Pumping Data

As the single biggest economic factor for the entire region, all eyes are fixed on the price per barrel. Oil & gas IT managers are participating at the strategic decision making level as they add value to the different areas of the business.

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By  Greg Wilson Published  January 27, 2002

Increasing IT investment|~||~||~|The region’s oil & gas (O&G) industry is on the frontline of the global economy. As the single biggest economic factor for the entire region, all eyes are fixed on the price per barrel. During 2001 the growth of oil demand slowed significantly, dropping to an increase of just 0.2 million barrels per day (MBD), down from 0.5 MBD the year before.

Although just how rapidly the global economy recovers is a constant subject of conjecture, the possibility of slacking demand merely highlights the reasons behind the accelerated information technology investments going on within many of the region’s oil & gas players. With volatile oil prices and intense competition becoming an everyday part of the market landscape, an astute IT strategy has become a key determinant of success.

In both the upstream exploration & production side of the business and the downstream supply sector, technology is integral to reducing costs and improving margins. Where previously IT strategies in the oil & gas industry had focused on connecting information islands within a company, the objective has shifted — IT strategies must align with business objectives and improve the financial position of an organisation, even as the industry must contend with revenue swings of a dramatic magnitude. “Technology progress in the upstream means prospects can be found and reservoirs produced that would otherwise be uneconomic or invisible,” says Joseph Stanislaw, president, Cambridge Energy Research Associates (CERA).

“The rise in upstream costs since 1996 is already being reversed. Upstream costs in non-OPEC countries are expected to fall by an average of 3% per year to 2010 — from almost U$9 per barrel to little more than US$7… Cost reductions will occur fastest in the deepwater offshore, at an average of 4% per year,” he adds.

Downstream organisations have also been investing in technology to reduce operating costs, increase efficiency and maintain competitiveness.

“Technology has increased the flexibility of the downstream industry in responding to changing regulatory and market conditions; shorter response times and adaptable operations have contributed to significant reductions in operating costs,” comments Stanislaw.

In response to tighter margins and intense competition, local O&G organisations have been heavily investing since the mid-90s to build standardised and integrated IT environments. The possibility of a further softening in the global demand for oil can only lead to a further accelerated period of IT investment.

“It is an inverse relationship really… every time the economy slows down it tends to lead to greater investment as automation brings with it savings,” says Shanker Iyer, group IT manager Emirates National Oil Company (ENOC.) “A slowdown accelerates the growth of IT,” he adds.

Whatever happens, further IT investment is going to be tightly integrated to the strategic deliverables of the business. Previous infrastructure work has brought a greater degree of stability to the every day environment and brought the role of the IT department into the spotlight of the organisation. Whereas before IT was “something that was bolted on after the facility was built,” it is now a “critical element in the initial design,” says Keith Herndon, telecommunications & technology manager, Petrochemical Development Oman (PDO).

Organisations assessing their respective businesses apart, it is increasingly time for IT departments “to reap the harvest of previous infrastructure work,” says Sunhil Al Banna, IT manager, of UAE-based petroleum distributor, Emarat.

According to Al Banna, the company’s migration to Oracle 11i and other parallel server and consolidation work has enabled the organisation to reduce its operating expenditure by as much as 20%. Currently, Emarat is progressing at speed with the development of a series of portals serving employees, customers and suppliers. It is also developing a CRM strategy for its chain of petrol stations.

||**||Interaction & outsourcing|~||~||~|For organisations to reap the benefits of IT investment there has to be increasingly close interaction between the IT department and the executive level management to ensure delivery of business value. A critical element of any project design “has to be a change in mindset within the business to ensure that IT is represented at the initial stages of design,” comments Herndon.

“Our key focus is on trying to move our staff into the higher value work, in terms of project management and really understanding the business. We shouldn’t be developing code, we shouldn’t be doing systems integration. Obviously there is going to be some interface work and configuration, but our goal is to really move up the value chain,” he adds.

Abu Dhabi Company for Onshore Oil Operations (ADCO), ensures close cooperation between its business aims and information technology by creating sub-IT teams that work alongside its engineers. The systems team attached to the petroleum development division (PDD) is responsible for running the company’s SGI-based Reality Centre. Due to its close work with the engineers the smaller ‘systems’ team is better able to achieve an understanding of the business needs.

“We are here because of the specialised needs of the petroleum development division… as we are closer to them and we can understand their requirements better,” says Masoud Al Mughairy, senior systems engineer, (IT coordinator) petroleum development division, ADCO. “We understand their requirements and [deliver] the type of technology to satisfy them. This isn’t always easy for corporate IT… that is the reason why [PDD] wanted IT to be very close.”

