In Sync with IT

From being used only in accounting and payroll processes, IT has come a
long way. Today, IT is an intrinsic part of petroleum PSUs and is being used for
a variety of purposesacquisition, processing, analysis of seismic data,
production monitoring et al

Unlike other sectors, the petroleum industry in India has been among the
earliest adopters of ITway back in the early sixties. This was a time when
erstwhile MNCs like Shell, Esso, Caltex, and Bharat Petroleum (BPCL) had begun
deploying computers with devices like comptometers and card punching machines.
Starting from the early IBM mainframe machines in the late 1960s for batch
applications, oil companies were among the early adopters of the latest IT
technologies, says KR Shankaran, executive chairperson, Petroleum India
International (PII), a consortium of the top eight corporates in the petroleum
and petrochemicals industry in India.

Shankaran adds on a lighter note that just like circus was a major attraction
in those times, in the very early days of computing, people in South Mumbai
would step into an oil company to have a glimpse of the computer. By 1965,
Bharat Petroleum had a completely functional EDP (Electronic Data Processing)
department with IBM 1460 second generation computers, and IT by that time was
ingrained in many crucial aspects of the companys operations.

During the initial years, systems were primarily used for balance sheet jobs
and payroll; for instance, the 8-bit machines were used for maintaining records
related to accounts departments and store purchase.

Initial Hurdles

The petroleum sector needs to process vast amounts of data for optimizing
production and distribution costs. In the Indian context, equitable pricing of
petroleum productsto ease the burden on the common manhas been a constant
objective, and prior to the widespread adoption of IT, manual processes had to
be put in place for achieving these objectives.

For any petroleum company, changes in pricing by the government meant that
the head office had to manually dispatch/fax letters to all the offices to
inform about any changes in pricing. With the deployment of IT, one only needs
to do alterations in the main system and automatically the change is reflected
in the pricing across India, in a matter of a few seconds.

Since petroleum companies are in the forefront of using IT, they have also
faced the problems typically associated with the early innovators. Many
software applications have matured on the strength of the early adoption and
travails faced by the PSU oil industry. Being early adopters, each petroleum
company developed its own bespoke applications, and many of these applications
were discontinued after the market matured, reasons Shankaran.

AK Kaushik, DGM, IIS, Bharat Petroleum, quotes an instance: Bharat Petroleum
undertook an important study during its reorganization exercise. Under the
study, an enterprise-wide IS plan strategy was debated and drafted after
identifying and analyzing the gaps that emerged from BPCLs reorganization from
its legacy structure to the more dynamic strategic business unit (SBU) model.

Understanding the customer and customer needs and delivering better value
for the money to them are some of the key drivers behind the increasing adoption
of IT, says K Kaushik.

Usage of IT

From being used in the accounting and payroll processes and being on the
sidelines of the company, Information Technology has come a long way. IT is
today used in upstream industries for a variety of purposesacquisition,
processing, accounting, analysis of seismic data, and production monitoring.

In a high-risk business like exploration and production (E&P), where the
operating cost of one well is approximately $1 mn per day and even then
companies arent too sure of whether oil will be discovered, IT has become an
integral partright from the stage when geologists conduct surveys to the
drilling stage, says Sudhir Bahuguna, senior vice president and CIO, Reliance
Gas Transportation Infrastructure.

IT is deployed intensively in a petroleum company setup at various stages. It
is first used at the initial stage when geologists conduct surveys in various
parts of the country, supported by the remote sensing satellite, on the basis on
which a preliminary report is prepared on the possibility of finding oil and gas
in a particular region. IT is also used during the seismic survey stage,
wherein, a blast is conducted for getting vibrations, on the basis of which data
is collected.

Once the seismic survey is complete, the drilling operations begin. Even
during the drilling process, IT is used for monitoring whether the drilling is
being done in the right direction; the drilled hole is of the right diameter,
etc, Bahuguna explains. Besides, the drilling operation can also be monitored
remotely. Therefore, throughout the exploration stage up to the production
stage, IT is deployed in the entire process chain.

