Top 6 trends for oil and gas industry in 2014
Today’s oil and gas industry executives – including control room operators monitoring use data, chief information security officers analyzing the potential cyber security risks of a new IT system, and oil rig managers discussing drilling sites with geologists – are making business decisions in an interconnected landscape of risks and rewards. Success demands balancing the dizzying array of new regulations, cutting edge technology, and emerging threats and opportunities that are ever present in this industry.
According to management consulting firm Booz Allen Hamilton, these are the six key trends that are poised to greatly impact the oil and gas sector and what every oil and gas executive needs to know.
Top six energy industry trends for 2014:
1. The technology supply chain will increase the need for cyber risk management.
Oil and gas companies recognize that embracing networked infrastructures allows them to more efficiently operate their business, and in doing so, they increasingly rely upon vendor materials, products and services.
However, the industry is only now coming to terms with the cyber risk management challenges created by a more open network and increased reliance on the technology supply chain. Oil and gas leaders must address the weighty task of assessing the security of third-party vendors and protecting critical business assets from those who should not have access or who wish to disrupt the business.
2. Cyber risk management will become more customized.
Every oil and gas company stands to be hacked, and only so much can be done to thwart this threat. Companies must create unique approaches to minimize the impact of an attempted attack, and protect critical assets.
In particular, oil and gas companies need to focus on developing comprehensive security risk management plans tailored to the circumstances when entering high-risk environments, such as ventures into new geographic locations, markets and products. A recent ABI Research study predicted that cyber attacks against oil and gas infrastructure will cost companies $1.87 billion by 2018
3. Future competitive advantages depend on technological innovation.
Until recently, oil and gas companies did not innovate beyond what was required to pull resources out of the ground with a reasonable amount of success. However, there has been a noticeable shift as companies begin to view technology as a new frontier for competitive advantage.
Oil and gas companies are using the latest ideas, such as mobility, cloud computing, and knowledge management, and wrapping them around their current processes to make everything work better. However, as innovation takes off, companies must turn their attention to protecting the R&D that went into creating this intellectual property, which creates another layer of security that must then be implemented.
4. Striking the right balance between strong cyber risk management and regulation will become more challenging.
Regulations help companies secure themselves from cyber threats. However, regulations apply a one-size-fits-all method to security that does not take into account each company’s “attack surface,” the unique vulnerabilities that come with its specific business processes. Often there are competing priorities between addressing what is required by regulation and what is genuinely needed at the time to effectively protect the company’s systems from cyber intrusions.
Also, firms must always stay abreast of the constantly changing regulatory environment. Just as energy companies achieve compliance under current regulations, new regulations are developed. Oil and gas companies must balance a host of issues, such as compliance with environmental regulations, while balancing geopolitical issues that can have material impact on the bottom line.
5. An aging workforce is creating unique risk management, infrastructure, and HR challenges.
The oil and gas industry is facing a shrinking talent pool for those with specialized expertise. Most individuals who have the institutional and technological “know how” about their organization’s specific cyber risks and operations are looking toward retirement.
This creates a knowledge gap that younger employees cannot meet on their own, and requires oil and gas leaders to work across their business to capture, retain, and integrate human capital intelligence. According to Ernst & Young, nearly 90 percent of senior human resources executives at 22 top international oil and gas companies believe their industry faces a talent shortage and call the problem one of the top five business issues facing their companies.
6. Data will continue to create differentiators.
Oil and gas companies are facing an explosion in the amount and types of data that their assets generate, yet they risk being less competitive if they do not make this data work for them. Organizations must also understand that while their data presents business opportunities, it also raises certain challenges.
For example, industry leaders must determine how to analyze and present their data in a way that allows the firm to create action, both in terms of driving business strategies and in understanding anomalies associated with their critical assets.
Ofwat allows retailers to raise prices from April
Retailers can recover a portion of excess bad debt by temporarily increasing prices from April 2022, according to an Ofwat statement.
The regulator confirmed its view that levels of bad debt costs across the business retail market are exceeding 2% of non-household revenue, thereby allowing "a temporary increase" in the maximum prices. Adjustments to price caps will apply for a minimum of two years to reduce the step changes in price that customers might experience.
Measures introduced since March 2020 to contain the spread of Covid-19 could lead to retailers facing higher levels of customer bad debt. Retailers’ abilities to respond to this are expected to be constrained by Ofwat strengthening protections for non-household customers during Covid-19 and the presence of price caps.
In April last year, Ofwat committed to provide additional regulatory protection if bad debt costs across the market exceeded 2% of non-household revenue.
Georgina Mills, Business Retail Market Director at Ofwat said: “These decisions aim to protect the interests of non-household customers in the short and longer term, including from the risk of systemic Retailer failure as the business retail market continues to feel the impacts of COVID-19. By implementing market-wide adjustments to price caps, we aim to minimise any additional costs for customers in the shorter term by promoting efficiency and supporting competition.”
There are also three areas where Ofwat has not reached definitive conclusions and is seeking further evidence and views from stakeholders:
- Pooling excess bad debt costs – Ofwat proposes that the recovery of excess bad debt costs is pooled across all non-household customers, via a uniform uplift to price caps.
- Keeping open the option of not pursuing a true up – For example if outturn bad debt costs are not materially higher than the 2% threshold.
- Undertaking the true up – If a 'true up' is required, Ofwat has set out how it expects this to work in practice.
Further consultation on the proposed adjustments to REC price caps can be expected by December.
"While it’s great that regulators are helping the industry deal with bad debt in the wake of the pandemic, raising prices only treats the symptoms. Instead, water companies should head upstream, using customer data to identify and rectify the causes of bad debt, stop it at source and help prevent it from occurring in the first place," she said.
"While recouping costs is a must, water companies shouldn’t just rely on the regulator. Data can help companies segment customers, identify and assist customers that are struggling financially, avoiding penalising the entire customer in tackling the cause of the issue."
United Utilities picks up pipeline award
A race-against-time plumbing job to connect four huge water pipes into the large Haweswater Aqueduct in Cumbria saw United Utilities awarded Utility Project of the Year by Pipeline Industries Guild.
The Hallbank project, near Kendal, was completed within a tight eight-day deadline, in a storm and during the second COVID lockdown last November – and with three hours to spare. Principal construction manager John Dawson said the project helped boost the resilience of water supplies across the North West.
“I think what made us stand out was the scale, the use of future technology and the fact that we were really just one team, working collaboratively for a common goal," he said.
Camus Energy secures $16m funding
Camus Energy, which provides advanced grid management technology, has secured $16 million in a Series A round, led by Park West Asset Management and joined by Congruent Ventures, Wave Capital and other investors, including an investor-owned utility. Camus will leverage the operating capital to expand its grid management software platform to meet growing demand from utilities across North America.
As local utilities look to save money and increase their use of clean energy by tapping into low-cost and low-carbon local resources, Camus' grid management platform provides connectivity between the utility's operations team, its grid-connected equipment and customer devices.