Upstream Oil Industry – How Companies can Increase Revenues

There are three major components in the oil and gas sector – Upstream, Midstream and Downstream. Upstream refers to exploration, drilling and production. To break it down, the process starts with the search for potential subterranean crude and natural gas field. This is followed by drilling the exploratory well. Then, there is final drilling and operation of the well to bring up raw gas or crude oil to the surface. Unconventional gas is considered part of the upstream industry. One of the major factors that distinguish upstream from midstream is the type of oil produced. It refers to crude or unrefined.

The upstream stimulates both midstream and downstream procedures. These are broad terminologies and used merely as categorization for each stage. Majority of oil companies highlight an integrated vertical approach to the upstream, midstream, and downstream processes. The key to the industry’s upstream segment is that it makes up the necessary first step from extraction to refining. The absence of a strong foundation in the upstream section means that there will not be enough oil that the rest of the industry can make use of. This will have a negative effect on consumers who rely on oil-based commodities for energy, fuel and other allied products.

Augmenting Profits

What should chief executive officers of companies in the oil and gas industries do to increase revenues?

Ì     Providers of enterprise resource planning like Oracle suggests that enterprises engaged in this niche need to acquire comprehensive data management solutions that cover the phases of exploration and production. These include the use of business intelligence, Professional Petroleum Data Model or PPDM industry prototype and data warehousing functions.

Ì     There should be integrated 3-d (three-dimensional) geospatial image visualization composed of structured and unstructured data used in operations. This platform is offered only by Oracle.

Ì     Companies should have quick value time and possibly the lowest costs for integrated oil field solutions.

Ì     Of course, there should be comprehensive Customer Relationship Management (CRM), field service functions for oil service and drilling firms, and an order management system used by industries like oil and gas for entry and processing.

Ì     Finally, there is a need for absolute, open and integrated technology expertise designed to generate basic management, excellent performance and cost-saving measures. Only Oracle offers these strategies.

The bottom line is the use of appropriate technology which will spell the difference for upstream oil and gas corporations. Incidentally, SAP and Accenture, a technology services and management consulting company have joined forces to identify potential growth areas in upstream operations. It is vital to address issues in upstream operations. The program’s objective is to focus on technology and methodology concerns particularly those associated with the production of hydrocarbon. The two entities will design business applications that combine multiple functions. These include planning, forecasting, accounting, operations, production, and maintenance. The ultimate target here is to formulate techniques that will help companies to double or triple their profits. Said solutions involve advanced analytics, reporting methods, mobile capabilities, and patterns based on leading industry practices.

Research and Development (R&D) is equally essential. This is often considered as identical with high-tech institutions with progressive expertise. Upstream companies have to develop new technology and equipment constantly to beef up their exploration and production capabilities. In fact, R & D is considered a cornerstone by companies engaged in upstream operations specifically oil exploration.

Upstream Industry Solutions

There are prominent international oil and gas companies which are in the midst of enhancing the value of their solutions (with the help of SAP) to add upstream industry capabilities. Some of these conglomerates are Chevron Texaco, Marathon, Equiva (Germany), British Petroleum, and Tesoro Corporation Texas. SAP has upstream capacity for the oil and gas sector which is meant to deliver expertise and automated techniques that upstream enterprises need to generate more value and increase profits in the current business environment. These competencies consist of production and revenue accounting, production sharing accounting, joint venture accounting, and offshore logistics administration.

Take the case of Chevron Texaco. It is currently pursuing SAP implementation by expanding the platforms to cover revenue accounting with production as well as resources management. Improvements of processes and amalgamation are deemed as the salient points that can increase savings and hopefully enhance revenues.

British Petroleum commenced a project to replace existing applications in oil supply, production and revenue with new programs in the same disciplines courtesy of SAP and O & G Industries.

Nexen, which is among the leading oil and gas producers based in Canada, has just completed the development and is currently implementing mySAP.com for its operations in North America. The implementation includes joint venture accounting capacity of My SAP Oil & Gas for the upstream sector. Nexen is planning to extend implementation to the United States and has given the go-signal to seek licensing for revenue accounting and production from SAP.

Current Situation

The growth perspective for the upstream industry is seen as positive for the coming decade. High oil prices are expected to propel record levels of outflow in the two industries. Increasing costs and the volatile economic situation may pose problems but everything is expected to go smoothly given the proper vision and focus on operations as well as complications. The key is to manage oil and gas assets efficiently.

There should be strategies to allow companies to cope with uncertainties in the future.

Upstream companies are faced with challenges which require them to ensure the reputation of their various assets. At the same time, the focus should be on cost-cutting, reduction of the instability in production, and maximizing their output. Some CEOs believe that these apparently incongruous priorities produce genuine opportunities for outperforming competitors by way of excellent operational execution.

Nevertheless, in a difficult upstream environment, it may not be easy to introduce significant improvements. You can expect more problems across the industry but one thing is certain, technology is a big factor for companies that strive to increase revenues in this otherwise complex industry.