IT spending trends among Energy Companies in 2014
The top five energy companies in the world are Exxon Mobil (USA/Annual Revenue of $341 billion); Chevron (USA/ Annual Revenue of $185); GazProm (Russia/ Annual Revenue of $118); Petro China (China/$220 billion); and, Conoco Philips (USA/$161 billion).
Escalating prices of oil are pushing the largest oil firms in the world to record their respective profits. Exxon Mobil is the leader in the energy industry. It continues to invest in information technology in accordance with its goal of expanding its oil and gas exploration. Chevron and Conoco Philips are not far behind.
The spending budget for information technology of Exxon Mobil is less than one percent of the corporation’s total revenue. The IT staff is divided among the different business units which include upstream and chemical ventures as well as downstream and oil processing operations. 20 percent of the personnel are assigned in these divisions while the rest are with corporate services for global concerns. This composition facilitates dexterity and implementation of cutting-edge technology in the local business units while maintaining the organization’s commitment to international standards.
Exxon Mobil does not subcontract principal information technology operations. However, IT staff members support daily computing like the help desk and computer applications to support users in higher-cost areas. The company prefers to call it the off-shore center. It puts emphasis on scalability which means focusing on marginal concerns instead of using technology that is not relevant at all. Exxon Mobil calls for a role-based technique that can be scaled to support 84,000 employees in nearly 200 countries. It believes that technology and consistency of business processes standardization are crucial to success for the biggest energy firm in the world.
Its program differs from competitors concentrating on equivalence and attaining the so-called economies of scale. Said strategy has benefited clearly the company’s upstream division which conducts oil exploration, extraction and haulage. The “upstream suitcase” platform incorporates everything needed by the corporation to enter a new market. This includes the ERP system, tools for monitoring equipment and personnel as well as dealing with work permits. This position in standardization was vital during the merger of Exxon and Mobil which enabled management to trim down the workforce by 15,000.
Exxon Mobil’s most impressive project was the implementation of the global ERP program for the chemical group. This combined business operations made use of SAP software to hurdle technical issues and integration concerns. This initiative helped enhance the features and relevance of data.
The Chief Information Officer of Chevron (Louie Elrich) said that the company is aggressive in its bid to look for more energy sources in Angola, Brazil and Mexico. This is notwithstanding the worldwide economic meltdown and decline in annual revenues arising from lower oil prices. Information technology was part of every aspect of company operations. The goal of the management team is to find, assess, dig up, refine, and sell energy that runs the world economy.
The goal of Chevron is to step up the business effect and significance of information technology in every component of Chevron's operations. According to the CIO, there are plans to reduce a hundred global data facilities into 50; streamline mixed up applications operating across the data centers, activate more servers, and upgrade 90,000 computer units. These measures are designed to lessen expenditures in information technology and simplify the highly complex and relatively inefficient worldwide IT infrastructure. These can serve as concrete examples of Chevron’s IT vision of integration from one corner of the globe to another.
The company’s data center consolidation program is expected to bring down costs in the energy, real estate, energy, security, and administration departments. The cost reductions are unquestionably essential. More importantly, it will generate savings that can be utilized for other purposes. The fusion of data hubs is meant to help the company reduce expenditures so it can pursue new but more important projects. An 80 to 20 IT budget proportion provides added value and devote more time to rationalize the environment. This is the point wherein funds can be shifted from one project to the other. It is to get things done for the least possible investment.
Chevron Corporation has a $39.8 billion capital and exploratory investment budget for 2014 that includes $4.8 billion (planned costs by affiliates). This does not entail cash outlays by the firm. This year’s budget is said to be lower by $2 billion lower compared to expected total investments last year. For 2014, total investments are projected to reach $42 billion, including expenses of roughly $4 billion for major resource purchases which are not covered in the original budget.
GAZPROM is the biggest producer of natural gas. It has been published that the company’s investment in innovative technologies will net 2 Rubles for every Ruble that is invested. It is one of the Russian corporations that lead in research and Development projects.
The company focuses on corporate performance management which is an essential component of business intelligence. CPM is also known as enterprise or business performance management. It includes complementary variables like server loading and network interchange. GAZPROM has partnered with SAP regarding the use of software products from SAP, standardization of business procedures, and automation solutions. The corporation implemented this information strategy. It underlines directions for the company’s IT goals. This means the unification of software applications. This up and down integrated information and management system is based on the company data facility to sustain corporate management techniques in the gas industry. It also produces IMS for the business ventures of GAZPROM.
