DIGITIZING
THE ENERGY INDUSTRY
TABLE OF CONTENTS
1Introduction
2 Analytics infrastructure
4 Process automation and oil and
gas operational excellence
5 The digital oil field
One of the most significant changes approaching the world of global
business is the Internet of Things (IoT). A recent McKinsey Global Institute
report stated that the IoT could unleash up to $6.2 trillion in new global
economic value annually by 2025. Regardless of whether the focus is
manufacturing, transportation or energy, the IoT is going to make a
game-changing impact on business and how it is done. Customers,
manufacturers and utility providers will find new ways to manage devices
and, ultimately, conserve resources and save money.
To usher in this new era, energy organizations need to create differentiating solutions that help
them better engage with all business partners, whether internal or external. These solutions need
to fully utilize the current trends in social, mobile, cloud and big data—topics which are discussed in
this white paper, along with the ways in which Software AG is positioned to help energy companies
benefit from these disruptive changes.
This white paper is written for energy providers. It provides examples of companies that are finding
creative solutions to their issues and discusses issues common to the energy sector, such as:
analytics infrastructure; process automation and oil & gas operational excellence; and the digital oil
field. Finally, the white paper offers solutions that can benefit organizations, their customers and the
bottom line.
BUSINESS WHITE PAPER
Digitizing the Energy Industry
Analytics infrastructure
GE estimates that a 1
percent reduction in
CAPEX could save
$90 billion over a
15-year period.
If your organization is like most other energy providers, you probably have divisions that
work independently with systems and processes, which really need to be integrated. For
an industry facing steadily increasing capital expenditure, now estimated at $600 billion
per year, it is clear why integrating an analytics infrastructure is a good idea—especially
when GE® estimates that a 1 percent reduction in CAPEX could save $90 billion over
a 15-year period. Integration is at the very foundation of analytics infrastructure for all
fields, but particularly for the electric, oil and gas sectors, which can use the Industrial
Internet to mitigate risk and maximize opportunity, especially in upstream facilities.
Well-control analytics provide an excellent use case for integrating upstream
digital processes. Implementing real-time analytics and process management allow
organizations to monitor real-time well-control conditions and get control-imbalance
conditions alerts. With these technologies, organizations also get real-time comparison
and alerts based on work activity—like cementing operations or pressure tests—and
automated initiation of well-control actions. This probably sounds like an impossible
dream. Currently, a system may look at past data and provide insight that might be an
hour old (at best). In the case of supporting applications that need to react now, even
hour-old data is not fast enough. While old data management systems are still required,
a new complementary system is needed—one that enables a “leave-and- layer”
approach to the architecture that allows enhancement of current operational systems.
Well-control analytics provide an excellent use case for integrating upstream
digital processes. Implementing real-time analytics and process management allow
organizations to monitor real-time well-control conditions and get control-imbalance
conditions alerts. With these technologies, organizations also get real-time comparison
and alerts based on work activity— like cementing operations or pressure tests—and
automated initiation of well-control actions. This probably sounds like an impossible
dream. Currently, a system may look at past data and provide insight that might be an
hour old (at best). In the case of supporting applications that need to react now, even
hour-old data is not fast enough. While old data management systems are still required,
a new complementary system is needed—one that enables a “leave-and-layer”
approach to the architecture that allows enhancement of current operational systems.
The digital business
closes the gap between
business and IT to create
digital systems of
differentiation that
drive agility on the very
front lines.
2
Another use case is the problem of energy theft, which is one of the most insidious
and surprisingly frequent parts of the energy business, when customers or energy
users bypass meters or divert portions of their energy to cause metrology to measure
consumption inaccurately. According to Forbes, the U.S. loses $6 billion annually due to
energy theft. Of course, this is a time-consuming, expensive and complex problem to
fix, and it provides another proof point to support the premise that the energy industry
can really benefit from using the Industrial Internet to mitigate its various and expensive
problems. How? By implementing solutions like an automated meter infrastructure,
which ties back to a real-time analytics provider that detects and provides alerts about
theft and tampering by using analytics that first uncover anomalies and then initiate an
automated recovery process. Ultimately, preventing energy theft leads to fairer prices
for legitimate customers, which means increased customer satisfaction and smoother
customer relations.
The problem of energy theft is larger than just diverted power. When significant enough,
stolen loads damage assets—among them, thermally induced transformer failures,
power surges and failed electrical systems. The financial consequences of piracy are,
therefore, more significant than unbilled services. Though smart meters offer real-time
alerts to reduce theft, they also generate a tsunami of data that cannot be digested
or analyzed in a meaningful way. This is where the digital business takes center stage;
however, monitoring millions of smart meter alerts requires state-of-the-art technology.
