Collaborating to Solve Shared Oil and Gas                                                               Industry Challenge...
● In order to mitigate the risks of drilling, and more generally of  large E&P investments, oil and gas companies have for...
time, sometimes turning problems into disasters and disasters intocalamities.Collaboration for Effective Operation and Ris...
A private cloud-based solution is a good choice as it guaranteesstandard procedures for all parties. Also, a shared indust...
THE BEST PRACTICEE&P Information Management Associationand its License2Share: An Example Fromthe Norwegian Continental She...
change. Lean interfaces are also provided to integrate information intocompanies own systems.EPIM chose Logica to provide ...
CANDIDATES FOR COLLABORATIONJoint venture partnerships span the entire oil and gas industry, bothupstream and downstream. ...
must be able to demonstrate where the data is and that its    movements can be traced. Customers must ask for identificati...
Copyright NoticeCopyright 2011 IDC Energy Insights. Reproduction without writtenpermission is completely forbidden. Extern...
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Collaborating to Solve Shared Oil and Gas Industry Challenges


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Collaborating to Solve Shared Oil and Gas Industry Challenges — Drivers , Enablers , and Best Practices.

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Collaborating to Solve Shared Oil and Gas Industry Challenges

  1. 1. Collaborating to Solve Shared Oil and Gas Industry Challenges — Drivers, Enablers, and Best Practices WHITE PAPER Sponsored by: Logica R o ber t a B ig l ian i Se p tember 2 IDC ENERGY INSIGHTS OPINION When a major event strikes the oil and gas industry — a change ofF.508.988.7881 regulation, a health and safety incident, or similar — it never affects just one company. It impacts the entire industry. This is why oil and gas companies — traditionally not inclined to share information with competitors — are gradually exploring new ways of collaborating to solve shared challenges.P.508.935.4400 This is not always easy. The data involved may be commercially sensitive; it may be subject to local data protection rules; the volume of data is often so substantial that it is not practical to share it; there is then the issue of safely sharing information with a huge number ofGlobal Headquarters: 5 Speen Street Framingham, MA 01701 USA contractors and with joint venture partners that may need to use it. IDC Energy Insights believes that the initiative launched by Exploration & Production (E&P) Information Management Association on the Norwegian Continental Shelf is an inspiring and innovative best practice collaboration — with License2Share, Norwegian Continental Shelf operators came together and solved shared challenges around licensing information management. THE IMPERATIVE FOR COLLABORATION Oil and gas companies operate in a difficult and uncertain political and environmental landscape. Global demand for oil and gas is back on the rise, while E&P costs are rising. Company executives have never been more challenged by pressure to control costs and speed up reserves development activities and operations. IDC Energy Insights believes some of the major industry challenges are best tackled through a collaborative approach: ● With the so-called ending of "easy oil" — and gas — the pressure to meet future energy demand while securing the industrys own future has increased. As investments for deep oil or unconventional resources are significantly more substantial, oil and gas companies have sought solutions to mitigate and spread risks through global alliances, M&A activities, internationalization, and innovation, including technological innovation. September 2011, IDC Energy Insights #IDCWP37T
  2. 2. ● In order to mitigate the risks of drilling, and more generally of large E&P investments, oil and gas companies have formed joint ventures (JVs). Decisions on budgets, procurement, drilling, and at the later stage on production, transport, and compliancy reporting need to be taken collaboratively and effectively. The global and dynamic nature of these relationships makes the role of the JV administrator very complex: collaboration tools need to show a clear, positive impact on operational effectiveness and improve processes such as ease of communication and reporting.● Recent environmental disasters have led to additional environmental, health, and safety concerns, and regulators are evaluating more stringent controls. Proactive, collaborative, and industry-led initiatives to produce comprehensive regulatory reporting are preferable over obligations to fill in bureaucratic forms.● As sustainability issues (affecting people, the planet, or profits) become more global in their impact, more standardized processes and collaborative technologies and tools are being developed to tackle the inherent complexities of the industry.● The time it takes to complete major infrastructure work (such as exploration or production rigs and refining capacity) do not need to be impacted by ineffective JV operations.● Oil and gas companies are struggling to find the balance between embracing sustainability and green/environmentally friendly practices, while facing the need to gain permission to expand their operations into more challenging territories or to develop unconventional resources.The Value of CollaborationRethinking and indentifying new opportunities for collaborationenables oil and gas companies to anticipate risk effectively, improveperformance, operate more efficiently, and respond to emerging trendsand challenges. Following are a few examples of areas that arebenefitting from increased collaboration.Collaboration to Safeguard Health, Safety, and theEnvironmentDeveloping and operating oil and gas fields involves the collaborationof many players: operators, JV partners, specialized contractors, andlocal governments and authorities. All these are often simultaneouslyinvolved with the same assets, so in order to streamline processes,mitigate risks, and best handle any problems that might arise, aninformation sharing platform is highly desirable. This allows allinvolved parties to have the appropriate level of understanding toorganize themselves to manage risks, and act promptly if problemsarise. The ability to rapidly act in the event of an emergency is crucial.Insufficient or inconsistent information can cause delays in reactionPage 2 #IDCWP37T ©2011 IDC Energy Insights
