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Integrated Capital Asset Management for Oil and Gas

Global demand for energy is growing at a faster pace along with a marked shift in demand growth from “developed” to “developing” world. Though stress on energy efficiency is increasing (energy saved is energy produced!), building additional capacity has become a need for Oil and Gas firms to close demand supply gap.

Driven by unprecedented oil price increase, investment cost in petroleum capital asset also have increased during recent years. Environmental and Sustainability issues are forming an essential element in decision making during a time of regulatory uncertainity. Oil and Gas enterprises across the world are looking for more effective and efficient technology to manage the Capital Asset Management process.

Major objectives of oil and gas enterprises while managing Capital Asset more efficiently are

  • Minimizing Total Cost of Ownership 
  • Improving Productivity of operations
  • Making investments sustainable

These objectives can be best met by Capital Asset Managment process (Investment Planning, Investment Appraisal, Investment Approval, Project Planning, Project Procurement, Project Execution, Commissioning, Operating, Maintaining and Retiring of capital assets) if appropriate business-technology solutions to address these objectives are available.

Multiple technologies and numerous players participate in this complex capital asset management business process. Government Bodies, Statutory Agencies, Financial Instituitions. PMC / EPC contractors, Equipment / Material Suppliers, Engineering / Construction service providers, Operations and Maintenance contractors etc are involved in this process along with the Owner enterprises.

Owner firms response to the three drivers to improve long term enterprise value, can be partly improved by integration of information. When a new capital asset is planned, the owner firm would like to have historic information on the lifecycle cost of similar equipment installed previously, to take a decision that can minimize Total Cost of Ownership.

Multiple solutions are serving parts of these processes and different players use technologies based on their internal technology stack to carryout these processes. Custom made excel worksheets for investment analysis, primavera project plans, Design models of equipment etc are few of them. Leveraging on SOA, these capital asset management processes can be integrated and enabled on a single platform for the benefit of all players.

What is the best way to create such a business platform that can be leveraged by all players in Capital Asset Management business? Should it be driven by enterprises owning oil and gas assets? Or should it be an initiative of EPC contracting companies? Or IT outsourcing enterprises see it as an opportunity?

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  • Nice Discussion,
    At this juncture when Oil and Gas sector is largely affcted by myriad factors you have come with exact intensity of seriousness while discussing its implications.
  • Joseph,I belive the solution is not far if each alternative is introspected correctly and with open mindedness.

    Secondly,IT can undoubtedly see it as an opprtunity when it comes to emerging potential business area i feel no IT cos should miss ti tap it.

  • SAP has solutions for most of this but most of the capital intensive industries don’t fully utilize them.  This confounds me because the single biggest item on the B/S and P&L is related to fixed assets.  Yet they don’t invest in better asset reporting or streamlined capitalization processes.  One big improvement that SAP customers can make in this area and support a lot of your points, is to better analyze the cost of maintaining a large capital asset (PM) against its utility and financial cost (FI-AA).  This is an excellent BW solution waiting to happen but so few customers really bother to go in that direction.


    • I fully agree with you Nathan SAP covers most of these functionalities. Especially with addition of NRX and Meridium solutions as third party solutions, SAP had progressed in covering end to end asset management. However, there are many opportunities for building composites to fill in the gaps specific to “Integrated Capital Asset Management”. My intention of initiating this blog is to get participation from interested parties in this discussion.

      Difficulty in enabling end to end asset management is the typical business model adopted by Oil and Gas firms to plan, engineer, construct, commission, operate and maintain assets. The firms that own these assets are not the ones that carryout most of the planning, engineering, construction activities during  this initial phase of the asset creation, less focus is given to the TCO of the assets and the value of integrating information captured during this stages for lifecycle management of assets.

      How do you see this problem and what is the best solution for addressing technology introduction at the interface of EPC/Owner/OEM/O&M enterprises?