Energy and value chain modernisation
For the energy industry, geo-political and economic instability make for a volatile market, however, where there lies uncertainty, there is undoubtedly opportunity. In changing times such as these, energy companies can gain more certainty in value chain modernisation (VCM). We’re seeing this as a key trend for 2023.
It all comes down to data. Data is the most important resource that a company owns. It’s the fundamental catalyst for smarter business decisions. Smarter business decisions however are only a reality when decisions are aligned along the value chain.
A unified, predictive data ecosystem across the oil and gas value chain can result in hugely transformational capabilities, such as untapped growth opportunities. And it’s not just beneficial for oil and gas companies, retailers also benefit from optimizing their value chain as they go on to develop a range of innovative products and services, customised specifically in accordance with their customers’ needs. When it comes to ESG - one of this year’s most important areas of focus for businesses, a connected data ecosystem provides investors, regulators and customers the transparency they now demand.
Build resilience by unlocking data and insights with unified, cloud-based ecosystems
In 2023, energy companies will need to maintain a continued focus on building resilience in unstable conditions. The key to resilience will lie in gathering data and insights accessible by all departments in real-time for an agile and quick response to change, and for unified decision-making.
Energy companies will be looking to create unified data ecosystems to unearth real insights that lead to smarter decisions, predictive capabilities and improved operations. The visibility gained by unifying data will have a direct impact on all areas in the supply chain and can save OPEX (operating expense) costs; it can even improve margins on CAPEX (capital expenditure) costs. Given the volume of products energy companies work with, gaining even small efficiencies can yield savings in the multi-millions.
A critical first step in refocusing an organisation is moving from in-house compute and data storage to the cloud, which will bring efficiency and performance gains, as well as cost savings. Cloud is the foundation on which an entire transformation strategy is built. It is also a key ingredient in allowing IT organisations to be agile in support of new value.
Modernising value chains with data and AI as a cornerstone
Market volatility will continue to affect the entire supply chain, but it also has a notable impact on trading capabilities. Markets have become more interconnected based on price arbitrage and carbon objectives. Aiming to maximise P&L while minimizing carbon footprint creates a situation where we have multi-objective optimisations.
This is where data really comes into play as the differentiator, especially in a highly volatile trading environment. As mentioned above, better decision-making in real time is only possible with immediate and reliable data. Modernising your CTRM ecosystem can help with better data integration, speed and agility. Taking it a step further, AI-driven models will be key for multi-objective optimizations, as well as complex structured deal management and valuations.
Secondly, updated CTRM systems are essential to keep up with the commercialization of new products, including carbon. The business case for carbon has been made, and energy companies are ready to focus on technology upgrades. Carbon trading, carbon management and monitoring, and carbon accounting processes will need to be incorporated into CTRM ecosystems to capture new market opportunities. There are different ways to collaborate on a CTRM implementation or upgrade; collaboration is a word that doesn’t always get the airtime it deserves in energy trading today, but that finally looks set to change. For the most part, many of the operations that energy companies perform and the tools they use are undifferentiated with no unique competitive edge.
Commercialisation and beyond: Key trends
In 2023, commercialisation trends will emerge across the supply and trading industry, representing an opportunity for new optimizations and revenue streams.
Growth in hydrogen production and battery capacity is set to make their respective value chains more complex and to cause further fragmentation across secondary energy sources. Both sectors are experiencing exponential growth: it is forecast that 10% of the world’s electricity will be used for hydrogen manufacturing, where 13% of natural gas will be used for that process. Meanwhile, battery storage capacity will increase by twenty times, while growth in annual DER2 installation capacity will increase by three times what it is today. Therefore, it is essential for companies in the supply and trading industry to gain a good understanding of the upcoming trends for secondary energy sources and to be continually prepared for what’s next beyond the next year.
Ecosystem partnerships will also be a new gateway to untapped market opportunities when focused on the delivery of various energy projects. One way to leverage partnerships is to add oil and gas production to high-growth, low-risk areas, and to deliver new energy projects, such as Bioenergy with Carbon Capture and Storage (BECCS), batteries and hydrogen.
When it comes to meeting carbon targets, companies must also consider the changing regulatory landscape. UK businesses for example, are becoming increasingly more aware that Scope 3 reporting will eventually become mandatory, maybe as early as for 2024. This challenge can be met by introducing and monetizing new products and services across the ever-evolving value chain, such as building carbon offset and inset businesses or introducing new products e.g. offset-paired carbon-negative LNG products.