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The Intersection of Information & Energy

The Upside of a Downward Oil Price Trend: Who is in the Sweet Spot?

Martin Richards, José María Sotomayor, and Rune Olsen
As I think about the ripple effect of oil prices on our varied stakeholders, one insight comes to mind – refineries are in the sweet spot. And we can all learn from their playbook as they maneuver the market.

Profitability is traditionally housed in upstream areas of the energy market, which leaves the downstream end with little room to optimise. If anything, refineries are accustomed to slim margins and squeezing out efficiencies. But what happens to refineries when oil prices drop? Their cost of materials suddenly plummets, yet they keep on producing outputs – generating a welcome influx of 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.

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

Refineries taking advantage

In the case of a U.S. refinery I know well, they made a strategic decision to aggressively implement new technologies with their new-found profits. What’s interesting is not only what they did, but that they did it at all.

We expect innovation in technology companies or the heart of Silicon Valley. But this customer is one steeped in tradition and history, tied heavily to the local community, and highly conservative in nature. This might be the least expected company to make such a bold and impressive sea-change.

As with many companies new to content management, this American refinery had layers of issues compiled over years of limited technology investments. 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 behind.

Within the first few months of implementing their content management strategy, the first windfall already arrived – they were refunded for some of their original 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 organizations not only become compliant with regulators like OSHA, but that fine refunds can quickly improve solution ROI.

With a centralised EMC content management platform in place, the company has also been able to start supporting other areas of the business, beyond pure documentation management. In this case, they integrated their content management system with their maintenance management system. Relevant documents become 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.

Technology driving success

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 personnel is 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 organisation.

As IDC points out, documentation and driving efficiencies are priorities for the energy industry when it comes to driving 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" core competency with new technologies and will inevitably reap long-term profitability in return. They know the downturn in oil prices has an upside, and they are seizing the moment.

We believe that the oil price downturn is an opportunity for facilities rather than a stumbling block. Let us know what you think below.