IDC Energy Insights Community > Oil & Gas Blog

IT Impacts from the BP Oil Spill (2 Comments)

Thu, 29 Jul 2010 20:14:20 +0000

Entry

With the BP oil spill successfully capped, at least temporarily, and the completion of a relief well in sight, it's time to look forward and assess the impact this disaster will have on energy regulations and policies in the United States and, in turn, how these changes will impact IT investments by oil and gas companies. We expect to see broad federal and state regulatory and policy changes as the result of the BP oil spill that will significantly increase regulatory requirements related to health, safety, and environment (HSE) in the oil and gas industry. These changes are predicted to increase spending by oil and gas companies on a range of technologies. Ultimately, however, the oil and gas industry must go beyond technology changes and invest in changes to its people and processes to achieve the standards of environmental protection and worker safety demanded by all stakeholders.

Our recently published report IT Impacts from the BP Oil Spill analyzes the impact in three areas - HSE and EAM systems, application and data integration, and advanced analytics.

We expect new regulatory requirements resulting from the BP oil spill to drive increased investment by oil and gas companies in HSE system enhancements, upgrades, and replacements. Software vendors that could benefit from this increased spending include SAP, IHS, Enviance, and Syntex. Expected regulatory changes may also accelerate the upgrade of work and asset management systems, thus increasing the growth rate in spending. Software vendors that could benefit are IBM, Oracle, SAP, and ABB (via its recent acquisition of Ventyx).

Oil and gas companies will also increase their investments in integration and process automation middleware in response to the application integration issues raised by the BP oil spill. Software vendors that could benefit from this increased spending include IBM, Oracle, SAP, and TIBCO. Consulting and system integration firms are also likely to benefit from this increased spending. This trend may also accelerate the adoption of data exchange standards, especially WITSML for drilling data and PRODML for production data.

Due to the tremendous complexity of deepwater offshore drilling, it is becoming increasingly difficult for human operators to predict and respond to problems as they occur. Advanced analytics, especially predictive analytics and real-time or streaming analytics, can help address this issue.We also expect that lessons learned from the BP oil spill will drive increased investment by oil and gas companies in advanced analytics. Enterprise software vendors that could benefit from this increased spending include SAS, IBM, TIBCO, and Teradata. Certain specialty vendors that focus on the oil and gas industry such as SmartSignal and Tessella may also benefit.

ETRM in a Postrecession Environment

Tue, 13 Jul 2010 16:41:49 +0000

Entry by Catherine Madden

Entry

We just completed a new piece of research focused on Energy Trading and Risk Management (ETRM) (Technology Assessment: ETRM in a Postrecession Environment, Document #EI224023). The report presents the results of the IDC's 2010 Vertical Group Survey of oil and gas companies. Overall, the survey indicated that nearly a third of oil and gas companies have not implemented an information technology (IT) solution to manage their ETRM operations. And, 2010 IT budgets remain under pressure and generally are still below that of 2008. This is creating a general sentiment among oil and gas companies to not invest unless they have to. For ETRM vendors, oil and gas companies indicate that IT is very focused on applications that have a high level of functionality.

The economics for the market remain volatile and traditional metrics of market health remain out of alignment; however, fundamentals are much stronger than 2009, and it is reflected in the size and number of deals for energy trading and risk management (ETRM) applications. In 2010, oil and gas companies are dependent on ETRM applications to get a complete view of their portfolios, which supports greater transparency and understanding of the level of risk the enterprise is exposed to as market conditions continue to fluctuate.

In the current environment, the supermajors have really trimmed down their portfolios, and there is no indication that the mood is changing for the largest oil and gas companies. For midtier energy companies, vendors are seeing a much higher level of activity, in part due to refiners. In the tight margins of the downstream segment, there has been a continued demand for systems that support an improved view of their P&Ls.

