Profit Magazine - November 2007

Q& A
MICHAEL HEAGNEY, RESEARCH DIRECTOR FOR THE OIL AND GAS PRACTICE AT ENERGY
INSIGHTS, ON THE ROLE OF TECHNOLOGY IN OIL AND GAS COMPANIES

PROFIT: How does technology help with oil and gas industry problems? HEAGNEY: The oil companies do a lot with technology—beyond IT and software—that the public isn’t aware of. The technology used in deepwater drilling is mind-boggling. These companies go through 12,000 feet of water before they even begin drilling into the earth, and they have horizontal wells that go on for miles. So the most important issue for these companies—as far as technology is concerned—is how they can reduce costs. They want to squeeze the most out of everything they spend. Because oil and gas companies produce so efficiently, a gallon of pure water costs more than a gallon of gas. Other business drivers include increasing reserves, recovering more energy

from known oil fields, and addressing the issue of an aging workforce. PROFIT: What can other industries learn from oil and gas and vice versa? HEAGNEY: I think there’s not enough cross-pollination of ideas among different industries, such as financial, manufacturing, pharmaceuticals, and mining. These industries don’t do a good job of looking at their peers in other industries and wondering what they can learn from them—everyone wants to reinvent the wheel. For instance, oil and gas certainly can learn lessons from the mining industry. And other industries can learn from oil and gas’s 100 years of experience working on a global scale. It’s a global economy today, and there’s a lot to be learned about working efficiently on huge, complex, monolithic projects.

Oil and gas companies are the kings of
knowing how to work on a global scale,
but I’m not sure other industries are
interested in looking over the fence and
learning from them.
PROFIT: How can Oracle benefit oil
and gas companies?
HEAGNEY: Oil and gas companies
know they can do a better job of
integrating, combining, and making
information available in real time. Oil
and gas companies look to independent
software vendors to help them with this
issue. Oracle isn’t writing seismic algo-
rithms, but it can help companies find
better information faster with metadata
stored in a database. Oracle’s data
warehousing and data mining applica-
tions can help companies get more out
of the data that they already have.

ride on top of the Oracle software. In addition, the lower cost of support and Oracle’s commitment to improving its products—for example, by supporting Linux and providing its customers with Web-based solutions—were key reasons why Diamond chose Oracle and is satisfied with that choice. “Oracle helps us support our user base with fewer people than many other companies in the drilling industry using SAP,” says Trahan. “The old paradigm is not working; people expect, want, and need access to more and better information.”

“Oracle has the muscle to offer best-of-breed point solutions in a structured way and have them integrated into a system to streamline business processes without a company needing to hire an army of people,” says Heagney. “Oil and gas companies want to concentrate on their core business, such as hydrocarbons and renewable energy.”

“We have eight people involved with the Oracle applications, and we have developed four additional systems with

Oracle tools,” notes Trahan, who says that Oracle costs less to buy and run than competing solutions. He adds, “We have [Oracle] Financials up in four countries and four on the way this year. The ratio of worldwide user to total IT staff is 48 to 1, while Oracle users to total Oracle IT staff is closer to 60 to 1, which is great.”

HANDLING COMPLEXITY

Heagney believes that the most important benefit that partners, such as Oracle, can provide to oil and gas companies is to “minimize risks.” The complexity of the oil and gas business can lead companies to partner with potential competitors in different countries and remain unaware of both sophisticated compliance issues and tax laws that differ from country to country. “Oracle offers oil companies an ERP [enterprise resource planning] system that can handle complex problems,” says Heagney.

Trahan believes that as Diamond
continues to move employees around
the globe, the need for a solution that

allows for a synergistic sharing of information among the company’s rigs is critical. According to Trahan, the old paradigm of managing information has not worked. “We have several Oracle solutions in our U.S. office that allow team members to better manage the business,” says Trahan. “Team members who have been moved to international locations are requesting that we expand these resources to their locations. Oracle gives us flexibility and portability to scale without requiring us to build something too elaborate or expensive.” <>