Digitizing the Energy Industry
For both upstream oil & gas and energy theft scenarios, the solution lies in implementing
a digital business. Software AG CEO Karl-Heinz Streibich authored a book on the topic,
“The Digital Enterprise,” which is about helping companies go digital through mobile,
social, big data and the cloud. The digital business closes the gap between business
and IT to create digital systems of differentiation that drive agility on the very front
lines. To accomplish this, Software AG offers five product lines to help companies start
their journeys toward the digital business—ARIS, Alfabet, webMethods, Apama and
Terracotta—as well as Software AG Cloud.
ARIS is a business alignment solution for companies that want to increase process
agility and efficiency, reduce implementation times and enhance quality. It allows them
to transform their processes, enable process-driven management for SAP® solutions
and ensure BPM governance. Often IT groups maintain multiple systems that perform
similar or identical functions without a keen understanding of the total cost to maintain
and support them, or how business employs these systems in support of the enterprise’s
activities. To close this gap, companies can use Software AG’s IT portfolio management
tool, Alfabet, which transforms organizations by improving how they plan and optimize
their IT landscapes.
For the typical energy organization, further synchronization is necessary beyond just
IT and business. Software AG’s webMethods increases agility by providing software
to rapidly integrate systems and automate enterprise-wide processes. It enables
enterprises to quickly integrate systems, services, devices, processes, business partners
and data to provide new business value and improve business performance.
In today’s energy sector, big data is becoming a significant influence in the way
companies behave. To manage mounting big data challenges in real-time, companies
can use Software AG’s Apama and Terracotta products, which provide context as the
basis for intelligent action.
Layered across all these platforms is a practice that Software AG refers to as analytics
and decisions. The typical executive in the energy field probably has a standard set of
concerns: Painless integration of IT and business processes is one. An in-depth, endto-end look at the entire process—plus the ability to produce real-time analytics—is
another, and thirdly, energy theft. Ultimately, executives want to be able to make, with
confidence, informed business decisions at speed and scale.
Analytics and decisions means lightning-speed access to big data from a wide variety
of sources, including Hadoop®, social, sensor, enterprise, Web and mobile. It leverages
the Industrial Internet, applying next-generation technology on an enterprise scale.
It provides continuous analytics so executives can analyze historical processes and
business data to identify statistical norms, patterns and behaviors, and can correlate
streaming data across silos to contextualize real-time data and current events that might
impact the process. It provides a dashboard with visual analytics and real-time data,
enabling real-time decision-making.
With analytics and decision support at the heart of Software AG’s Digital Business
Platform, energy enterprises are able to combine current, real-time metrics with historical
data to assess whether today’s electricity usage is typical and is being properly billed.
Having context—typical usage and patterns determined to indicate fraud—is critical to
identifying and stopping electricity theft.
So how do you begin putting these analytics processes into motion, especially as an
energy executive? Consider that new fuel reserves are increasingly located in remote
and expensive- to-reach areas, while global safety and regulatory oversight is on the rise.
Therefore, extending the Industrial Internet to the oil and gas industries creates multiple
opportunities. For the electric industry, consider that integration of distributed energy
resources, energy efficiency and adoption of sub-cycle phasor measurement technology,
all of which are a part of the broader smart grid domain, have dramatically increased the
challenge and opportunity for managing grid stability.
3
Digitizing the Energy Industry
Combining Software AG products with analytics and decisions allows energy industry
executives to address their various pain points with a “leave-and-layer” approach to
their organization’s current architecture. Whether focused on oil, gas or electricity, the
Industrial Internet is approaching, and it can help in ways never before thought possible.
This is just a small portion of the intelligent operations story, and many more use cases
will come to light as the IoT evolves. Energy theft is just one area where the impact of
the IoT will be felt, but it is illustrative of the potential value utilities can derive from IoT
in the smart grid domain. Other industries, such as the oil and gas sectors, will soon start
benefitting from the IoT to ensure human health and safety, in addition to increasing
revenue.
Process automation and oil & gas operational
excellence
The digital business will positively impact the energy industry—especially when
implementing analytics infrastructure. Several significant factors are conflating to shape
the digital world, including Moore’s Law, which is the relationship between increased
chip complexity and capacity with the chip’s processing capabilities and speed. In
addition, the economics of storage capacity are changing how we move and store data,
leading to the rise of “big data.” Another influential factor is the increased technological
sophistication of telecommunications and memory; the physical distance between
data and processor is now far less of an issue than it once was. Finally, four megatrends
(mobile, social, the cloud and big data) are fundamentally transforming business
processes and technology platforms.