As IT organisations concentrate on adding value to the business there is a growing trend towards outsourcing, particularly of everyday IT maintenance tasks. Kuwait Oil Company (KOC) has already begun a programme of selective outsourcing and consolidation. By consolidating many of its vendor contracts it is able to reduce the number of partners it deals with and centralise its own spending power. “There is a constant strategy of IT investment to make the organisation as efficient as possible,” says Hesham Al Nouri, general superintendent, information technology department, Kuwait Oil Company (KOC). “While we are investing a lot in IT we are also doing a lot to minimise costs through the consolidation of servers and the outsourcing of certain services. Although the investments may sound big we are actually saving [US$ 1.5 million] per year by outsourcing this area,” explains Al Nouri.

KOC has also slashed costs by outsourcing its departmental application development to a third party. The contract that begun in November 2001, has outsourced the supply of approximately 40 third party applications, including their upgrade, on-site support and consultancy services. Once again, the project has consolidated the supply, support and maintenance with just one supplier.

Alongside the outsourcing of basic desktop maintenance, KOC has recently signed an agreement with Cisco enterprise partner, Universe Computers, for managed network services. The five-year contract, which will come into effect in March, covers areas of network security, hardware and software technical support, maintenance services, upgrades, installation and consultancy for KOC’s 4000-user country-wide network.

“With the network services we had so many different contracts and tenders going out for new locations… now we have consolidated these under one contract… there are a lot of savings,” says Al Nouri.

Although the initial five-year contract is only what Al Nouri describes as “partial” outsourcing, it is likely that eventually everything will “be fully outsourced.”

Just how many other organisations in the region are prepared to make the outsourcing leap is uncertain. Logica’s regional manager, energy & utilities, Aniket Deuskar, is keen to introduce the outsourcing model to local companies. Logica, primarily known as a systems integrator within the region, has already won an outsourcing contract to support Shell Expo. As part of that deal, Logica is paid according to incentivised contracts. For example, the company is paid when it reaches a certain cost target, clears a certain number of defaults or obtains a certain level of user satisfaction.

“Reducing the cost is the main driving factor behind the whole deal,” says Deuskar.

“However, although outsourcing isn’t a new idea there are local sensitivities that have to be taken into account when rolling this out to the local market,” he adds.

Any sweeping outsourcing agreement has to take into account the nationalisation programmes that run in most of the national oil companies (NOC). “Outsourcing goes against the grain of many of these [nationalisation] programmes,” explains Deuskar.

Before outsourcing becomes commonplace within the region’s oil & gas industry, it’s likely contractors will have to undertake a commitment to train a number of local resources.

||**||Realigning the business|~||~||~|ENOC has brought a greater degree of cost control by rearranging its IT/business relationship along service provider lines.

Consequently its has spun off part of its IT department into a third party provider called Gulf Technology Services (GTS) as it has sought to centralise certain information technology services such as the Microsoft network, or its centralised Oracle applications.

Currently, GTS negotiates service level agreements with the different areas of the business. ENOC’s in-house IT department “ensures that these services are delivered as per the agreement… and it is an interface to the user,” says Shankar Iyer.

The relationship between GTS and ENOC Group has evolved over the last three years. “The relationship has been successful. There has been a lot of background work in order to implement such a system. Each company must feel comfortable that they are getting a level of service that is proportional to the money they pay, and not less… this requires closely managing the relationships,” says Iyer.

“In terms of savings, the services provided by GTS if provided by external companies might be three times the cost,” he adds.

GTS manages its relationships with the different business units through its use of WonderWare. In particular, the use of the helpdesk module enables GTS to track requests and proactively warns engineers about potential system failures.

“[WonderWare] provides several facilities… network management, desktop management and anything related to the office environment,” says Iyer. “The helpdesk also routes all calls from Oracle, the maintenance management, or the Tempest [trading system], to the relevant support engineers,” he adds.

Eventually, Iyer predicts that ENOC will fully spin-off its GTS business and take it public. Already GTS has been marketing its Oracle implementation and consulting expertise to other organisations in the region.

Whether through partial outsourcing or the creation of sister service provider organisation, the oil & gas industry appears determined to reengineer its technology/business relationship to deliver business value. How far the industry is willing to push the service provider envelope is open to question.

