IT integration can help energy suppliers through recession

The recession has hit the oil and petrochemicals industry hard. Demand for chemicals , plastics and fuel has fallen sharply, a n d...

The recession has hit the oil and petrochemicals industry hard. Demand for chemicals, plastics and fuel has fallen sharply, and the cost of a barrel of oil has plummeted, hitting the industry’s profits and growth prospects.

Ian Miller is director of application services, consulting and integration at Hewlett-Packard, a big IT supplier to the oil and petrochemicals sector.

Oil companies are cutting their IT budgets to save money in the downturn, he said. But nevertheless, they are also keeping an eye on longer-term projects where IT will play a critical role.

The oil and gas industry is a big user of computational grids. The grids run complex calculations which generate three-dimensional seismic data that enables the oil companies to determine the location of oil reserves accurately.

Low-cost commodity PCs, which can be configured as grids of Linux machines, have made it more economical to run three-dimensional seismic analysis and build complex models of oil rigs.

HP is working with Nvidia, the graphics card maker, to combine its high-end graphics processors with HP dual processors on a blade architecture. The company claims this offers high levels of performance in a box that offers low power consumption and takes up little space.

IT as an enabler

Joe Hill, EDS fellow and chief technology officer at HP’s EDS Global Energy practice, says IT has made it possible to undertake deep sea drilling on high-yield rigs within the Gulf of Mexico, something that would have been impossible before. Developments in computer telemetry and the ability to communicate quickly across the entire oil and gas supply chain allows the rigs to cope with hurricane season, he says.

“[On a rig], hurricanes cannot be treated as atypical events. When one strikes, the well must be taken offline and returned to production as quickly as possible.

“If it wasn’t for IT, we would have run out of oil a long time ago, or at least it would not be economical to drill,” he says.

Douglas Hason, director of global energy industries at HP, says, “IT used to be a back-office function, now it is centre and front office. We used to talk to CIOs. Now we talk to CEOs.”

Collaboration advances

But there is still further to go.

A study out last week from Microsoft and Accenture shows that oil and gas firms are also moving into the 21st century by adopting web 2.0 technologies. Of the 272 oil and gas industry engineers, project managers, business unit heads and geoscientists surveyed, 70% believe that collaboration and knowledge-sharing are important for driving revenue and cutting costs, and contribute to the health and safety of workers.

“In the oil and gas industry, collaboration is a key strategy to reduce costs, improve efficiencies and promote collaborative working relationships among oilfield asset teams located in remote locations around the globe,” says Jill Feblowitz, practice director at Energy Insights, an IDC company.

Building on basics

However, Dan Miklovic, Gartner vice-president for natural resources manufacturing, says the oil and gas industry still has to get the basics right.

“Many large oil companies have tried to drive their entire business applications portfolio into a single platform supplied by a single [ERP] supplier. In other industries there is a greater propensity to adopt a best-of-breed approach to applications resulting in enthusiastic users that are engaged and more readily use IT to enhance performance,” he says.

While he says it is cheaper to run a single IT system, integrating multiple IT systems allows decision-makers to gain access to more information, which in turn leads to more informed decision-making.

So it looks like good old-fashioned IT integration is the best bet for ailing oil and gas firms.

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