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Follow The Oil Downstream To Find The Upside To Lower Oil Prices

Posted: 11/23/2015
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As we read news reports about the global economy, and the ripple effects of oil prices that are at half decade lows, something came to mind: refineries are poised to take advantage. And we can all learn from their playbook as they manoeuvre in the contemporary marketplace.

Profitability Moving Downstream

Profitability is traditionally centered in upstream areas of the energy market, which leaves the downstream end fighting to optimise narrow margins. Refineries have dealt with this economic equation for years, and regularly fight to squeeze out efficiencies. But what happens to refineries when oil prices drop? The cost of materials suddenly plummets, yet they keep on outputting– generating a welcome increase in profitability.

Certainly this varies by region and the refinery itself. I have seen firsthand, however, that a brownfield environment can reshape itself during market swings. Astute leaders are using the "upside" of the downward oil price trend to make infrastructure improvements and technology investments.

Old School Refineries on the Cutting Edge

In the case of a refinery in the United States I know well, the operators made a strategic decision to implement new technologies with their newfound profits. What’s interesting is not that they made this a priority, but that they embarked on it at all: innovation is expected from technology companies or those at the heart of Silicon Valley.

This owner, is, conversely, steeped in tradition and history, tied heavily to the local community, and highly conservative in nature, one of the least expected companies to make such a bold and impressive shift.

As with many companies new to content management, this American refinery had layers of issues compounded over years of limited technology investment. Paper-based, like many energy infrastructure facilities built decades ago, they had no content management in place. They commonly incurred regulatory fines because they simply could not locate technical drawings. While physical maintenance was a visible priority over the years, digital maintenance lagged.

Fast Return on Technology Investment

Within the first few months of implementing their content management strategy, the first windfall arrived: they received a refund on historical compliance fines. By proving to regulators the ability to quickly locate electronic records, they recouped penalty fees, which in turn helped offset the costs of their new system. One of the great advantages of content management is that organisations not only become compliant with regulators like the Occupational Safety and Health Administration (OSHA), but that fine refunds can quickly improve returns on investment.

With a centralised content management platform in place, the company has also been able to start supporting other areas of the business, beyond pure document management. In this case, they integrated their content management system with their maintenance management system. Relevant documents are easy to find, including P&IDs, SOPs, shut down procedures and vendor equipment documentation. Engineers save time on repairs, increase accuracy across maintenance work, and eliminate work duplication thanks to getting more accurate information faster.

It’s also worth noting how the technology investment is supporting the broader lifecycle of the refinery’s staffing needs. Automated, tech-centric work environments are attractive to new hires. And once new staff are on board, regulators require they are trained, audited for training, and that jobs performed are audited as handled by someone trained.

This rigorous tracking and proof of staff credentials is greatly eased with content management. Finally, as ageing crews retire, the knowledge capture and retention capabilities of content management offer enduring benefits to the wider organisation.

As IDC points out, documentation and driving efficiencies are priorities for the energy industry when it comes to upping profitability. By pointing dollars to visionary modernisation investments, we are seeing evidence that brownfield refineries are taking advantage of a rare window of opportunity.

By making smart investments as the market shifts, they are enhancing their "efficiency" and core competency with new technologies that will inevitably reap long-term profitability in return. We all know that the downturn in oil prices has an upside, and they are seizing the moment to prepare for it.


Martin Richards, Senior Director, EMC Enterprise Content Division

Read More: Oil Price: The Top 25 Events That Rocked The Cost Of Crude Oil