Oil Space, a vertical application server provider (ASP) specialising in the physical crude oil industry, has been in discussions with the region’s oil & gas players for the last several months about its range of services. Although on the surface the industry has been cautious in its adoption of the Internet and e-business models, just about every local company in the industry has programmes in place to develop some form of virtual services.

“By and large, the oil industry didn’t jump on the Internet bandwagon,” says Aamer Alireza, regional manager of Oil Space. “The industry was having its own crisis when the dot-coms began to crash… However, they realise the need for optimisation and the industry as a whole is assessing the possibilities of the Internet,” he comments.

Although the benefits of the ASP model have been much debated in the IT industry as a whole for the last 18 months, the region has seen precious few companies make the leap. Although Oil Space is in discussions with several companies, information security still remain a stumbling block. “The oil industry is very information sensitive… security has be our first name,” says Alireza.

But in all likelihood, operating reference sites are going to be a necessity for many of the naturally conservative O&G industry to embrace the ASP model. The initial reaction of many companies has been ‘we will build it ourselves,’ but the oil giants are realising the need for cheaper models and continued innovation. “Oil companies are looking for cheaper models… they are moving away from the big investments of the past,” adds Alireza.

However, the initial Internet focus of much of the oil & gas industry is on the supply chain and in particular the reduction of procurement costs. But the O&G companies generally appears cautious to embrace the Web as a primary procurement channel.

For example, although ENOC was one of the initial organisations to sign up for Dubai’s Tejari.com exchange, it has yet to fully integrate its backend systems to the exchange. “We have used Tejari for its auctions and for some selective purchases,” says Iyer.

“It wouldn’t be wise to invest and re-train people and then have to invest again once we have migrated to 11i,” explains Iyer.

Iyer is also unenthusiastic about the advantages of online trading, citing both security concerns and the lack of a real business need — for the most part ENOC’s Tempest system already fulfils the group’s trading requirements.

However, ENOC Group is keen to pursue supply chain efficiencies through the Internet, particularly for its EPPCO and ENOC chains of gas stations. The group is currently assessing the business itself and considering setting up a logistics company of its own, or outsourcing the function to a trusted third party. Either way, creating data transparency across the whole process is going to be key to maximising efficiencies.

||**||E-procurement|~||~||~|Qatar Liquefied Gas (QLG) has been pondering e-procurement opportunities since last year. However, QLG has found it difficult going to due a variety of reasons, including poor infrastructure and high Internet charges, which are particularly off-putting for local suppliers.

“This represents a considerable cost for them,” says Ghanim Al Kuwair, IT manager, QLG.

With its supplier base dragging its feet in terms of Internet adoption, QLG is investigating alternative options, including the UAE’s Tejari.com. Potentially, the portal could help the organisation save on its non-plant procurement, “which represents a considerable number of our procurement transactions. The plant related transactions are very large value, but are fewer in number. The majority of transactions are on low value items, which is an area that we can improve in using IT,” says Al Kuwair. Furthermore, QLG is looking at other possibilities, including leveraging its partnership with shareholder company Mobil, to use its Trade Ranger exchange.

Oil Space’s Alireza agrees that security, quality of service and cost are proving inhibitive as the local oil & gas industry moves online. However, these issues will be overcome in time as more organisations realise the need for “real time channels of information to manage their business,” he adds.

KOC has begun work to develop real-time channels of its own. The Kuwaiti-E&P giant has already sought feedback from its local suppliers about automating its tendering process over the Internet and begun work on an early pilot. “On our web site [there are] two pages, one is for e-tendering, that is simply for publishing live tenders and enabling the contractors to send queries and from the side of the contract department to send supplementary letters,” explains Mariam Al Ajmi, superintendent computer technical services, KOC.

In addition, there is also commercial information available to give perspective suppliers an idea of the tenders that are currently in process, the results of tenders and forthcoming tenders.

Many of the region’s O&G organisations are in the process of reaping the benefits of infrastructure work and delivering greater value. Within the next 18-months many of these organisations will deliver Internet services and bring a greater degree of supply chain efficiency. However, perhaps the challenges will be in persuading local suppliers of the benefits of B2B or procurement and establishing the CIO role within the business. “A seat on the managing directors committee is definitely a goal and that is happening in lots of different areas. But that only comes after you have established credibility in the business,” says PDO’s Keith Herndon.

||**||ADCO improves accuracy with Reality Centre|~||~||~|Drilling an oil well can require a capital outlay of anywhere between US$15-to-50 million. The return on investment (ROI) is entirely dependent on the interpretation of data gathered through numerous geological and seismic tests. Misinterpreted information can potentially cost millions, the investment of upwards of US$2 million in a virtual reality visualisation centre appears sound.