  3. 3. time, sometimes turning problems into disasters and disasters intocalamities.Collaboration for Effective Operation and Risk MitigationSharing operational information has a lot of benefits compared withexchanging data and reporting to partners in a joint operation.Inefficiencies are unaffordable, as they can lead to missed deadlines,lower production output, rescheduling of very expensive infrastructure,and longer time to "first oil." To limit the financial damages caused bydelays or downtime, a proper orchestration of information flows iscritical and must be backed by adequate supporting collaboration tools.All the involved parties need access to the required information — nomore, no less — that can affect their work. This would enable, forinstance, the timely exchange of data with contractors or themanagement of a multiparty workforce. Excellent collaborationcapabilities enable people in diverse locations to really work globallyas a team, allowing companies to optimize scarce or highly skilledresources.Collaboration to Reinforce ComplianceThe value of high-quality information-sharing goes beyondcollaboration for improved efficiencies, into the realm of compliancy.Compliance infringement is a type of risk oil and gas companiescannot afford to take. They need to operate according to a multitude oflocal, national, and international regulations and controls, and be ableto report the appropriate data to the relevant organizations, be it anational authority or a partner in the joint venture. Once an explorationpermit or a production license is obtained it needs to be managedduring its entire life cycle.Collaboration to Safeguard KnowledgeAnother risk related to the complexity of joint ventures is that oftenvaluable information can be lost among partners. Many of the assetsemployed by the oil and gas industry are built by one firm, operated byanother, and maintained by yet another. Valuable knowledge gainedduring the build phase may be lost as the asset passes fromconstruction to operation. By sharing information and lessons learnedamong the involved organizations, operating and maintenance costscan be significantly reduced.ENABLING COLLABORATIONElevating Collaboration With Cloud-BasedSolutionsFor oil and gas projects, considering the number of parties involved,the geographic spread of these parties, and the amount of data beingdealt with, collaboration via an information-sharing platform such asthe cloud is a promising option.©2011 IDC Energy Insights #IDCWP37T Page 3
  4. 4. A private cloud-based solution is a good choice as it guaranteesstandard procedures for all parties. Also, a shared industry cloudplatform, such as RigNet/SOIL, is even more able to address securityconcerns. According to IDC Energy Insights International Survey onSecurity Governance, Risk, and Compliance, cloud adopters keysecurity issues when introducing cloud computing services into theirorganizations are dominated by data protection and compliance issues(25%), including data control over the cloud, privacy, and datalocalization issues. IDC Energy Insights, however, believes these fearsmay be misguided:● Organizations that are wary of cloud because they believe their data will necessarily be more secure when kept within the confines of their organizations need to consider that as many as half of all security breaches are caused internally, by accident or by design.● Serious cloud providers are likely to be as good as or even better than companies internal IT organization because they can leverage their scale to keep up with the latest technologies and hire the best staff, and due to the scrutiny to which their procedures and policies are subjected by customers and regulatory authorities.● A significant shortage of skilled IT security specialists puts a price and availability premium on their heads, and attracting and retaining such skilled staff is difficult.Customers need to ensure that service providers have undertakenexternal auditing and that they have security certifications. This doesnot transfer ownership or responsibility for data security and integrityto the service provider, as the customer is ultimately responsible, but itdoes lay the foundation for serious information security governance.Information Security is Not Threatened byCollaborationOil and gas companies deal with extremely sensitive data.Collaboration inherently requires increased data sharing, but this doesnot necessarily mean increased threats to data security and protection.In effect, data security and data protection can be guaranteed, even incollaborations where data sharing is a must, through appropriate dataprotection measures and processes and adequate data management. Asoil and gas projects become more complex, involving ever moreentities, more stringent data protection processes must be put in place,and data access and data handling must be scrutinized to ensure thatrules are respected. In the best practice case study in the next section,security is stringent and each access is handled according to strictidentity management rules. The myth of increased collaboration and agreater number of participants not respecting data protection must bedispelled, as data security can be guaranteed if the correct measuresand policies are in place.Page 4 #IDCWP37T ©2011 IDC Energy Insights
