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The Intersection of Information & Energy

Massive layoffs in the oil sector and blood running in the streets of Stavanger

Posted: 10/12/2015
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Provocative headlines like this are frequently seen in Norwegian newspapers these days. Declining oil prices are causing unrest – not only within the oil and gas industry, but also other sectors that depend on the oil and gas industry running smoothly.

Statoil and the North Sea have featured widely in the international and domestic Norwegian press. Recently we have seen stories like:

Statoil, Norway’s biggest oil company is preparing to deepen cuts to investment, operating expenses and staff in a bid to generate an extra $5 billion of cash a year.

The state-controlled oil company wants to meet that target for additional pretax cash flow by 2020 by reducing capital expenditure by as much as 25 percent compared with 2013, trimming operating costs by 15 percent and eliminating 20 percent of its technical staff, according to internal documents.

The goals are more ambitious than those Statoil made public in February, showing the pressure rising costs are putting on profit margins at the world’s largest oil producers as oil prices stagnate. Statoil has particular challenges in Norway; where drilling is more expensive than anywhere in the world and labor costs are almost double those in the United States and at least 40 percent higher than in the neighboring United Kingdom.

In the past six months, the price of oil has fallen by about 75%. Meanwhile, analysts have warned that investments in the North Sea oil exploration have all but dried up, threatening the entire industry.

To combat the pressures brought on by lower oil prices, nearly all oil and gas companies are prioritising operational excellence initiatives, and both reducing cost and optimising resources have become their core mantra. How can an information management strategy within an operational excellence programme contribute to cost savings?

Today’s Challenge

In today’s uncertain economic climate, oil and gas companies are going through a period with high numbers of mergers and acquisitions. As a result, like many other companies that have gone through acquisitions that have led to a change in software platforms and solutions, newly formed oil and gas companies have information stored in many different repositories. An oil company that has been in the business for some years probably has elements of each: file shares on different servers, Lotus Notes databases, ECM systems floating around, and a bit of SharePoint. Lotus Notes and SharePoint, both popular collaboration and information sharing tools that promised simplified content management, actually tend to magnify the information silo conundrum for most companies.

Vital information is often spread around in all of these repositories, and these repositories are often siloed, with no links between them.

While most of this information has been inactive for some time, due to regulatory requirements, it must remain available upon request. As a result, no one dares to remove or shutdown these systems, in case the information is needed in the future. To continue maintaining these systems costs companies a significant amount of money and resource allocation.

Siloed information maintained across various repositories leads to redundancy of processes, information, applications and infrastructure. This increases cost and reduces productivity. Employees waste considerable time and lose productivity searching for information across a variety of different systems. This also reduces the organization’s ability to be agile and adapt to changes in the business, which is especially important in light of today’s lower oil prices.

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

Investing for Future Savings

To save costs, many companies are focused on implementing operation excellence principles. One key aspect of these programs is optimising the way employees work with information and breaking down the silos that prevent information from being managed in a unified way across the entire organisation.

To achieve better operational excellence, oil and gas companies can start looking at the different legacy applications and information repositories, identifying which departments are using them and the processes linked to that usage. If the information is static, the application is a candidate for decommissioning.

"But what about the data?" someone will scream and protest if you remove the application. To preserve access to the information, it can be moved into an archive based on the Open Archival Information System (OAIS) standard for long-term preservation and archiving of digital information. The OAIS reference model diagram has become the most recognizable conceptualisation of a system for digital preservation.

https://energysquared.files.wordpress.com/2015/10/dataarchive.png

When the information is moved into an OAIS archive, the applications can be retired, while the information will remain available using generic user interfaces. When stored in the archive, new relationships between information from different systems can be made available, increasing the value of the content. The introduction of data archiving solutions for application decommissioning is proving to show a quick return on investment.

The Next Step? Data Mining

Siloed applications and records repositories house valuable data that needs to be unlocked and unleashed with new applications and big data analytics without subjecting the organisation to compliance risks. Moving the information into central archiving solutions will liberate valuable data from legacy and siloed applications, and makes it accessible whilst maintaining governance and retention policies.

In a future post, I will look closer into the possibilities of using the archive for analytics, but now, I am looking forward to hear your feedback on the above.


Rune Olsen, Senior System Engineer, EMC