Visualisation centres enable a wide range of business activities including reservoir model visualisation & building, oil well planning — both horizontal and vertical wells — real-time drilling decisions, work-over program planning, regional data integration and visualisation and prospect generation.

ADCO, the onshore exploration and development (E&D) subsidiary of ADNOC is one of the initial organisations to make the upfront investment in a visualisation centre. Towards the end of 2000, ADCO began installing its SGI ONXY-based Reality Centre to aid its Petroleum Development Division (PDD) in visualisation and collaboration. “If you know where to drill then you can really save [money,]” says Masoud Al Mughairy, senior systems engineer, (IT coordinator), PDD, ADCO.

“Rather than drilling and making mistakes we’re trying to pinpoint the place to drill. [The Reality Centre] is a tool for multi-discipline collaboration, making it something that will save us money,” explains Al Mughairy.

In full operation since the beginning of 2001, the centre is essentially an extremely advanced visual aid, enabling teams to rotate, zoom — and depending on the application — even immerse themselves in geological data. The Reality Centre is powered by a four-CPU, 8 G/byte SGI ONXY machine, which has been designed specifically for heavy-duty graphical output. Data is pumped through the machines graphics pipes where integration software manages the different media outputs and presents the images through three CRT projectors on to the 7x5 metre sq screen.

A central console enables the user to present different media, on different areas of the screen for example, a PowerPoint presentation, a video and a geological model can all be presented together. “The ONXY machine has graphic pipes that give it the capability of running and managing very intensive, graphic images,” says Al Mughairy.

Within the visualisation centre ADCO also uses a Sun Microsystems workstation and a PC to ensure that it can support all platforms in the one room.

“Whatever outputs we have, whether they are from the ONXY graphics pipes or from the DVD, the video, or the PC, [the media] goes through channels. The integrator software manages the channels and according to the console, [users] can pick what they want,” he adds.

The Reality Centre itself hosts very little application software. ADCO has centralised its business applications and deployed a floating licensing model. This gives the engineers the freedom to walk in and boot up the usual applications from a central location.

With the exception of very intense performance visualisation sessions, the majority of data is also centrally stored and accessed. “We don’t need to have any special software on the ONXY,” says Al Mughairy.

“[The centre] can be used as any workstation that the [engineer] is used to. They just come in and launch an application in the normal way they do it in the office — the only difference is that they have it on the big screen,” he adds.

Depending on whether the application supports ‘stereo’ 3D, users can even put on a pair of goggles and immerse themselves in data.

The potential ROI of the Reality Centre is obvious — any percentage increase on the accuracy of drilling wells is going to result in huge savings. With intense global competition applying pressure on the business to be as efficient as possible, more oil & gas organisations are making the investment in visualisation centres.

Petrochemical Development Oman (PDO) went live with its Virtual Reality Centre (VRC) in June of last year. Saudi Aramco is also thought to have put in place several VR centres.

“The technology is becoming more and more a part of how we do our day-to-day business,” says Keith Herndon, telecommunications & technology manager, PDO.

“It is an opportunity for us to do much more detailed value assurance reviews, well proposals and pickings, so the integrated teams of sub-surface and well engineering staff can sit in these VRCs and work together collaboratively. That is a tremendous opportunity… we are seeing substantial and tangible savings here in PDO around that,” explains Herndon.

Kuwait Oil Company (KOC) has already issued tenders for a similar visualisation apparatus as it seeks to enhance the collaborative environment for a ‘wide spectrum of oil field professionals within its own exploration & development business. Within the visualisation centre they will be able to “display, discuss, and manipulate information in an effort to facilitate decision making and improve communication,” says Mariam Al Ajmi, superintendent computer technical services, KOC.

Although there may be a strong demand from certain areas within the exploration side of the business there are change management issues that need to be addressed as users learn how to use the Reality Centre.

According to Al Mughairy, users must negotiate a learning curve as they adapt current collaboration models from the meeting room into the Reality Centre.

“[Groups] should be able to meet there whether they are from a single discipline or a multi-discipline and discuss ways of achieving better decisions, and accurately interprete data to save money,” says Al Mughairy.

“[This] it is something that requires a change in culture… in the initial phases it was something new that took time to get people used too. Rather than doing meetings in conference rooms they would come here and [hold] meetings and interactively discuss their work while the applications running,” he explains.

