Showing posts with label Las Vegas. Show all posts
Showing posts with label Las Vegas. Show all posts

Monday, April 27, 2015

Streamlining ‘crude’ corporations in tough times

In tougher times, operational efficiencies - often brought about by digital streamlining - do matter and the oil and gas business is most certainly going through a rough patch. Yet, despite living in an increasingly digital world, most in the business view IT through a prism of functionality rather than one of enablement and efficiencies. 

Afterall, when you think of the energy business in general and big oil in particular, it is all about physical assets, drilling and generating not servers and computers. Sometimes, a change of circumstances provides the necessary jolt and that circumstance has been the oil price decline

As every oil and gas and oilfield services company, large or small, listed or independent is scrambling around to save costs; suddenly many are meaningfully warming up to the premise of IT services management [or ITSM] - a concept that has been around for a while, but has not tickled the fancy of big oil to the same extent as big banking or big pharma.

With IT driven processes streamlining and merging functions ranging from human resource management to data management, organising emergency response to a centralised incident logging platform - the idea is has savings at its core. The Oilholic went exploring its potential at the recently concluded Knowledge 15 Convention in Las Vegas, Nevada; an event put together by ServiceNow (NYSE:NOW), one of the market leaders in the sphere. 

 

The company has been notching up the concept with each passing year. From giving the corporate world its Platform as a Service (PaaS) offering to Software as a service (SaaS), to IT and infrastructure as service, ServiceNow simply defines what it brings to the solutions table these days as “Everything as a Service”.

Banners proudly proclaiming the strategy were all around the Mandalay Bay Convention Centre; venue of the event (see photo above). Everything is indeed in play - name a process optimisation slant, and a solution could be conjured up, as ServiceNow CEO Frank Slootman told this blogger in an exclusive Forbes interview.

And while the oil and gas sector remains behind the curve, attitudes are changing according to Slootman. Most in big oil are keenly observing how alternative energy and utilities companies are adopting ITSM to improve procedures and save costs, as the Oilholic noted in another Forbes article

Furthermore, KPMG’s IT advisory partner Phil Crozier opines that a wave of mergers and acquisitions within the sector could further the drive. “Hypothetically speaking, let’s look at Shell’s bid for BG Group. The person who is in-charge of IT operations in that sort of a setting does not get told how to bring two organisations together, merely a percentage of some sorts – say 20% – to take off the cost base.

“Now, the only way you can efficiently achieve those sorts of savings would be via process efficiencies and simplification in the approach taken by the two firms. That’s where digital process optimisation comes in.”

That drive is gathering momentum. The Oilholic found several energy sector executives around the convention floor eagerly exploring ITSM avenues. ServiceNow already counts the likes of Valero, Statoil, GDF Suez, GE Energy and several others among its growing client portfolio in the sector.

However, there is still a long way to go before ServiceNow or its bitter rival BMC can put the sector at par with ITSM adoption at big pharma, big finance or big tech. Anecdotal evidence suggests 2015-16 could see many big oil sceptics recognise the potential, even if under financial duress.

Of course, for the moment, you’ll just have to take the Oilholic’s word for it. One found it very difficult to get sector executives to talk about their potential plans on record. The topic is a sensitive one and outsourcing – which forms a component of all this – has been a political hot potato for better parts of a decade.

Here at Knowledge 15, some delegates even claimed to have reduced their headline back-office costs by as much as 50% over a period of 5 to 8 years. The potential for savings and efficiencies is almost, always accompanied by a reduction in headcount. As for the oil and gas sector, forget the back office - currently its shedding employees back, front and centre.

While it’s hard to be dispassionate about job losses, this is about something deeper. To quote one energy sector executive: “A dollar saved elsewhere in the organisation via effective ITSM solutions deployment for procedural matters, could be spent in upstream operations which is what every oil and gas exploration company is really about.”

IT driven streamlining seems to be finally bringing about that belated realisation for some. That’s all for the moment folks! Keep reading, keep it ‘crude’! 

To follow The Oilholic on Twitter click here.
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To email: gaurav.sharma@oilholicssynonymous.com

© Gaurav Sharma 2015. Photo: ServiceNow’s ‘Everything as a service’ banner at Knowledge 15, Las Vegas, Nevada, USA © Gaurav Sharma, April 2015.

Sunday, April 19, 2015

The ostentatious & those 'crude' percentages

The Oilholic finds himself gazing at the bright lights of Las Vegas, Nevada once again after a gap of five years. This gambling hub's uniqueness is often the ostentatious and loud way it goes about itself. The oil market had its own fair share of loud and exaggerated assumptions last week.