Petro China announced that it would be cutting down on spending as it gets ready to encourage private investments in accordance with the Chinese government’s drive to reduce state control of the country’s largest producer of crude oil and gas. This year Petro China is willing to spend for information technology by utilizing Honeywell Technology Solutions for advanced information management. The company is also acquiring software applications for its refineries and petro-chemical sites across the country. The corporation makes use of information solutions from Honeywell in 13 different locations.
Honeywell is famous for its Refining and Petro-Chemical Modeling System as well as Intuition Executive Advanced Information Management program that helps plant operators in monitoring operations within the whole company. This can supply real-time information required to enhance the profitability and efficiency of plant operations. China is currently the biggest consumer of energy globally. It is also the second biggest consumer of crude oil after the United States. It could be first in terms of oil importer worldwide in 2014. This puts pressure on Petro China to enhance the efficiency of all its facilities and refinery plants. The oil firm first used the RPMS in Beijing and a dozen other plants in 2005.
Conoco Philips is known for employing high-performance computing together with innovations in algorithms for modeling and simulation in various areas. These are advances in IT specifically mobile platforms, networks and highly automated communications. These enable multiple applications of computing which were not possible in oil fields before. One example is real-time diagnosis and solutions for production facilities in offshore and isolated locations.
With the available funding which is less than one percent of the company revenues, it has started to study consequences of nanotechnology research in different areas. How does Conoco Phillips focus its efforts on such priority concerns? It is fully aware of the importance of technology to reduce environmental footprints in its operations. The corporation also aims to create technology ensuring that deepwater operations are safe and bring about the least disruption to ecology. The capital outlay of the company was $15.8 billion in 2013 but only a fraction of this was used for IT modernization.
IT Trends in Spending
Information technology evolved rapidly in so far as the leading energy corporations in the world. These advancements produced remarkable results and discoveries in the upstream and downstream segments of f oil and gas production at relatively lower costs.
If you read link above you will find out “information from two global benchmarking studies conducted since the early 1990s to provide oil company IT and business managements with information technology information technology (IT) performance measurements for exploration and production and downstream operations. The annual surveys provide economic signals to help guide investment and budget decision-making for senior oil industry management. Data is collected with rigorous definitions to ensure comparisons can be made between different types and sizes of upstream and downstream operations.
The surveys not only provide a management level toolkit but also unique insights into the trends in economic commitments to IT in the upstream and downstream oil businesses in Europe, North America, and other regions. In this paper typical spending profiles of upstream and downstream operating units will be examined. Recent trends in operational efficiency and investment requirements will be analyzed showing differences between company peer groups and geographical areas.”
So, you can discern the technological trends and blueprints between development of software applications development/ support and infrastructure components such as desktop computing and network communications.
The key for energy companies is to allocate more financial resources for information technology initiatives since these are vital to all its functions. If other industries can benefit from IT development programs, there is no reason for the energy (oil and gas) sector not to gain advantages from IT development. The energy sector is one of the highest revenue earners as seen in data provided from the Fortune 500 global corporations. It is therefore obvious that not only less than one percent should be channeled to information technology.
Information technology costs are recorded for the purpose of separately studying the production and administration. An IT overhaul model opening is also deployed to look at IT reliability for various applications as there are specific software designs for E and P business processes and the additional infrastructure like servers, Unix workstations, desktop computing and networks and communications systems. At every particular level of the expense model a detailed economic opening is obtained to identify support load (operating) IT costs and investment payments as well as traditional accounting expenditures like operating expense and capital expenditure. In this paper only higher-level analysis has been shown, as the results for each company profiles are confidential and private.
For the total survey of the IT expenditure commitments the expense recorded was $1 billion of which Information technology operating expenses was $805 million or 6.2% of the total company operating expense.
The revenue generated solely in the IT sector of the companies were recorded as follows- $292 million for exploration IT, $258 million on production IT and $265 million on administrative profiling. From the survey conducted it is clearly noted that the provincial entirety for IT expenditure comes from regions like Europe and North America. Results show that approximately $518 million were spent in Europe, $288 million in North America and $205 million in South America, Africa, Middle East and Asia Pacific combined. From the entire survey it is clear that a carefully planned IT expenditure can help in the smooth transitions of various other stations.