For the smaller energy companies, but ones that have large consumption patterns or distribution networks, there has been an increased amount of participation. These energy companies are increasingly in the market to acquire a system. However, these deals can fall apart quickly due to their dependency on cash flow at the company. Meanwhile, among midstream companies (pipeline), there has also been an increased level of activity.

Interestingly, there has been more churn than we would have expected in the down market. However, at the same time, there are noticeable exceptions. Interviews with ETRM vendors indicated that there were a handful of incidents that resulted in some large oil and gas companies halting the bid process for new applications. In these instances, large energy companies may have gone through a full system evaluation and then did not execute the bid process.

At the same time, several vendors noted that deals in the last six months were not always budgeted including several large size deals. Vendors need to be aware that in some cases, oil and gas companies are approving deals despite the lack of IT budget.

Additionally, the report includes data on spend for ETRM in North America; importance of ETRM to oil and gas companies; and how oil and gas companies consume ETRM.

Are you seeing similar conditions in the market? Completed any deals that were not budgeted?

Read the related press release here.

Using the Cloud for Design and Construction Collaboration (2 Comments)

Thu, 03 Jun 2010 15:52:01 +0000

Entry by Jill Feblowitz

Entry

For asset intensive industries like oil and gas that are continuously involved in large projects, getting multiple parties together to share information has always been a challenge. Then too, many of the newer sources of oil require more joint ventures. The holy grail is to be able to have a consistent view of up-to-date information across the project life cycle - from design bidding, to design, to construction bidding, to construction, to as built, to operations and maintenance and finally to retirement of the asset. Sharing specifications, drawings and other documents, while insuring appropriate approvals, has always been labor intensive and subject to version confusion. Companies like Autodesk and EMC have worked on the technical aspects of sharing and storing structured and unstructured data and supporting workflow along with document version control. Now this functionality moves to the cloud.

We recently talked to Aconex about their approach to project collaboration. The company offers a Saas model to bring all the parties together for sharing data. This reminds us of what some were trying to accomplish during the dot.com era. Then, there was a lot of attention paid to exchanges which brought together companies and their supply chain partners. Now this trend has morphed into Saas platforms. The volumes are impressive. A gas well project that Aconex supports in Australia has 2,360 users from 89 companies. Project mail volume was clocked at 531,600 and their platform managed 368 gigabytes of data. For some documents, personnel using Aconex can view and mark up at the same time.

Of course, in the Saas arrangement, each company involved has their own document management systems internally, but Aconex has worked with Microsoft to Sharepoint easily accessible to the platform. Scale across many clients and partners does not seem to be a problem as Aconex claims to be able to handle terabytes of data globally, with security and redundancy built in. An interesting feature in the high turnover construction industry is that users and/or companies need to be set up only once and then can be granted access to the next project.

Collaboration means many things in the oil and gas industry. 3-D visualization is still a challenge given data volumes – systems just aren't fast enough right now to be able to support 3-D. But collaboration using the cloud seems to be arriving. Aconex is not the only providers, of course. Autodesk, with its acquisition of Buzzsaw in 2001 and subsequent acquisition of Constructware in 2006 is heavily in the game. And the path forward for EMC is with the cloud as well.

Keywords

Cloud computing

Regulation in a Post-BP Oil Spill World (4 Comments)

Wed, 02 Jun 2010 19:00:28 +0000

Entry by Rick Nicholson

Entry

I just finished moderating a panel discussion on oil & gas industry regulation at the Next Generation Oil & Gas Summit Latin America in Panama and thought I'd share some of the discussion points. As you can imagine, much of the discussion, both in formal sessions and in informal conversations, centers on the BP oil spill in the Gulf of Mexico and the impact it will have on the oil & gas industry. This morning's panelists included:

Juan Carlos Zapeda - President of Mexico's National Hydrocarbons Commission
Santiago Ferro - Uruguay Round Coordinator for ANCAP, Uruguay's NOC
Gustavo Navarro - Mgr. of Production and Planning for Petroperu

