ERP and e-business in Oil and Gas

Oil IT Journal’s survey of Enterprise Resource Planning and Allocation (ERP/ERA) in oil and gas includes exclusive interviews from SAP, Oracle, TotalFinaElf, Trade Ranger, SAIC and other significant vendors, implementers and operators. In the aftermath of the dot com hype and the embarrassment of Y2K, ERP players are focusing on their own ‘core business’—trying to squeeze the value out of the truly colossal investment that a major oil’s ERP system represents. Elsewhere, on the business to business front, things have settled down somewhat. While the knee-jerk reactions of the vendor community are a thing of the past, the exact roles that buyers, suppliers and hubs are to play in the brave new world of e-procurement are still the object of healthy debate.


The head of SAP’s oil and gas division Dieter Hasslein believes that with ongoing industry consolidation, we are entering a ‘post hype’ period where companies are determined to ‘realize the value’ of IT investments. One growth area is the interface between oils as Owner Operator (OO) to service sector Engineering Prime Contractors (EPC). SAP’s customers in both OO and EPC were two separate markets. Today, operators may ask the EPC to implement IT infrastructure which will be handed over upon commissioning. Bechtel or Halliburton may build inside their own IT environment and then migrate plant data to the OO’s system on handover.


SAP’s new NetWeaver tools can be used for such data migration—or to access data resident in the EPC environment from inside the OO’s SAP system. More new technology—SAP’s ‘Master Data Management’ will be released later this year and will provide tools for content consolidation, data harmonization and management across disparate existing data sources.


Hasslein considers technical to business integration as a complex problem which is ‘neither a data nor a pure technology problem’. There are ‘extra dimensions’ of knowledge, semantics and of the business process itself. An example of this is Shell’s use of NetWeaver to integrate internal procurement with suppliers and public markets such as Trade Ranger (‘very important to Shell’). SAP claims 80% of the oil and gas ERP market.

Total Fina Elf

Oil IT Journal spoke with Jean-Pierre Foehn, VP business development with TFE’s Global E-Procurement Project. TFE’s interest was sparked when president Thierry Desmarest was invited by Shell’s Mark Moody-Stuart and BP’s John Brown to join them in a new e-venture, Trade Ranger—operating in the emerging internet businesses space of supply and procurement.


Along with Trade Ranger involvement, TFE recognized that it needed to track activity in the e-procurement space and to determine which domains, technology and services would be impacted by e-business. TFE is also involved in upstream geoscience, drilling and other technical computing particularly through working over the web with ASP technologies.


Today, TFE performs online calls for tender and its gas stations purchase supplies from catalogues provided internally or by external providers including Trade Ranger. Technology assures authentication and delivery. Billing through Trade Ranger is ‘emergent technology’. TFE is also looking into e-procurement of services such as logging, painting offshore platforms, engineering and online travel—all again leveraging external service provision. It should be noted that e-procurement is embryonic today, of TFE’s € 20 billion non oil procurement, only around € 10 million is e-procurement.


Scott Shemwell, VP of Oracle’s energy sector, explained how Oracle’s web-based infrastructure is built in tiers – allowing for support of a broad range of industries by building base capabilities and customizing to vertical through a partner. The top-tier oil and gas offering includes a vertical component from Novistar (now a Petroleum Place company).


Oracle clients like Unocal host instances of Novistar Production Suite at Oracle’s data center allowing for web-enabled data and asset management. Other Oracle/Novistar clients include Kerr McGee and Oxy. Shemwell believes that e-buisness is ‘moving away from exchanges into asset management’—particularly in engineering and the ‘e-oilfield’ where Oracle claims a ‘complete solution for facilities, finance and project lifecycle management’. Oracle’s ‘collaborative engineering’ suite offers supply chain and asset management all written to one instance of Oracle.


SAIC VP Angela Minas figures that most major oil and gas companies have now deployed their ERP (usually SAP) systems. So the work that remains is generally with smaller companies which have not yet deployed—or with larger companies seeking to get a better return on their ERP investment. In both cases, SAIC believes that business process reengineering and reengineering is critical. ‘Don’t assume that the right processes are in place’. Pre-implementation projects show that around 85% of the cost benefits are not directly ERP-enabled. A recent SAIC study for an independent oil company showed that while $3 million of annual cost savings could be attributed to the ERP system—an extra $13 million would come from BPR.