  5. 5. THE BEST PRACTICEE&P Information Management Associationand its License2Share: An Example Fromthe Norwegian Continental ShelfMembers of the Exploration & Production Information ManagementAssociation (EPIM) operate exploration permits, production, transportlicenses, and joint ventures involved in activities on the NorwegianContinental Shelf (NCS). Members include leading global oil and gascompanies such as Chevron, ConocoPhillips, ExxonMobil, BP, Statoil,ENI, Total, and GDF Suez. In addition, observer members include theClimate and Pollution Agency, the Ministry of Petroleum and Energy,the Norwegian Petroleum Directorate, and the Petroleum SafetyAuthority Norway.EPIMs mission is to make available IT solutions that facilitate the bestpossible flow of information between its members. By working closelywith oil and gas companies operating on the NCS, EPIM aims toidentify areas where, by introducing collaboration platforms, it ispossible to improve information quality and flow, minimizing the riskof inconsistent versions, reducing handling times (retrieval and versioncontrol), and lowering costs for each individual operator. All thisneeds to be done without impacting competition between companies orjoint ventures.EPIM provides a number of services, and one of the most successful isLicense2Share (L2S), implemented and operated on behalf of EPIMby Logica.What is License2Share?License2Share (L2S) is the official communication and archiving toolfor administrative interaction between operators, partners, andauthorities for all licenses on the Norwegian Continental Shelf. Theapplication, which runs in a private cloud environment, is designed tomeet the requirements for information handling as stated in the licenseagreements and encompass functionalities for publishing andreporting, managing workflow and approval documentation, archiving,and providing assistance for user training.L2S is currently used by 76 companies (operators and partners) and bythe Norwegian authorities. It has more than 6,000 users, and every dayhas an average 800 to 1,000 unique log-ins. Role-based views arecreated for joint venture administrators. Security is stringent and eachaccess is handled according to strict identity management rules. L2S isthe de facto enterprise content management system for license datathroughout the lifespan of oil and gas fields. The standardizedprocesses and practices embedded in the solution are built on morethan a decade of operator experience in the NCS, and are a bestpractice reference. For this reason, adoption of the service by each userrequires very limited customization (which is easily done duringconfiguration), and some functions are mandatory and not subject to©2011 IDC Energy Insights #IDCWP37T Page 5
  6. 6. change. Lean interfaces are also provided to integrate information intocompanies own systems.EPIM chose Logica to provide system integration services toimplement L2S and to migrate data from previous platforms. Logica isnow responsible for the outsourcing services, as well as user supportservices based on OpenText Content Lifecycle Management software.L2S: The Value of CollaborationL2S brings together JV parties with disparate processes, data fromvarious sources, and applications into a single collaboration platform.The key business value of the initiative is that companies recognizethat the collaboration does not jeopardize competition, but actuallystreamlines work processes, making them more effective and reducinginformation risks and costs. "All players involved are confident thatthey are all gaining from collaboration," said Ove Ryland, managingdirector, EPIM. "They can count on L2S to fulfill regulationrequirements in a very effective and predictable way." L2S facilitatesthe information sharing inside each JV operating on the NCS, andsimplifies the process for companies deciding to join or leave a jointventure.A key success factor of the initiative is the pragmatic approach takenfor its implementation. Experts from the key operators workedtogether to define standard procedures or data formatting andreporting, looking for a best practice solution that would satisfy therequirements of both companies and regulators. The same approach isfollowed for any additional new functionality that is implemented. Bydoing so, any adopter can count on a "best practice" solution built onthe industrys concrete experiences. In addition, companies might havedifferent roles in various JVs, being an operator in one and a partner inanother, for instance. By adopting the platform they get consistencyacross licenses.To summarize, the key advantages of L2S are:● Reliable administration and archiving of JV documentation● Reliable collaboration on events, compliance, and legal document sharing and data management● JV life-cycle content management of different document types, traceable and time stamped● Easy alignment to changes in the JV life cycle● Compliance with local legislation, including the flexibility to incorporate future changes in legislation● A private cloud-based solution that is easily extendable and scalable● A proven and accepted industry conceptPage 6 #IDCWP37T ©2011 IDC Energy Insights
