S09 ORME 5 2020 IBM_Layout 1 28/07/2020 16:08 Page 34
Navigating the COVID-19
storm Saul Zambrano, global industry director: energy and utilities digital transformation leader, Software AG discusses how energy companies are maintaining cash liquidity and repositioning their operations to navigate the COVID-19 headwinds. HEN I THINK of what is happening in the industry today, the image of a double black swan jumps to mind. The Black Swan effect is a metaphor that describes events that are rare, hard-to-predict and have a major impact. While a single black swan event is extremely rare, to have two happen at the same time is exceptionally rare. That is the situation the oil and gas sector finds itself in at the moment. As COVID-19 continues to accelerate, an economic contraction is causing oil demand to drop rapidly, and doing so at a time when supplies were already greater than what the world could consume. And while the energy sector has experienced volatile market contractions before, the speed and magnitude of this current one is unprecedented. As a result, energy companies are aggressively re-positioning their current operations to navigate the storm. Two key trends are emerging as to how energy companies are responding – they have both a short- and long-term approach. The energy companies that survive this market correction are the ones that are not only hyper-focused on maintaining cash liquidity through the storm, but are also taking advantage of this time to reposition their operations. It has never been more crucial to function in a more agile, reliable and efficient manner now and for the expansion period ahead.
Focus on cash liquidity The most critical area where energy companies are being affected is on their cash balances. As a result, the principal goal during these times is to preserve cash by eliminating non-essential or duplicative costs. One core area of focus is on non-essential costs in their supply chain processes. Historically, energy companies tended to manage these processes with a focus on cycle time improvements and/or vendor price concessions. In the current environment, that is no longer enough. The principal business
Issue 5 2020
Image Credit: Software AG
Saul Zambrano, global industry director: energy and utilities digital transformation leader, Software AG.
outcome these teams are trying to address is to leverage process insights that allow them to pursue process improvements with an eye to reducing cost of operations. Thus, process mining is becoming one of the most relevant technologies they are pursuing within their finance, supply chain and field maintenance teams. Additionally, one of the principal areas of duplicative costs is in the IT/OT application portfolio. Accordingly, the IT/OT application portfolio technology platform is one of the most relevant technologies that Enterprise Architects are evaluating for rapid deployment within their planning environments. The technology allows them to quickly understand their application portfolio with a full understanding of their application inventory relative to cost, cross-application dependencies and capabilities. This information is critical if they are going to get costs out of the business without sacrificing the capabilities that support the business.
Focus on agile operations This brings me to my next area of impact – a focus on agile operations. One of the most important strategies that is being pursued by leading companies in this sector is the transformation of asset management practices. Ultimately, these leading
companies will continue to invest in Industrial IoT (IIoT) technologies that not only allow them to manage their assets more efficiently, but also embed a foundational IIoT capability. This is a pathway to workflow automation that leverages a full understanding of workflow processes, real-time data and analytics. The ultimate goal is to be able to monitor and optimise processes in real time through the application of streaming, predictive and AI/ML analytics. Additionally, prior to the recent market contraction, one of the principal IT strategies that was prioritised by the industry was the migration to cloud operations. This trend will accelerate. Energy companies will continue to adopt iPaaS technologies that allow them to accelerate their cloud-to-cloud integration capabilities.
Focus on production reliability Which leads me to my last area of impact: a focus on production reliability. Today, energy companies are selling less oil and gas. During times such as these, one of the first exercises they pursue is to decide which wells and refining assets to turn off. In a world of negative to low oil prices, the need to remove less efficient assets from production is critical. While this approach ensures the best possible operating margins, it also concentrates operating risk in the wells that remain on – and the refining assets that are processing the oil and gas streams. Consequently, any unplanned service disruption in production and refining assets will have a massive negative financial impact. Technology that allows them to ensure uptime performance for the remaining onstream production assets would be a welcome addition. By that token, self-service industrial analytics technologies are actively being deployed across the entire sector. These technologies provide production and reliability engineers with multi-asset visual data analytics that allow them to quickly identify reliability and production risk for multi-asset complex production processes. n