The general consensus is that the BP spill, like the Exxon Valdez spill that preceded it, will inevitably cause a number of changes in oil & gas industry regulation. These changes will impact the U.S. and other countries like Mexico that control assets in the Gulf, and will include both organizational changes to regulatory bodies as well as changes to the nature of the regulations. One expected organizational change is the separation of government regulation into two or more regulatory authorities. One would focus on health, safety and environment (HSE) regulation and the other would be tasked with hydrocarbon management. The HSE regulator, although pressured by the government and the public to ensure that another BP-style disaster doesn't happen, will probably focus more on disaster recovery regulation since this area is lagging and because it is impossible to completely prevent accidents from occurring. The hydrocarbon management body would be tasked with ensuring that exploration and production plans (the way an oil & gas company will develop a field) are consistent with government policy and goals. By splitting these two areas of responsibility, conflicts of interest between the desire to maximize production and the need to protect workers and the environment can be minimized. Another expected change will be the drive toward greater transparency and accountability - both on the part of the regulators and the oil & gas companies.

On an interesting side note, some of the conference delegates voiced a concern echoed in an article in last Sunday's New York Times that technology alone cannot solve all of our problems. The key to addressing issues like the BP oil spill involves technology, processes and people. Until we get all three in alignment we won't be able to overcome the truly big challenges.

2010 Worldwide Revenue for the Top 50 IT Vendors in the Oil and Gas Industry

Tue, 04 May 2010 19:22:36 +0000

Entry by Catherine Madden

Entry

We just published research on Worldwide Revenue for the Top 50 IT Vendors in the Oil and Gas Industry (http://bit.ly/c3uN7y). The report features profiles of key vendors providing solutions to solve critical issues in the oil and gas industry, including Accenture, Capgemini, CSC, Deloitte, EMC, HP, IBM, Infosys, Logica, Microsoft, Oracle, SAIC, SAP, Tata Consultancy Services, Wipro, and Xerox.

For the report, IDC Energy Insights calculated oil and gas revenues for fifty IT vendors and compared it to total company revenue. The highest oil and gas revenues were generated, in order, by HP, IBM, and Microsoft. As some of the largest information technology companies in the world, all three vendors have significant horizontal offerings that support the oil and gas industry. These vendors are focused on meeting the challenges across the oil and gas value chain with solutions that are very specific to the oil and gas industry, and with staff that have extensive oil and gas expertise. Increasingly, vendors are in a key position to support oil and gas companies by utilizing their knowledge of other verticals where specific information technology solutions may have an application in the oil and gas industry.

This report provides a view of the competitive landscape for IT vendors who serve the oil and gas industry, as well as oil and gas companies who purchase IT solutions. The vendor profiles provide an easy reference tool to quickly quantify a vendor's role in the energy vertical versus its horizontal market offerings, which highlights its key offerings, customers, and alliances pertaining to the oil and gas industry.

Do you agree that the vendors are increasingly able to provide oil and gas specific solutions that aid the toughest challenges faced by the industry? What IT trends are a priority for investment by your company? Information management? Workflow automation? Integration of solutions?

Click here to read the press release. http://www.idc-ei.com/getdoc.jsp?containerId=prUS22326210

Shell and IBM - A Competitive Edge? (1 Comment)

Mon, 01 Mar 2010 22:29:08 +0000

Entry by Catherine Madden

Entry

On Friday, IBM announced a research collaboration with Shell that will support improved and more cost effective reservoir modeling. The collaboration will focus on developing and implementing advanced techniques for reconciling geophysical and reservoir engineering field data. IBM indicated that the strategic partnership was not about two companies joining forces to discover the unknown, but to apply the capabilities of IBM and Shell to improve reservoir modeling, which Shell would then fold into their proprietary reservoir modeling tool kits for application in new oil and natural gas developments as well as existing assets.

