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SAP moves upstream

Over the years, SAP has worked hard to develop its Executive Oil and Gas Advisory Council to direct and commit resources and its Global Advisory Council to manage the work stream and measure progress

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The Oil and Gas (O&G) applications market traditionally was big and small at the same time. Big in the sense of the magnitude of spending on applications, but small compared to the manufacturing industry which has a large number of companies. 

So ERP vendors have had the challenge of deciding how much O&G functionality to build out to satisfy the needs of their O&G customers, functionality that could be sold to a limited number of companies. 

In recent years, the number of companies in the O&G market has grown, with the rise of national oil companies and the proliferation of upstream and midstream companies focused on enhanced oil recovery and unconventional resources. 

ERP vendors have taken notice and made efforts to engage the industry in a dialog about solution development. This trend is demonstrated by the engagement of SAP with its oil and gas customers.

The second annual Best Practices in Oil and Gas conference was held in San Antonio, Texas and run by the Eventful group.  This year, conference attendance grew to over 500 attendees, an attendance that was largely made up of representatives from super majors, majors, independents, national oil companies and oil field services companies. 

The conference mostly drew from North American companies, but there was presence from across the globe as well. The conference was part show and tell, but also part customer participation and feedback.  ASUG had a strong presence, so there were a lot of practitioners engaged this year.  

Over the years, SAP has worked hard to develop its Executive Oil and Gas Advisory Council to direct and commit resources and its Global Advisory Council to manage the work stream and measure progress. This year, it showed. One architect told me that he had and other O&G customers had been working to get a hearing for their ideas and their efforts in the last year were bearing fruit. 

There was also buzz about HANA, but the buzz was coming from customers who appear sold on the concept, though still tackling BW. Companies are in the Proof of Concept stage with HANA; there are not a lot of poster children just yet.

SAP has continued on its acquisition strategy. O&G companies whose supply chain is heavily engaged in cloud-based Ariba - Exxonmobil has been using Ariba for years - can take comfort that Ariba is now a part of the SAP fold.  

With new cost pressures, oil field services companies are getting more serious about supply chain and logistics. For these companies, Ariba will be of interest for basic functions like streamlining the invoicing process through electronic PO validation and invoicing plus access to maintenance, repair and operations catalogs.   

The acquisition of Right Hemisphere has brought some cool 3D in context visualisation capabilities that can be used for asset management.   

Just after last years' conference SAP acquired mobile workforce vendor Syclo and some wondered why both Sybase and Syclo. The answer: Syclo already has pre-integration with SAP EAM and a history in the O&G industry allowing solutions to be delivered sooner rather than having to wait for development of Sybase.

SAP has always been strong in the downstream, and in ERP in upstream, and is now looking to tackle more of the upstream market.  SAP has functionality that can be applied in large capital project portfolio management; enterprise asset management; mobile workforce; health, safety and environment; and hydrocarbon accounting.  PRA, SAP's hydrocarbon accounting application, continues to be enhanced in a three year program with 14 O&G customers.  

Over the last year, SAP has further developed what it calls Upstream Operations Management to address operational aspects of production management (SAP UOM is built on ERP to link production and maintenance). 

At this point the solution is ready for deployment including data capture at the oil field. With its partnership with Accenture, SAP is building on these applications along with HANA, mobility and analytics to address more fully the global requirements for upstream operations.

Here's where HANA comes in.  Last year, SAP demonstrated the application of HANA to using historical data to identify the root cause of non-performing wells.  This year, the emphasis is on predictive analytics, using data to determine the optimum time to do a well work-over based on market conditions.    

Accenture and SAP are working together to deliver a solution that takes the work-overs into execution.  In a "day in the life" demonstration - practicality seems to be a common theme these days for ERP vendors ala IFS World - the "workover" work orders are submitted to SAP Workforce Scheduling and Optimisation by Clicksoftware for scheduling optimisation.  

Schedules and work orders are then electronically transferred to the appropriate oil field services companies for execution.  SAP then captures the cost side of the workovers, while the production volumes and revenues are discovered using SAP's UOM and PRA respectively to access "live" production data.  In this way, costs and revenues can be analysed.    

All this, in addition to GIS integration, mobility and more analytics - seismic noise reduction was mentioned - are a part of the plan. An interesting vision, though the execution links between operators and oil field services companies is no doubt a long way off, not from a technical perspective - Ariba and the business network have addressed this - but from a business perspective.  

OFS companies will want to optimise deployments of their workforce for workovers according to what they perceive to be their business objectives, which may not be in line with the owner/operator business objectives.

Posted by Jill Feblowitz, Vice President, IDC Energy Insights
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