Data Warehouse

Minas notes that most majors deploy data warehouse technology alongside ERP systems. Often companies have a tough time simply getting their reporting back to where it was before they embarked on ERP! The goal of one-time data entry and ‘push button’ reporting turned out to be a ‘fantasy’ according to Minas. “These are very complex systems! Folks who implemented them did not correctly evaluate the real business needs. There was too much IT-driven work and poor liaison with business.” Minas warns, “The cost of an ERP system can easily run to hundreds of millions of dollars. The costs of pre-ERP financial systems are just not high enough to show significant ROI on this kind of investment. Even with BPR it can be hard achieve significant financial benefits!”

Enertia Software

Enertia Software was founded in 1983 to develop oil and gas software for the PC. In 1996 Enertia ‘threw away’ 3 million lines of DOS code and 29 modular applications and re-built a ‘fully relational’ oil and gas ERP solution on a Microsoft SQL Server 2000 platform. Enertia is a ‘completely data-driven’ application powered by a data model with about 1800 tables of information. Enertia includes field data capture, production accounting and regulatory reporting, product pricing, revenue distribution and many other facets of upstream ERP.

Major in merger

Oil IT Journal spoke with the ERP specialist in one major who wished to remain anonymous. In the throes of post-merger rationalization, our ‘deep throat’ told us, “B2B is the buzz that is bringing our companies together. Both companies are SAP users and current activity is focused on merging two R/3 systems. Even with SAP in both units, implementations were done differently. Different tools were deployed, data structures and business processes also differ. Having said that, SAP is absolutely core to what we are doing in the area of financial and transactional process management. Other relevant tools in this space include Novistar, Tobin, Microsoft Exchange, Office and SharePoint, and SAP’s Document Management System.”


“On the e-business front we have noted the entrenched positions of vendors and purchasers who are rightly concerned that their wares are not reduced to commodities. It is natural that there is friction as these strategies are fleshed out. But basically, Trade Ranger is a good idea.”


ElectroBusiness’ (EB) technology facilitates the exchange of transactional information between oils and vendors. EB works outside of company firewalls and independently of B2B hubs. EB claims ‘one time’ integration. By mapping processes to EB, vendors can transact with clients deploying JD Edwards, SAP or a ‘home-grown’ ERP system. EB currently serves BP Canada and queries BP’s database to check invoice conformity before posting to the ERP system. Data cleanup is ‘an important part’ of EB’s service offering. EB is an approved integration network for OFS Portal members in Canada.

MRO Software

MRO Software’s ‘strategic asset management solution’ was originally developed for production assets but now extends to IT, offices, accommodation and transport fleets—facilitating outsourced management of retail outlets for Shell in the UK. Maximo gives operators a handle on downtime, showing which equipment and assets really impact the business, and optimizes maintenance. Unplanned maintenance costs are an order of magnitude more than planned work. Maximo also measures ‘days away from work case frequency’ (DAFWCF) – a key measure of safety performance.


Bill Baksi told Oil IT Journal how Schlumberger Information Solutions is leveraging its Decision Point E&P Portal (DP) as an enabler for technical to business integration. A recent case study centers on Pioneer Resources which uses DP for role-based access into disparate data sources including ERP and production. Pioneer’s head office in Irving has ‘ubiquitous’ web access to data in acquired by units operating in Canada and Argentina. All data from SCADA systems up is current. DP integrates Pioneer’s production data with its legacy ERP system running Premas on an AS/400. Elsewhere DP—described by SIS as ‘portal agnostic’—integrates Oracle Financials, SAP, JD Edwards with technical data sources.

Trade Ranger

Trade Ranger president John Wilson believes that oil and gas is immature as compared to industries like manufacturing—where online processes certify suppliers, help them cut costs and improve product—without squeezing suppliers’ profits. Trade Ranger wants to bring similar efficiencies to oil and gas. Supplier/buyer relationships should be built on a quid pro quo and avoid the kind of price pressures associated with auctions—an area that Trade Ranger tries to avoid.


Wilson believes synergies and economies stem from rationalizing the transaction processes and developing catalogues. The focus is on high volume low value transactions, where transaction costs can be driven down through process automation. Trade Ranger has developed Trade Ranger Open Content Standard (TROCS) – a catalogue standard which is customized to individual transaction types. Vendors and suppliers can hard-wire their own business rules into TROCS so that TFE may deal differently with Halliburton than BP for instance. Trade Ranger has been in the cross fire between buyers and suppliers. But Wilson believes this is set to change. “2003 will be the year that vendors and suppliers achieve non-threatening relationships through Trade Ranger”.

Click here to comment on this article

Click here to view this article in context on a desktop

© Oil IT Journal - all rights reserved.