic programs that drive market awareness, customeradoption and partner programs for CygNet's enterprise operations platform software andindustry solutions. Robb has more than 20 years of industry experience and has authorednumerous articles for leading industry publications. Prior to CygNet, Robb spent 13 yearsleading sales of automation and real-time enterprise data management solutions to the utility,energy and environmental industries. During his tenure, Robb led the successful entry into twonew market segments and negotiated key agreements with Fortune 500 Energy companies.Robb has completed extensive business and technical coursework at Canada's Niagara College,Mohawk College, and the Saskatchewan Institute of Applied Technology. He holds certificationsfrom the Ontario Association of Engineering Technicians and Technologists (OACETT), as wellas the Alberta Society of Engineering Technicians and Technologists (ASET).

Tech Trends 2010