Technology is used mainly for exploration purposes. IT helps in calculation
of crude pricing and for doing seismic studies, which require high computing
power machines. For instance, Indian Oil uses a refinery petrochemical model
system. In this system, on entering the date and the type of the crude oil, the
system informs how much petrol it can generate, and, accordingly, the plant
manager can tune the capacity of the plant.

In the downstream sector, IT is used for refinery process optimization,
terminal automation, and commercial activities. IT is embedded in virtually
every single activity, be it tank farm automation, tracking coupled with
complete logistics arrangement, accounting, or even complex refining operations.

Even in the transportation stage, IT finds usage in the form of supply chain
management (SCM), which helps in deciding which petrol pump requires how much
quantity of petrol.

Apart from finding usage in the exploration and production stages, IT is also
helpful in monitoring the entire plant through SCADA (supervisory control and
data acquisition); since every oil well is virtually a factory by itself, a
24-hour monitoring of its functioning is mandatory, and a sophisticated and
automated sensory system is needed.

One of the leading oil PSUs in India, ONGC, implemented some years back one
of the worlds largest SAP Enterprise Resource Package (ERP) R/3 Systems which
enabled ONGC to integrate financial accounting with budgeting and costing. The
system ensured data integrity besides providing on-line accounting information
through one-time data capture, resulting in better decision making.

The then ONGC chairman and MD, Subir Raha, had said, The project is all
about data capture as part of all transactions. If there is an invoice drawn up
somewhere, it is automatically fed into the system as data, so is a pay slip or
the days measurement of oil from a well ...and the beauty is that it would all
be available on tap.

ITs Come a Long Way

The oil industry has always been at the forefront of adopting the latest in
information technology for continuous cost reduction through process
simplification in both production environment and office environment, without
giving up on audit trial and transparency. The rapid adoption of technology for
carrying out transactions instantaneously without sacrificing checks and
balances is transforming the way IT is being used in PSUs, says Shankaran.

Today, companies use the best-in-class solutions. For instance, BPCL has
deployed the Enterprise Application Suite that is SAP with petroleum vertical
ISOIL as the business process backbone. BPCL has also established a complete
network of the important business suites of BPCL with its own VSAT Hub and full
36 MHz Ku-band satellite transponder to support VSAT links, Kaushik says.

With the rapid growth of the Indian economy, the requirement, volume and
variety of commerce grows and, therefore, the efficiency, speed and reliability,
credibility and underlying legal framework of financial transactions can only be
assured by electronic transactions. And, Oil PSUs have been the early adopters
of common systems such as carrying out monetary transactions using electronic
means, and will continue to be the leaders in adopting such changes.

But with the growing deployment of IT solutions, it has become essential for
petroleum companies to sort out the problems associated with the availability of
a number of solutions. We need to make the right choice of product suited to
the requirement; managing change management, thus enabling the departments to
make the shift from one system to the other; convincing the management on the
rate of return on IT; and finally following the implementation schedule, says
Bahuguna.

The Road Ahead

The importance of IT in the petroleum industry is no less than any other
forward looking and growing sector in the world. Today, IT is not only a
leveraging tool, but it has also become the survival tool, vital for the
existence of any business. And this is a fact that no company can ignore.

IT plays a crucial role in all aspects of business operationsright from the
exploration and production (E&P) operations to the complete logistics support
and the customer service delivery processes. IT will continue to be looked at as
an enabling means and even globally, the petroleum industry is an early adopter
of technology and Indian companies too are at par with them.

 Bahuguna, for instance, admits the contribution of IT in the success of
Reliance finding gas reserves in the KG basin, which was driven, apart from
innovation, by the intensive usage of information technology.

Players are hopeful that the petroleum industry would continue to embrace and
adopt new technologies. In fact, the exploration and production sectors will
continue to drive certain technologies.

Huge exploratory data management and its interpretation are the key areas in
upstream; plant information management with potential for optimization in the
midstream; and the SCM and the CRM are the areas in downstream where
technologies will have a major role to play for delivering superior customer
experience. Such objectives will be achieved increasingly through simulation,
e-learning, and others.

Increasingly, IT solutions in retailing would also be in high demand. Most
importantly, the introduction of more and more embedded IT systems will aid in
production, planning, refining, and profitable marketing of products.

Stuti Das

stutid@cybermedia.co.in