These megatrends can be seen time and again across the modern enterprise. Mobile is
disrupting every sector, from energy to retail, health, automotive, finance, education and
more. Change is happening at incredible scale and speed, due to the shift to 4G/5G and
Machine-to-Machine (M2M) technologies. Furthermore, social media is becoming the
go-to outlet for organizations that want to connect with their customers in a meaningful
way. It is not only a necessity; it also impacts how companies invest in a differentiating
solution. By integrating social media efforts with their content strategy, companies are
seeing increased lead generation, referral traffic and revenue.
Another necessity is the ability to operate in the cloud, which allows flexibility in how
companies manage their IT investments, particularly due to disparate solutions that are
siloed— with little awareness of surrounding systems. Companies must now create a
unified view across the enterprise and support the scale and real-time responsiveness
that the business demands. While not every enterprise is a digital business, every
business will definitely need to become digital—regardless of industry, size or function.
By enabling a high-level look at every process with analytics infrastructure, chances of
improving an organization’s operational excellence are very good. This has become
a more critical focus since 2010’s BP® spill, a highly unfortunate incident that brought
negative attention to the oil and gas industry’s operational shortfalls at the time. To
prevent a catastrophe such as the BP spill from ever happening again, companies are
actively seeking ways to institute analytics and decisions, which is the ability to make
confident, informed business decisions quickly and at scale.
Ultimately, operational excellence—and the technology it requires—is a noble goal for
the energy sector. But it’s a very large undertaking and one that requires not only the
implementation of technology-enabled processes but also a significant transformation of
an organization’s culture.
Done correctly, process automation creates differentiating solutions that help energy
executives better engage with their customers, partners and employees. Those solutions
need to fully utilize social, mobile, cloud and big data to make the kind of seismic impact
required by the energy industry. At the same time, the IoT has become a reality, ushering
in the age of the Industrial Internet.
4
Digitizing the Energy Industry
Baker Hughes
One company that stands out in the early adoption of process automation is Baker
Hughes, a top-tier oilfield service company. The company had no global, standard orderto-cash process and realized that its exceptions and discrepancies in the early stages of
the process resulted in significant rework and effort—especially when it came time to
invoice the customer. These inefficiencies impacted the overall order-to-cash cycle time.
Ultimately, Baker Hughes wanted to optimize its Procure-to-Pay (P2P) process to improve
invoice accuracy, minimize delivery delays and reduce late payments. The company knew
it needed increased process agility, visibility and control into the entire invoicing process,
so Baker Hughes used the webMethods Integration Platform to combine its SAP
Enterprise Resource Planning (ERP) system with other systems, giving the company new,
efficient capabilities for process modeling and execution. This allowed Baker Hughes to
create a real-time dashboard to proactively monitor P2P activities, end-to-end, across
different systems. The objective of this undertaking was to improve quality and customer
satisfaction while focusing on the order-to-cash process.
After implementing its process automation system, Baker Hughes realized significant
benefits. The P2P process was faster, traceable and paperless. The company reduced
invoicing costs, sav- ing $5-6 on each bill, reduced invoice errors and payment
delinquency rates, and improved pro- cess visibility and supplier relationships. Baker
Hughes also tracked Key Performance Indicators (KPIs), which contributed to continuous
process improvement. The result was a rather significant cash flow enhancement—to the
tune of $100s of millions.
While Baker Hughes illustrates an ultimately profit-driven success, it should also be
noted that the company underwent some very significant changes to accommodate
the shift into digital. It combined nine divisions into a single, unified company and
created a dedicated team from sales ops, finance and IT for implementation, training
and change management. Employees adapted to new ways of working, using a set
of technologies designed to automate invoice ops and capture statistics around that
process. Empowering the owners of processes such as generating invoices lent better
managerial skills to that group, and the results speak for themselves. Baker Hughes
now has global standards that facilitate best practices. Visibility and transparency drive
operational accountability, and its staff works across functions, meaning they know when
appropriate action is needed and which actions to take. This streamlined process helped
Baker Hughes decrease days of outstanding sales by a day and a half.
Because it contributes to better, more consistent decision-making, analytics and decision
support was critical to the company’s success. By allowing ad-hoc social collaboration,
teams could respond faster to events. It allowed Baker Hughes to measure indicators to
increase visibility and agility and provided an all-important link between transformation
activities being undertaken and use of technology to help support that transformation.
Analytics and decisions starts with understanding processes and then allows
organizations to drill down into specific processes within a chosen work area, whether
that is changing invoicing processes or implementing safety practices on an oil rig.