  7. 7. CANDIDATES FOR COLLABORATIONJoint venture partnerships span the entire oil and gas industry, bothupstream and downstream. There are a number of situations where asolution such as L2S could be effectively adopted. The best practiceexample described above proves that regulators are excellentcandidates for adoption. IDC Energy Insights would expect interestfrom other entities, such as the Bureau of Ocean Energy Management,Regulation, and Enforcement (BOEMRE) in the U.S.In addition to the regulators themselves, there are three other primecollaboration candidates: deepwater, shale, and LNG. Deepwaterassets require multibillion-dollar investments over extended periods oftime, and this alone leads operating companies to de-risk largeportfolio investments by sharing the costs through joint ventures. Thewave of unconventional shale investment in North America, started byindependents, has attracted numerous investors, from the "supermajors" to international independents and national oil companies.Many of these investments have been through joint ventures andpartnerships, making them strong candidates to seek better ways tocollaborate. Finally, there is the LNG market, in which by naturemultiple parties are involved throughout the value chain, from gasproducer to liquefaction plant to wholesale gas consumer, makingthem excellent candidates to share information.CONCLUSIONSCollaboration, when done effectively, allows oil and gas companies tomitigate risk effectively, improve performance, operate globally moreefficiently, and solve shared challenges. IDC Energy Insightsrecommends the following to oil and gas companies:● Sharing specifications, drawings, and other documents, while insuring appropriate approvals, has always been labor intensive and subject to version confusion. Alternative approaches, such as L2S, need to be evaluated and more often translated into practice. Often it is not true that collaboration is not possible due to competition among players.● Challenge the myth that collaboration equals weaker information security, and keep a close eye on evolving information technologies such as cloud. Though oil and gas companies have been slow to adopt some of these technologies, the technologies are gradually becoming part of organizations set-up, bringing significant benefits to a number of critical business activities.● When adopting cloud solutions, the location of data storage is a key piece of information in that data storage must be subject to privacy and usage regulations depending on the country or region. Data handling, segregation, and encryption, including availability issues, must be evaluated. Should there be a requirement for a legal investigation involving inappropriate activity, the cloud vendor©2011 IDC Energy Insights #IDCWP37T Page 7
  8. 8. must be able to demonstrate where the data is and that its movements can be traced. Customers must ask for identification of key personnel, such as administrators with privileged access, along with hiring policies and employment cessation processes.● Finally, detailed processes and agreements must be in place for data recovery, replication, infrastructure replication, and service restoration in the event of an interruption or disaster.ABOUT LOGICALogica is a business and technology service company employing41,000 people across 40 countries. Logica provides businessconsulting, systems integration, and outsourcing to clients around theworld, including many of the Global 500. Logica creates value forclients by successfully integrating people, business, and technology.Logica is committed to long-term collaboration, applying insight tocreate innovative answers to clients business needs. It has worked inthe oil and gas industry for over 30 years, with oil majors, regionaloperators, and service companies, throughout the world. Logica helpsits clients harness technology to extract more value from every singleaspect of their supply chains, whether that involves improvingdecision making in rigs and refineries, making distribution networksrun more efficiently and sustainably, improving health and safety,making trading decisions, or restructuring their businesses. Logica islisted on both the London Stock Exchange and Euronext (Amsterdam).For more information, please visit IDC ENERGY INSIGHTSIDC Energy Insights provides research-based advisory and consultingservices focused on market and technology developments in theenergy and utility industries. Staffed by senior analysts with decadesof direct industry experience, IDC Energy Insights covers the energyvalue chain — upstream, wholesale, delivery, and customer service —providing independent, timely, and relevant analysis focused on keybusiness and technology issues. IDC Energy Insights serves a diverseand growing global client base, including electric, gas, and waterutilities; IT vendors; independent power producers; retail energyproviders; oil and gas companies; equipment manufacturers;government agencies; financial institutions; and professional servicesfirms. IDC is a subsidiary of IDG, the worlds leading technologymedia, research, and events company.Page 8 #IDCWP37T ©2011 IDC Energy Insights
  9. 9. Copyright NoticeCopyright 2011 IDC Energy Insights. Reproduction without writtenpermission is completely forbidden. External Publication of IDCEnergy Insights Information and Data: Any IDC Energy Insightsinformation that is to be used in advertising, press releases, orpromotional materials requires prior written approval from theappropriate IDC Energy Insights Vice President. A draft of theproposed document should accompany any such request. IDC EnergyInsights reserves the right to deny approval of external usage for anyreason.©2011 IDC Energy Insights #IDCWP37T Page 9