Oil & Energy

High-end solutions

The oil and energy sector is on an upswing with its IT investments at an all time high. The sector is moving toward high-end solutions that can be implemented effectively across their far flung and remote locations. By Tanu Talwar

Sustained business growth, efficient process delivery, integrated databases and infrastructure coupled with a pressing need for minimal failure rates and overall smooth operations are the most important factors attracting each and every vertical to look at deploying a well structured and beneficial IT architecture, that serves as a ladder to success to its growing business. Looking upon Information Technology as a means to streamline their complex processes and bring managerial efficiency most segments today including the oil and energy sector are increasingly boosting their IT budgets and are future proofing their networks with advanced technologies and high end IT solutions.

A significant industry vertical of the overall economy, the oil and energy sector is on an upswing with its IT investments at an all time high. Interviews and discussions with leading players in this vertical along with the vendors reveal the sector to be moving toward high-end solutions that can be rolled out effectively across far flung locations.

ERP continues to rule

Looking at the application side it’s the Enterprise Resource Planning (ERP) application that rules the roost when it comes to the deployment of enterprise wide applications within this sector. As per the survey investments in Enterprise wide applications accounts for 20 percent of the overall IT spends and it’s the oil and energy sector along with the manufacturing and engineering vertical and the FMCG and consumer durables that has shown maximum inclination towards the deployment of this technology.

Every company in this sector has deployed an ERP system. One of the prime reasons for this widespread adoption is the complexity of processes and wide scope of business operations running along remote locations handled by every company in this sector. However, taking a closer look one finds that most of the companies have adopted ERP mainly to streamline their processes, come up to the industry standard, achieve faster delivery of products and services and attain a competitive advantage.

In order to get a clear picture lets take a closer look at the ERP solutions implemented across organisations in this segment. While IOCL and BPCL have deployed SAP, HPCL has implemented an ERP solution from JD Edwards with its Indian partner, Systime. For a continuous process industry vertical with companies dealing in petroleum or power that are constantly engaged in supply or generation, an ERP system is critical. In order, to get a closer insight into the vast network of these companies lets consider Indian Oil Corporation Limited. The IOCL and its subsidiaries account for 47 percent of the petroleum products market among public sector oil companies, 43.5 percent of the national refining capacity and 74 percent of the petroleum products pipeline capacity. It owns and operates 10 of India’s 18 refineries with a combined refining capacity of 60.20 million tones per annum (1.2 million barrels per day). The organisations cross-country crude oil and product pipelines network spanning over 9,000 km meet the energy needs of the country. It provides petroleum products to millions through a countrywide network of over 30,000 sales points that are backed for supplies by 183 bulk storage terminals and depots, 97 aviation fuel stations and 88 Indane LPG bottling plants. It has about 15,000 petrol and diesel stations and sells LPG cylinders to 43.4 million households.

One of the primary reasons that the company decided to go in for an ERP solution six years ago was the need to get a consolidated picture of its operations and integrate its entire business cycle.

Ramasamy, General Manager Corporate Information Systems, IOCL explains, “Prior to the SAP implementation we had different legacy application for different departments. As there was no centralised system of information consolidation we were met with huge volumes of unsystematic data that caused various hurdles such as monitoring hassles and untimely flow of information.” Then again with disconnected systems the company had spent both time and money in transferring data from one site to the other. Looking at these problems IOCL decided to engage PwC to come up with a foolproof plan to overcome these difficulties. A 75 member team from PwC evaluated its problem and presented a report suggesting the deployment of a well equipped SAP ERP solution along with add on solutions for integrating the company’s supply chain management system.

HPCL’s case is similar. The company had been running different applications for its various departments that resulted in fragmented islands of information. In the absence of an integrated system, as the volume of data grew the company was faced with a constant challenge of collaborating and consolidating this data from different locations. The company had been spending both its valuable time and effort in the compilation and upgradation of data done across multiple levels. Then again, there was no mechanism in place that could offer it immediate information on its inventory and finance status at different locations

Sriram, General Manager, Information Technology, Corporate, HPCL states, “Besides looking at solving these hurdles we were also looking for a way to establish and remain in direct contact with our dealers. Irregular contact with our dealers at times caused the speed of our operations to slow down.” Looking at all these hurdles the company decided to go in for an internal evaluation. Sriram explains, “A team of our 40 business members sat down to evaluate and look out for the best ERP solution available in the market. We considered the three major players namely SAP, JD Edwards and Oracle.” However, after doing a techno-commercial evaluation the company decided to stick with JD Edwards. “Although we evaluated the three ERP solutions we found that JD Edwards offered the best solution for our technological and commercial requirements,” adds Sriram.

Ever since its implementation three years ago, the company has reaped several benefits and it has been smooth sailing with processes being streamlined. The application looks after the organisations entire chain of embedded financial controls, audit trails, performance measurements as well as for HR and people management and to process the payroll for all 12,000 employees comprising of managerial and non-managerial positions.

With the JD Edwards ERP solution in operation, the company has been able to put a centralised system in place that allows the accessibility of data from all its remote locations. The system has enabled the company to access information at the click of a button. “We now have ‘online’ data status on all materials and this gives us a better picture of stock availability at each location,” asserts Sriram. Furthermore, the solution has helped the company establish direct contact with its dealers about the dispatch and status of stock. It has further equipped it with the facility to evaluate and check a dealer’s credentials and financial status.

