Global Energy Trends
VIEWPOINT PAPER
Long-term success
Intelligent, growth-based investment in energy markets and other infrastructure is
needed to ensure a positive future for the global economy. EDS, an HP company,
analyzes emerging technologies that are helping to reduce costs and risk, while
continuing to drive innovation and promote greater customer satisfaction in the
energy industry.
Table of Contents
Utilities
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Oil and Gas
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Introduction
Energy in 2008
Key Issues Meeting Those Challenges
The Impact of IT
Intelligent Partnerships Conclusion
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Global Energy Trends
EDS Viewpoint Paper
Introduction
Tumultuous economic times rocked the world in 2008 and continue to dominate our focus in 2009. Global economic uncertainty
is so widespread, and the path to recovery so unclear, that “cautiously optimistic” is the most hopeful position taken by many
organizations. In this volatile financial environment, some may instinctively seek to retreat and retrench, particularly as it relates
to long-term investments in infrastructure, innovation and information technologies. But such a move would be disastrous for
a world that desperately needs new sources of energy and smart new ways to meet a growing planetwide demand.
Energy and utility firms that don’t retreat can capitalize on opportunities to make smart, ROI-based investments in their
future. Those organizations can now deploy an intelligent new generation of technologies designed specifically to improve
upstream and downstream performance, to ensure safe and reliable supplies, and to improve conservation and sustainability,
customer satisfaction and long-term profitability.
In this viewpoint paper, EDS, an HP company, examines the forces now shaping the international utilities, oil and gas marketplace.
We analyze emerging technologies that are helping those organizations reduce costs and risk, while continuing to drive
innovation and promote greater customer satisfaction. Finally, we offer specific recommendations on how utilities and energy
companies can best leverage these new capabilities to ensure long-term growth, sustainability and profitability.
Energy in 2008
The global importance of energy was more apparent than
ever in 2008 when dramatic fluctuations in the price of
energy affected both local and worldwide economies,
governments and populations. When the price of crude oil
peaked at $140 a barrel in the summer of 2008, the United
States was sending some $800 billion a year to fundamentally
unfriendly nations. In the Uunited States and elsewhere,
the continually fluctuating price of energy holds significant
implications for productivity, national security and future
opportunities.
It may be worth taking a moment to remind ourselves of the
central importance of the energy sector. In today’s global
economy, the energy industry has evolved into a vital and
closely integrated sector of the economy. Super majors like
Chevron and ExxonMobil have become vertically integrated
Many other industries rely heavily on oil or oil-based
derivatives as a crucial feedstock in their manufacturing
operations. Virtually every company – from fuel-intensive
sectors like airlines and transport firms, to everyday
businesses like retailers, restaurants and service firms –
rely on oil to transport and deliver goods and people. In
today’s global economy, the cost of energy can be the
source of economic, political and potentially military
conflict, and fluctuations in the price of oil affect various
constituencies in different ways.
Consumers and most businesses feel an immediate and
dramatic impact from the rising price of fuel. Dramatic
escalations in the price of fuel affect consumer spending
and confidence, often negatively and immediately impacting
GDP. Those forces in turn exert tremendous pressures on
governments of all kinds.
firms that explore, produce and transport energy, then refine
the product, distribute it, and often sell it either at their own
retail outlets or through intermediaries to the end consumers.
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EDS Viewpoint Paper
Global Energy Trends
Utilities are also heavily affected by the short-term price of
How governments, energy companies and our populations
fuel, which is by far the largest component of their operating
as a whole respond to these challenges will determine the
cost and which greatly affects the rates utilities charge their
ultimate health of our energy sector and our global economy.
end customers. The cost of energy also heavily influences
To make the right decisions, we must first understand the
long-term utility decisions on variables such as the size,
forces that are shaping that worldwide energy environment.
type and number of generating plants, energy sources,
alternative fuels, demand management, IT investments
Key Issues
and basic business models.
Utilities and oil and gas firms face significant and unique
Oil and gas firms, on the other hand, typically take a much
challenges in today’s energy economy. On the demand side,
longer view of energy prices, often investing billions in
those organizations must address the challenges of price,
exploration and production projects with 20- to 40-year
growing worldwide consumption and the need to identify
horizons. Vertically integrated energy firms also enjoy a
and bring to market viable alternative energy sources. On
natural hedge against the short-term volatility of energy
the supply side, they must find and manage diminishing
prices. When the price of fuel is low, those companies make
reserves, leverage new technologies and address significant
less on the sale of gasoline but also see a reduction in the
labor and regulatory developments.
cost of oil-based feedstock used in the production of
To achieve profitable, long-term growth, utilities must
chemicals or in other downstream businesses. When prices
capture larger shares of increasingly deregulated markets
escalate, oil and gas firms make more on the exploration
and work to secure their supply of affordable energy while
and production side of their businesses but are squeezed by
operating in a more sustainable, environmentally sound
higher costs on the downstream side.