IDC Energy Insights perspective is that improved reservoir management can pay off in lower overall costs for finding and extracting hydrocarbons, and aid higher recovery levels making companies less vulnerable to the many unknowns at new E&P developments. But, the real the strength of this strategic partnership seems to be in two areas: first, the focus on "reformulating and automate the task of reconciling the different data". In our view, the acceleration of the digital oil field is partially dependent on improvements in collaboration, but also the reassessment and automation of workflows. If the reconciling of data can be improved, completed faster, and free up the time of experts, it should hit the bottom line. Secondly, this also moves the vision of multi-discipline team collaboration further along the spectrum to real gains from shared information that supports more knowledge, and better decisions.

Of course, given the costs and challenges associated with exploring and producing in new fields, supermajors appear to be investing and giving more attention to enhanced oil recovery.

And for Shell, it has been an interesting couple of weeks, as two strategic partnerships were announced with HP and IBM. Both are leveraging the research and technology labs from these companies. Of course, the profile of both research labs is very reputable, and both vendors already had many plays in the oil and gas industry. These partnerships seem to be indicative of less reliance by oil and gas companies to meet all of their research and development needs. Not just a partnership in name, but an outward view to tap talent where it can support business operations. The recent announcements seem to indicate that some supermajors are relying on partners for non-commodity services. Is Shell ahead of the curve and more progressive? Is this a threat to oil field service companies?

Shutdown at Alaskan Oilfield Points to Better Pipeline Monitoring

Tue, 13 Apr 2010 13:28:28 +0000

Entry by Jill Feblowitz

Entry

Recent reports of an oil leak resulting in shutin of two oilfields in Alaska caught our eye. The leak, due to corrosion, caused a production loss of at least 14,000 -15,000 barrels at the Oooguruk field operated by ConocoPhillips for Pioneer Natural Resources and another 3,250 at 3H Pad. And that is assuming that the company was able to repair the leak in a day. With a back of the envelop calculation given a price per barrel at $85 that means a loss of at about $1.5 million. Fortunately, companies report that there was no environmental impact and resulting damages. The question is, why this happened in a day and age when technology is available to mitigate such losses.

The leak was reported as caused by external corrosion. The problem may be due to the method of detection of problems like corrosion. Our guess is that detection of weakness in the pipeline requires on-site inspection with sophisticated testing equipment and that is costly to perform on long stretches of pipeline. Since the leak was due to external corrosion, pipeline inspection gauges (pigs) that are sent through a pipe to detect and clean the pipe internally wouldn't be the answer. However, it does seems that there could be other means of detecting leakages using flow sensors might have alerted the company to potential leaks. Sensors are now available for use in adverse conditions (extreme heat or cold) and with long life batteries. In addition, the combination of mesh networks and satellite communications provide a means of communicating the alert. So why haven't the companies invested in this technology. Is it cost? We're curious about your thoughts on this subject.

HP Labs Focuses New Technology on Oil & Gas

Mon, 12 Apr 2010 21:25:03 +0000

Entry by Rick Nicholson

Entry

I had the pleasure of spending last Friday at HP Labs in Palo Alto meeting with researchers and seeing demos of new technologies that relate to energy and the environment. Prith Banerjee, SVP of Research and Director of HP Labs has organized the research into 8 themes and 21 "big bet" projects. Nearly all of the themes include work that relates to energy and the environment and at least two projects have a specific oil & gas industry focus.

Within the Intelligent Infrastructure theme is a "big bet" project that you may have heard of called CeNSE (Central Nervous System for the Earth) which envisions trillions of interconnected, inexpensive sensors that measure and process all sorts of data in real time. The research is laying the conceptual groundwork for the communication fabric of a CeNSE-scale sensor network and is testing the concept in a joint initiative with Shell. For this initiative, HP Labs and Shell will choose one existing field in which to deploy and test the new technology. Up to 1 million land-based sensor nodes will be deployed to support seismic data capture. Each sensor node will contain a highly sensitive inertial sensor (which will have especially good low frequency capabilities), battery power, wireless communications and GPS. The test is expected to capture 100 TB of data a day and may last for 200 days (you do the math!). The goal is to generate enough high resolution seismic data to increase recovery from the field by 5%.

