Industry News - Internet Inquirer - Technology leveling the playing field in energy businessTechnology leveling the playing field in energy business by: Blake McLane, VP, CyrusOne Friday, March 17, 2006
Introduction
Overflowing the pages in the oil industry's history are countless stories of huge successes, failures just as big, and new challenges constantly replacing older ones.
None of that is surprising to anyone working in or around the oil business and knowledgeable of how the global E&P process functions as well as what's required to stay profitable. But, the extent to which technology is re-shaping the oil industry virtually exceeds the most vivid imaginations of management at companies ranging from small independents to majors as recently as the last decade.
Drill bit - ultimate exploration tool
The focal point of the oil industry's technology story is that the explosive innovations are occurring at every organizational layer (both onshore & offshore), whether at operating companies, drilling companies, major contractors and a wide array of oilfield service companies. Even now, it's still a truism that, for all the geoscientists' skill and technological wizardry, the drill bit is the ultimate exploration tool.
Yet, from 4D seismic and the dynamics of visualization rooms to state-of-the art software for drilling operations, technology is dramatically reducing the industry's historic trial-and-error statistics. Long gone are the days when nine of ten exploratory wells were dry holes, with today's ratio more similar to the reverse.
A story of equally big proportions involves IT outsourcing, which goes well beyond the stereotypical idea of call centers in India. Today, under the auspices of Managed IT Services, smaller companies are leveraging external technology providers to make the playing field much more level with larger competitors. No longer do small companies need millions invested in on-site IT equipment, service and support while requiring constant upgrades and maintenance. Instead, the magic term has become "data centers."
For company management that have not made the transition to off-site data centers, and have not explored the data center phenomenon, be prepared for a whole new world. For example, data centers are tailor-made for high-growth or acquisition mode companies that:
need scalability in their infrastructure
have mission-critical applications that are client facing and require client access 24/7 for EDI (electronic data interface) or order placement
are running out of data center space on-site due to this continued growth
would have to hire additional infrastructure staff to have round-the-clock coverage of the company's business operations
need to be able to invest in applications, databases and Help Desk functions while treating infrastructure as a utility
have a mission critical requirement for Internet connectivity because downtime means loss of company revenue
Data centers also solve a particularly sensitive problem in the highly
confidential oil industry - providing data security and availability - while being cost-effective. As much as 10:1 savings of outsourcing vs. implementing an internal solution have been experienced by companies. At the same time, productivity and reliability have greatly increased by reducing downtime.
Any company anywhere
What all this means is a redefinition of business economics. Oilfield companies of all sizes, and not restricted by geographic location, can cost-effectively be at a competitive IT operational level. And, while smaller companies especially reap the benefits of Managed IT Services, one of the world's largest oilfield service companies observed that their IT operating expenses have decreased by 47%.
It's become increasingly evident that small independents having access to virtually the same technology as majors is changing the business landscape. Although this technology won't accomplish the impossible feat of turning mites into giants, it can make them much more competitive with each other and with mid-size independents in all energy industry sectors from seismic through drilling to production. Data centers and Managed IT Services are simply the next logical step for companies already enjoying the benefits of technology in the field - to move up to the next level in their technology at the office.