manner. At the same time, utilities face new and substantial
In the teeth of a global economic downturn, many may be
pricing and market pressures. Utilities must create more
tempted to retrench and reduce spending on energy-related
predictive economic models to forecast both long- and
innovation, exploration and production. But in the long
short-term energy costs.
term, such a path would be nothing short of disastrous for
Forward-looking companies are working to refocus their
consumers, energy producers and the larger world economy.
investments away from generation and distribution and
In our view – despite the short-term fluctuations in the price
toward the tools, automation and demand management
of energy and the difficulties of the larger global economy –
solutions that will drive tomorrow’s utility marketplace.
utilities, oil and gas firms, and national and international
They must address demographic shifts that are creating
governments simply must continue to invest in energy-
severe talent shortages in many technical fields. Utilities
related infrastructure and innovation.
must also adapt their business models to fit changing
market and regulatory realities, while responding to the
Oil and gas firms must continue to seek new reserves
demand for improved customer service and support.
and more efficient ways to extract energy from proven
sources. Utilities must continue to invest in the information
Oil and gas companies also face significant challenges,
technologies and other infrastructure needed to optimize
including increased competition, continued price volatility
conservation, demand management and the use of alternative
and growing worldwide demand, particularly from Brazil,
fuels. The policies of the new Obama administration in the
Russia, India, China and other developing nations. On the
United States, as well as other governments worldwide, will
supply side, energy firms must continue to find and exploit
of course be crucial to the long-term global energy outlook.
sought-after reserves, while simultaneously managing
increased political and regulatory pressures. The industry
as a whole is hindered by aging equipment and refineries,
shortages of labor and services, and the need to update
their technologies and fundamental business systems.
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Global Energy Trends
EDS Viewpoint Paper
To succeed in a world that was shook by a weak economy,
enterprisewide data systems. Oil and gas firms must
unprecedented volatility and low consumer confidence in
collaborate more closely with other energy companies and
2008, oil and gas organizations must accelerate time-to-oil
with the commercial industrial firms they serve. Good IT
to ensure supply at the pump. They must optimize their
can support and accelerate these needed changes.
operations, enhance asset utilization and tighten their cost
structures. Energy firms must also improve their ability to
Utilities
manage risk and meet a growing regimen of compliance
Utilities can now deploy a range of advanced technologies
requirements.
designed specifically to reduce their carbon footprint,
support demand management, and drive greater efficiencies,
Meeting Those Challenges
cost savings and customer services. Specific IT solutions
In the United States and elsewhere, there is a broad need to
might include Smart Grid, Advanced Meter Infrastructure (AMI),
reinvest in new-generation capacity, to upgrade grids with
AMI and thermal assessments, application modernization,
new circuits, switches and automation, and to introduce
consolidation, data center automation, business intelligence
demand management and other conservation-based
and continuity, IT service management, and space and energy
initiatives. Oil and gas firms address the need for IT
efficiency initiatives.
transformation by streamlining their data centers, virtual-
Those solutions can be used to reduce utility CO2 levels and
izing systems and modernizing their applications.
energy data consumption, while streamlining the introduction
Next-generation technology is available now to reduce CO2
of new services and pricing or tariff models, and balancing
levels emitted from electricity generation and to manage
supply and demand by helping end users reduce their water
end-user consumption, to help ensure a secure and stable
and energy consumption. Next-generation IT solutions can
supply of electricity, gas and water, and to drive efficiency by
also support the management and control of AMI, provide
serving and growing a loyal customer base. By redirecting
actionable insights into customer needs and usage, and
IT expenditures from infrastructure and application
provide quality audit and compliance data.
maintenance activities – and toward efforts focused on
Advanced network capabilities, Web services, RFID, predictive
alternative energy sources, water preservation, pricing
modeling and Customer Relationship Management (CRM)
efficiencies and more agile business models, this intelligent
systems are now making their way into the utilities sector.
cycle of savings and reinvestment can help utilities achieve
long-term, profitable growth.
Utilities can now leverage those and other IT systems to
integrate and consolidate data and applications, to comply
Forward-looking energy companies are leveraging intelligent
with FERC/NERC requirements, to help commercial end
IT solutions to standardize and automate operations, to
users reduce energy consumption, and to improve customer
accelerate time-to-oil and to optimize operations, assets,
service levels.
risk and profits. This allows oil and gas firms to focus their
investments on the acquisition of new reserves, the
Utilities will also deploy technologies driven by embedded
optimization of refineries, the reduction of costs per Barrel
sensors, software and close integration to manage and
of Oil Equivalent (BoE) and on meeting broader business
flatten the energy demand curve. Much as the universal
and regulatory objectives.
remote controller greatly simplified the management of
home entertainment systems, those unobtrusive systems
The Impact of IT
Information technology will and must play a key role in the
transformation of the global energy sector. Companies of all
kinds need improved planning, coordination and integrated
will help consumers accept and adapt to the coming realities
of energy demand management. Consumers may also use
the increasingly ubiquitous mobile phone to remotely manage
energy settings and other variables in a new generation of
smart homes.
