InformationWeek 500: Energy Companies And Utilities Aim To Squeeze Out More Efficiencies
With oil and gas prices down, companies are focusing on process efficiency and maximizing margins.
Oil and gas companies operate from the ocean floor to the mountaintop, while U.S.-based utilities reach virtually every household from coast to coast. The sector's IT needs are equally expansive. But there's one common thread: Falling oil and gas prices the past two years have made it imperative that companies in this industry find operational efficiencies.
They were "going flat out" when oil prices were $125 to $140 per barrel in 2008, says Curt Mortenson, a principal at Deloitte Consulting. "When everyone's making that kind of money ... cost is less of a consideration." Now, with oil hovering around $75 per barrel and natural gas prices down 60% from two years ago, companies are focusing on process efficiency and maximizing margins.
Business process innovation was cited as a focus of 75% of the industry's CIOs. An example would be deploying monitoring equipment to oil rigs to track the maintenance levels of components, to maximize rig uptime. "It's about replacing particular items based on wear indicators versus 'hot-shotting' materials out to these rigs when they go down," Mortenson says. Location data matters for those type of uses, as well as for logistics that are a key part of the business; 58% of the sector's CIOs are adopting GPS-enabled or location-aware Web apps, compared with 25% for all industries.
Doug Haugh, executive VP and CIO of Mansfield Oil, sees the combination of mobile data collection and widespread machine-to-machine connectivity as the next big force in the industry. "We're seeing every piece of physical hardware across the supply chain become intelligently connected to the network," Haugh says.
Energy companies were focused on business process improvement before the BP spill, but the disaster will no doubt affect the demands on IT. "It's going to have an impact on how we drill, what redundancies are going to be required, and what data we need to capture," Mortenson says.