The digital oil field
The impact of digital technology on the world of business cannot be underestimated.
One of the most significant advancements has to be the IoT, which is increasingly found
anywhere from traffic lights to remote controls to oil well equipment, and it is changing
the way the oil and gas industry is conducting its business. It is becoming more and
more apparent that the IoT is very good at connecting disparate parts within a system
and providing a holistic, end-to-end look at the entire process. To leverage the power of
the IoT and address the gap between business and IT, there needs to be a widespread
application of process control or real-time technology in the oil and gas space, which
faces steadily increasing CAPEX—now estimated at $600 billion per year.
5
Digitizing the Energy Industry
The IoT has much to offer the oil and gas industry, which is complex, global, highly
scrutinized and also has a very small margin for error. The stakes are high, and the impact
of errors can be devastating. With these parameters, it’s surprising that this technology
is only now being widely integrated into everyday energy operations. Through digital
technology, oil and gas companies can transform into digital businesses, which allows
them to differentiate from their competitors and better engage customers, partners and
employees.
Becoming a digital business enables complete business performance transparency
for not only managerial and operational excellence but also for required government
regulations. It also provides real-time support of management decisions, providing the
capability to learn and decide quickly. Finally, workers involved in the digital business can
make decisions at the point of operations anywhere within the company.
New fuel reserves increasingly are located in remote and expensive-to-reach areas while
safety and regulatory oversight continues to increase globally, so extending the Industrial
Internet to the oil and gas industries creates multiple opportunities. At Software AG,
this is referred to as the “digital oil field.” As a digital business, an oil company’s remote
fields, rigs, drills and reservoirs are linked, allowing operators and suppliers to improve
planning and modeling cycle times. The digital business uses data to understand
process history and then predict patterns of the future, so executives can manage the
end-to-end process of the digital oil field and take prescribed action when necessary.
Consider the safety benefits of being able to remotely sense, monitor and automate
dangerous tasks. Imagine using sensor information in a drilling operation, which would
provide an alert when an abnormality occurs. In the case of drilling a well, the main
concern is to ensure hydrocarbons don’t enter the well before it’s completed, as it
could result in loss of control and a subsequent blowout—similar to what happened at
Macondo. The Deepwater Horizon Study suggested that the Macondo disaster may
have been mitigated or avoided if automated process control technology that leveraged
data from real-time information systems had been available.
With a digital oil field, it is possible to monitor real-time well control conditions and
get automated alerts about control imbalance conditions. The digital oil field provides
access to real-time comparison and alerts based on work activity such as cementing
operations and pressure tests, and it offers automated initiation of well control actions.
Becoming a digital business provides the capabilities for continuous improvements,
wherever and whenever they are required.
Analysts at Gartner, Inc. recently wrote, “Organizations are making their business
operations more intelligent by integrating analytics, social and mobile technologies into
their processes and the applications that enable them.” Analytics and decisions enables
critical business decisions at speed, at scale and with confidence. You can’t manage
what you can’t measure, and you can’t fix what you can’t see or understand. Given the
complexities of the oil and gas industry, analytics and decisions is a necessary step in
helping organizations to create process through real-time technology.
The IoT is rapidly changing how business is being done across every sector. Specific
to the oil and gas industry, however, the IoT is connecting all the disparate parts of our
operations and creating a comprehensive look at our entire process, which can increase
the agility and safety of our business. By connecting more physical objects to the
Internet, companies can benefit from the knowledge and efficiency gains of a digitized
and automated world.
6
Digitizing the Energy Industry
From smart meters to oil rigs to ensuring best practices for safety and compliance—it
is clear that the IoT is having a significant and positive impact on the energy sector.
What’s perhaps most exciting is that while its full impact is as-yet unknown, its benefits
are becoming clear. When an organization combines the power of the IoT with the
rigor and quality enabled by analytics and decisions, the result is a true benefit and
point of differentiation. The four new pillars of modern business—social, mobile, big
data and cloud—are creating a compelling new set of rules for companies who want to
thrive by embracing excellence. Gartner Vice President and Analyst Janelle Hill wrote,
“Tomorrow’s business operations will integrate real-time intelligence. This will require a
new approach using intelligent business operations—a style of work in which real-time
analytic and decision management technologies are integrated into the transactionexecuting and bookkeeping operational activities that run a business.” Software AG
helps organizations transform into digital businesses so they can differentiate from
competitors and better engage all business partners.
Organizations are
making their business
operations more
intelligent by integrating
analytics, social and
mobile technologies
into their processes
and the applications that
enable them.
7
Digitizing the Energy Industry
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