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EDS Viewpoint Paper
Global Energy Trends
To survive and succeed in tomorrow’s energy marketplace,
privacy, security and safety, and enhance the customer focus
utilities must also adopt a longer and more rational Total
and transformation of energy firms. HP’s global infrastructure
Cost of Ownership (TCO) view of their investments. By
and delivery centers, proven ITIL processes and ITSM
implementing application-based energy management IT
methodologies, and collaborative partnering approach
systems, utilities can realize an accelerated and positive
enable clients to accelerate business benefits and improve
rate of return on those capital investments.
service levels while significantly reducing operating and
capital costs.
Oil and Gas
Oil and gas firms can also deploy a range of IT solutions
Conclusion
designed specifically to support more efficient upstream
Most observers expect continued challenges to global
and downstream operations.
economies and energy markets in 2009 and beyond. Countries
Established and emerging oil and gas IT technologies
worldwide will struggle to stabilize credit and equity markets,
include high performance, portable and handheld computing
and to revive employment and GDP performance. Energy
systems, software designed specifically to manage distributed
firms, both utilities and oil and gas companies, and the
IT and oilfield assets, and “fit for purpose” solutions to manage
governments that guide or regulate those organizations,
energy applications and service-oriented architectures.
face their own set of decisions and difficulties.
Energy firms can now also leverage emergency service
Given the dramatic decline in the price-per-barrel of oil in late
management, early warning systems, digital (manless) rig
2008, many may be tempted to rethink or forego planned
systems, fault reporting and business intelligence (BI)
investments in energy-related infrastructure and innovation.
solutions to improve productivity and profitability.
Yet, when we consider the long-term requirements of our
These solutions can be deployed to ensure supply at the
global energy environment – marked by the continued growth
pump, to optimize operations, costs and asset utilization,
in demand, supply limitations and the pressures of reliability,
and to enhance compliance and risk management. Oil and
quality, stability and risk management – investment is the
gas firms can leverage advanced IT solutions in upstream
only logical course of action. Forward-looking organizations
activities such as exploration, development and production.
must find ways to locate and exploit new energy reserves,
Downstream, energy firms can leverage these technologies
to improve production efficiencies, and to promote
to improve performance in refining and shipping, trading,
conservation-minded demand management, sustainability
primary and secondary distribution, storage, and marketing.
and profitability.
Intelligent Partnerships
To overcome these challenges and to fully grasp these
emerging opportunities, many utilities and oil and gas firms
now work to create collaborative partnerships with allies who
specialize in innovative process and IT solutions. Forward-
maximizing the “fifth fuel” of conservation, and driving
long-term customer satisfaction and business success.
Intelligent, growth-based investment in energy and other
infrastructure is the only way to ensure a positive future
that have delivered proven efficiencies and TOC payback
for the global economy.
operations through advanced technology and business
processes designed to improve energy management, drive
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ensuring supplies, driving productivity and cost savings,
specifically to meet their unique situations, as well as systems
EDS, an HP company, helps energy companies improve
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will allow energy firms to tackle their most daunting problems:
looking energy firms are incorporating technologies developed
across other industrial sectors.
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Fortunately, advanced technologies are now emerging that
Global Energy Trends
EDS Viewpoint Paper
ABOUT THE AUTHOR
Ian Miller
Leader, Global Energy Industry Group
Ian Miller leads the Global Energy Industry group for EDS, an HP
company, which serves clients in the oil and gas, utilities, chemicals,
and mining industry segments, bringing deep industry knowledge,
world-class capabilities, innovation and a performance-based
culture. He has a wealth of experience in consulting and project
management, with a special focus on the energy industry.
Miller has served in numerous leadership roles during his
distinguished career. Most recently, he managed Hewlett-Packard’s
Applications Services business in Europe, Middle East and Africa,
where he refined and refocused the applications services
portfolio to provide the best economic solutions for customers.
Before that, he was CEO of Parity Group PLC, an IT services
company, where he led a complete restructuring and recapitalization
process from 2001 to 2004. Miller was also president of the Energy
Global Industry Group for EDS from 1994-2001, helping major oil,
gas and chemicals corporations succeed in the digital economy.
Before joining EDS, he spent 16 years at PA Consulting Group, the
last six years as a partner, responsible for the Global Energy
practice. He qualified as a chartered accountant with a member
firm of KPMG.
In addition, Miller is a nonexecutive director of KBC Advanced
Technologies PLC, a UK-quoted company specializing in refinery
process optimization. He also holds the post of Special Commandant
of the City of London Police and was awarded an MBE by the Queen
in the Birthday Honours List in 2008 for his services to policing.
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