Within the Analytics theme another "big bet" project - Analytics for Operations - is using production data from another oil & gas company to test real-time streaming analytics. In this case, the data includes historical and real-time data from down-hole sensors in an operating well. The technology mines the historical data, looking for patterns and discovering root causes of problems. It then processes the real-time streaming data by comparing it against the mined historical data and generating alerts when possible problems are predicted. The technology includes live analytics (the processing of streaming data), deep analytics (complex data sets and relationships), and visual analytics (human interaction).

HP Labs is clearly making a major commitment to technology research that could benefit the oil & gas industry. The challenge that lies ahead is to move the research into commercial markets - either through HP's product and service groups or in conjunction with partners.

Schlumberger and Smith International – More M&A Activity on the Horizon?

Tue, 02 Mar 2010 14:29:26 +0000

Entry by Catherine Madden

Entry

On Monday, February 22, Schlumberger announced plans to acquire Smith International Inc. in

a stock-for-stock transaction worth an estimated $11 billion.

Schlumberger's planned acquisition of Smith International is intended to diversify their

offerings, in particular, Smith’s drilling technologies are considered important to

Schlumberger as oil and gas companies expand exploration activity to more challenging

environments. Schlumberger views most of their other products as complementary, and their

global footprint should enhance their offerings to the market.

Following the Baker Hughes announcement in August 2009 that they would purchase BJ Services

Co. in a cash-and-stock deal valued at $5.5 billion, the Schlumberger and Smith deal is

beginning to look like the merger & acquistion period of the late '90s that formed some of

the largest oil and gas companies on the planet. While the financial crisis created a

favorable M&A environment, there were more expectations around the next moves by oil and gas

companies, and even there, the announcement by ExxonMobil to acquire XTO was rather off the

radar.

Like the Baker Hughes deal, this merger should provide long-term positioning for the future

with access to technologies that aid non-conventional plays, and puts Schlumberger's market

size far ahead of Halliburton.

For the oil field service companies, does this mean that Halliburton needs to consider its

size to remain competitive, or is its position in shale and deep water a significant enough

advantage? Over the last several years, much of the focus for success in the oil and gas

industry has been on very advanced technologies for exploration, and enhanced oil recovery.

Schlumberger's acquisition of drilling services from Smith falls into a more manufacturing

specific equipment for the reservoir versus capabilities for collaboration and knowledge

management in the oil & gas industry. Does the merger signal that there has been too much

focus on high technology instead of seeking a balance between high and low technology?

Do you agree that the next big break through for the industry is "engineered drilling

systems that optimize all the components of the drillstring"? Are oil field service

companies focused enough on integrating their services and information with oil and gas

companies for maximum value from the reservoir?

JP Morgan Extends Global Oil Trading with Acquisition

Tue, 23 Feb 2010 21:17:19 +0000

Entry by Jill Feblowitz

Entry

The big news in trading circles last week was the announcement by JP Morgan that it intends to buy the global oil, metals and European energy commodity trading business of the joint venture of Royal Bank of Scotland and Sempra Energy (RBS Sempra). The deal fills a gap in JP Morgan's trading infrastructure outside of North America.

It's not surprising that JP Morgan is going after acquisitions, and that a focus is on the energy commodity business. The company acquired North American trading infrastructure with its acquisition of Bearn Stearns. While this deal will double JP Morgan's client base to 3,000, according to Matthias Reiker in MarketWatch, the acquisition fills a gap in trading infrastructure outside of North America. Now the head of commodities, Blythe Masters say, the real work is in integration. There's no question that the presence of JP Morgan in global oil markets will add to market liquidity. It will be interesting to see whether the company tries to tackle the holy grail that so many other companies have tried and failed at over the years. Integration the global trading desks under a unified system. At least, they will do what Total is trying to accomplish with creating visibility to position on a global basis and across commodities. We suspect that if they do attempt to create global visibility, that it will require the help of a professional service firm that has lots of experience in this area.