Sample these headlines – “Brent spikes to 2015 high”, “Oil markets rally as shale production drops”, “Brent up 10%.” There is some truth in all of this, and the last one is technically correct. Brent did close last Friday up 10.03% relative to the Friday before, while WTI rose 8.41% and OPEC's basket of crude oil(s) rose 10.02% over a comparable period (see graph blow right hand corner).

Bullish yes, bull run nope! This blogger believes market fundamentals haven't materially altered. There is still too much crude oil out there. So what's afoot? Well, given that one is in a leading gambling hub of world, once 'the leading one' by revenue until Macau recently pinched the accolade, it is best to take a cue from punters of a different variety – some of the lot who've been betting on oil markets for decades out of the comfort of Nevada, but never ever turn up at the end of a pipeline to collect black gold.

Their verdict – those betting long are clutching at the straws after enduring a torrid first quarter of the year. Now who can blame the wider trading community for booking a bit of profit? But what's mildly amusing here is how percentages are interpreted by the media 'Las Vegas size', and fanned by traders "clutching at the straws", to quote one of their lot, 'Las Vegas style'.

For the moment, the Oilholic is sticking one's 2015 forecast – i.e. a mid-year equilibrium Brent price of $60 per barrel, followed by a gradual climb upwards to $75 towards the end of the year, if we are lucky and media speculation about the Chinese government buying more crude are borne out in reality. The Oilholic remains sceptical about the latter.

Since one put the forecast out there, many, especially over the last few weeks wrote back wondering if this blogger was being too pessimistic. Far from it, some of the oldest hands in the business known to the Oilholic, including our trader friends here in Las Vegas, actually opine that yours truly is being too optimistic!

The reasons are simple enough – making assumptions about the decline of US shale, as some are doing at the moment is daft! Make no mistake, Bakken is suffering, but Eagle Ford, according to very reliable anecdotal evidence and data from Drillinginfo, is doing pretty well for itself. Furthermore, in the Oilholic’s 10+ years of monitoring the industry, US shale explorers have always proved doubters wrong.

Beyond US shores – both Saudi and Russian production is still marginally above 10 million bpd. Finally, who, alas who, will tell the exaggerators to tackle the real elephant in the room – the actual demand for black gold. While the latter has shifted somewhat based on evidence of improved take-up by refiners as the so called “US driving season” approaches, emerging markets are not importing as much as they did if a quarter-on-quarter annualised conversion is carried out.

Quite frankly, all eyes are now on OPEC. Its own production is at a record high; it believes that US oil production won’t be at the level it is at now by December and its own clout as a swing producer is diminished (though not as severely as some would claim).

Meanwhile, Russian president Vladimir Putin declared the country's financial crisis to be over last week, but it seems Russia’s GDP fell between 2% to 4% over the first quarter of this year. The news caused further rumbles for the rouble which fell by around 4.5% last time one checked. The Oilholic still reckons; Russian production cannot be sustained at its current levels.

That said, giving credit where it is due – Russians have defied broader expectations of a decline so far. To a certain extent, and in a very different setting, Canada too has defied expectations, going by separate research put out by BMO Capital and the Canadian Association of Petroleum Producers. Fewer rigs in Canada have – again inserting the words 'so far' – not resulted in a dramatic reduction in Canadian production.

Finally, here's an interesting report from the Weekend FT (subscription required). It seems BP's activist shareholders have won a victory by persuading most shareholders to back a resolution obliging the oil major to set out the potential cost of climate change to its business. As if that's going to make a difference - somebody tell these activists the oil majors no longer control bulk of the world's oil – most of which is in the hands of National Oil Companies unwilling to give an inch!

That's all for the moment folks from Las Vegas folks, as the Oilholic turns his attention to the technology side of the energy business, with some fascinating insight coming up over the next few days from here. In the interim, keep reading, keep it ‘crude’!

To follow The Oilholic on Twitter click here.
To follow The Oilholic on Google+ click here.
To follow The Oilholic on Forbes click here.
To email: gaurav.sharma@oilholicssynonymous.com

© Gaurav Sharma 2015. Photo: Paris Casino on the Las Vegas Strip, Nevada, USA © Gaurav Sharma, April 2015. Graph: Oil benchmark prices - latest Friday close © Gaurav Sharma, April 17, 2015.