To overcome some of the initial change management hurdles the dedicated IT department within PDD hosted an open day for the separate business divisions within ADCO. There was also a series of smaller presentations to different areas of the business.

Even so, after 12 months of operations, there are times when the Reality Centre stands idle. During these periods, sister ADNOC companies sometimes book time at the Reality Centre. ADCO is currently assessing how it can use the Reality Centre for pure number crunching when it is idle.

Despite the quiet spells the Reality Centre has proved to be value for money.

“It is difficult to quantify the return on investment… In the long run it will save us a lot of money — on drilling. Let’s say that it cost us US$2 million or 3 million — that is only a fraction of drilling costs. So in the long run it must be paying itself off,” says Al Mughairy.

||**||Saudi Aramco EXPEC implements NAS devices|~||~||~|Saudi Aramco’s Exploration & Petroleum Engineering Centre (EXPEC) boasts some serious big iron hardware. The supercomputing geoscience centre contains some of the highest configuration machines in the region, from a variety of vendors, including IBM, Sun and SGI. The centre is also home a 128-processor Linux cluster.

During the course of a day the centre regularly churns out hundreds of terabytes of data as it runs seismic programmes on Aramco’s 1.5 km million worth of oil fields.

To manage the huge reams of data Saudi Aramco has invested in a collection of network attached devices (NAS) and direct attached boxes. Currently, the data management group within EXPEC is assessing its future storage strategy. “We are debating whether a [storage area network] will serve our purpose or if a NAS will do.” says Zaki Awwami, senior systems analyst, Saudi Aramco, EXPEC.

“Previously we used to have a large EMC pool and we would then connect servers to this pool. We haven’t ever fully developed SAN, we have the NAS solution and we have other platforms that are directly attached,” he adds.

To help manage the enormous amounts of data generated, EXPEC has developed a data hierarchy to serve the different areas of its business. At the extreme high-end, supporting the IBM SP environment is a huge collection of IBM and ECM disks that make up the GPFS. “This is basically a direct attached file system, which have the huge amounts of data… this is where the 100s of terabytes of data is,” explains Awwami.

To act as a general network storage resource, Saudi Aramco has deployed four Network Appliance NAS boxes, supplied by Algosaibi Information Systems. Even away from the massive high-end machines, many of the users are running small geological and seismic applications running on different flavours of Unix.

Consequently, the Net App boxes are all configured to store all NFS (Network File System) data — the de-facto Unix network protocol.

Currently, Aramco has deployed four clustered machines, each holding six terabytes of data. Should one machine fail, then the other will automatically take over. “The Net App boxes are being used to support everything, from the user’s home directory, to seismic data… anytime [a user] needs to store data then they can use this resource,” comments Awwami.

“[The Net App machines] provide storage on the network and that is accessed by either servers or clients from a particular [Unix] platform in the form of NFS data,” he adds.

There are also plans to migrate the NT server data into a similar environment in the near future.

The four Net Appliance devices are already delivering a number of benefits to the Aramco environment. According to Awwami, the NAS machines were a cheaper alternative than buying more Unix disks, and they make it easier to administer the NFS data. “We needed to do a lot of administration on the general operating system just so it serve NFS data [to the user population.] Other reasons are the availability and performance,” comments Awwami.

“These machines have high availability built in… and then there is the performance these machines can provide. [We] basically went to Net App to simplify our environment,” he adds.

However, the Net Appliance devices do have their limitations, namely their ability to scale beyond six terabytes. An organisation the size of Aramco has literary “100s of terabytes on the floor,” says Awwami.

“When we bought Net App we were promised that each filer would hold 12 terabytes… right now it doesn’t. I am sure that for a medium-sized company that would be very [fine]. But we have hundreds of terabytes on the floor and we would like this platform to scale up,” says Awwami.

In the meantime, to scale its storage platform Aramco just adds another filer to its network.

Aramco is also assessing the possibility of rolling out NAS devices to other areas of the organisation. Within the exploration & production business, there are several ‘information islands’ each processing different applications and generating separate data. Many of these sites are running direct attached storage for performance reasons. However, the movement towards NAS is gathering momentum. “There is great interest to try this [NAS] in the attached database instance. But that hasn’t happened yet,” explains Awwami.

At the time of going to press, EXPEC had just extended its use of NAS technology, through a huge deal for EMC Clariion boxes. The hardware, being supplied through STME will deliver an additional 160 terabytes of data. The deal represents the largest NAS deal in Europe for EMC.

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