At large the application has given these companies the freedom and flexibility to announce updated prices simultaneously, something that wasn’t possible earlier. Furthermore, franchisees running sales and retail outlets are armed with up-to-date online information.

Besides ERP applications, companies in this sector are also aggressively eyeing the Business intelligence tools. Nearly 50 percent of the respondents have currently invested in business intelligence tools while 40 percent have drawn plans to invest in the technology in future. Companies like IOCL are bullish about deploying data warehousing and data mining solution in the next six to seven months across 650 locations. Thinking about future proofing its network HPCL too is looking at BI tools and aims to deploy these solutions over the next couple of years.

Storage – a top priority

Storage is one of the most intricate topics of discussion among CIOs in this sector. The fact is that the storage requirements of the sector are huge and almost every single detail is stored for future reference. The storage requirements of this sector largely depend upon the nature of an oil company. While some are engaged in seismic surveys done to gather data to analyse whether a field holds oil and to estimates its size and location others that are in to the retail side of this sector are mainly concerned about the storage of their database and basically look out for options that offer e-mail archiving and database protection and other disaster recovery solutions. As per the survey, nearly sixty percent of all respondents with in this sector extensively plan to invest in storage this year. Currently nearly 40 percent of the respondents in this sector have SAN while 60 percent of the respondents prefer NAS.

Discussing their storage requirements, Ramasamy of IOCL, says, “Our major concern as far as storage is concerned is to keep an up to date record of our stock and delivery dispatches. Then again we need to save our e-mails and look out for a network that help us consolidate our data thereby offering better management.” The company is currently running a Storage area network (SAN) and feels that it is the best option available as SANs address the key components of the organisation’s DR strategy as data can be transferred to a remote location for seamless DR or replicated quickly to another location without affecting network speed.

Seconding Ramasamy’s opinion Sriram of HPCL states, “Our storage requirements mainly span out to storing e-mail, day to day supply and delivery transactions, financial records, dealers details and updating our database. We currently have a SAN and have deployed storage solutions from IBM and HP and are considering Sun Microsystems solutions for our future requirements.” Another critical factor working in favour of SAN is the wide variety of network-enabled techniques namely clustering, failover, alternate paths, mirroring, and replication of data protecting it from any unforeseen dangers that the network provides.

As per the industry experts a combination of NAS and SAN is a favourable option for this sector. With the segment being divided in to two sectors namely upstream and downstream the storage network depends upon the division it is deployed in. Chiefly the upstream sector is engaged in aspects such as the seismic surveys, experimentation on fields, exploration and interpretation of information put forth by geologists, petro-physicists. In such cases, the data is generated from separate sources and locations and has a humongous volume. A SAN is the best option for storing such heavy data.

The fact is that during a seismic survey huge volumes of data are generated and the file size may run to over 60 GB. Looking at an example, upstream companies such as ONGC that are engaged in exploration and drilling of oil conduct such seismic surveys, these surveys are in the form of raw data that are further sent to the companies analyses centre where it is converted and stored in the form of processed data. This kind of data requires the storage infrastructure to have capacities of 10 to 50 TB per location. Then again, being a valuable source of information, companies are required to store each and every survey carried out due to which they have high capacity storage systems in place.

However in the case of downstream companies that are engaged in the retail petrol outlets and distribution networks, NAS would be a better bet as the storage requirements of these companies are less complex than those operating in the upstream market. Then again, with most organisations in this sector maintaining age-old data a key storage tool that they have started to look upon is that of Information Life cycle management. With the feature updating data as per the references made more organisations in this space have started to look at deploying this technology. “Though currently we don’t have this function in place, we surely intend to incorporate ILM in the future,” adds Sriram.

Connectivity holds the key

Connectivity is the next major area that continues to be key area of IT spends among companies in this sector. Besides deploying leased lines companies in this space are aggressively deploying the VSAT and are also looking at options as Radio links and DSL. Currently about 80 of the total respondents have VSAT while 20 of the respondents have DSL and another 20 percent of respondents have opted for radio links. IOCL with operations spread across 650 locations has ensured that 400 of its remote and far-flung locations stay connected through a VSAT network. The network has ensured 24*7 connectivity between company offices at different locations providing it the facility to place and track orders immediately. Besides this the company is also looking at going in for a VPN network with leased lines for back up in its 230 locations to be implemented over a period of six to seven months.

Then there is HPCL that has connected all its regional offices and refineries by deploying VSAT and leased lines. Sriram explains, “Our first choice has always been to go in for leased lines. However, the fact remains that the cost of deployment is high and the deployment is not possible in every part of the country. Due to this reason we opt for VSAT links as they are more bandwidth friendly and less expensive compared to leased lines.” The company has connected over 370 of its locations through a VSAT network and is looking at deploying a VPN network by BSNL in future besides planning to adopt last mile wireless connectivity on its 100 locations. However, the high latency issue faced with VSAT has faded the attraction towards this connectivity medium for organisations in this sector.

Talking about BPCL’s connectivity infrastructure Anil Kumar Kaushik, Deputy General Manager, Information systems, BPCL states, “We currently have 500 VSATs located across the country connecting all our depots, LPG bottling plants, aviation fuel stations, petrol and retail outlets.” The company has currently connected 300 of its retail outlets through the VSAT links and is drawing future plans to extend this network to another 300 of its locations. Organisations like BPCL also use VPN extensively. “Though we are running on VSAT we are aggressively aiming to adopt leased lines on VPN and would look at VSAT only for locations where leased lines can not be deployed” adds Kaushik.