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How oil companies use BI to maximize profits

Kim S. Nash | June 8, 2008
No one argues that oil isn't one heck of a lucrative industry. And all those profits don't come from good business intelligence practices alone. But it's a powerful notion to run a company with the mind-set that virtually every employee is a data analyst.

Prices at the pump reflect these expenses. The cost of crude oil constitutes most of the price of gas, accounting for 73 percent of today's $4-plus figure, according to the U.S. Department of Energy. Refining, meanwhile, is 8 percent; so is distribution and marketing. The remaining 12 percent goes to state and federal taxes. Each oil company analyzes its costs and potential income, says David Smith, an IT consultant to the oil industry at Electronic Data Systems, trying to profit at each step (except for taxes, which are fixed).

Traditional economic principles of supply and demand alone fall short when you try to forecast prices, Smith says. "With political instability, fear about Iran and Iraq-those have ripple effects and an emotional response at the pump," he says.

"You have to blend that volatility with real-time market data and factors you can't predict."

Big Oil's Big Picture

After oil, the best kind of gusher to discover and manage these days is data, and therefore profits, in real time. Or close to it. That's what Hess is after.

For the past four years, the $32 billion integrated oil company has been building BI systems to trace and interpret data from start to finish along the exploration and production value chain in as close to real time as possible, says Lensing. The idea is to be able to see activity at all its assets in Norway, Denmark, the U.K., the U.S., Thailand and Africa. Are its four fields in Equatorial Guinea producing as expected today? Is the refinery in New Jersey running at capacity, or can it take in more barrels of oil before the end of the month? What have sales at its 1,370 gas stations been since last Saturday at noon?

No one business intelligence product can do it all, though. For financial analysis, Hess mainly uses tools from Hyperion, which Oracle bought last year. To estimate how much oil or natural gas its wells can produce, the company develops a model of the reservoir terrain based in part on readings from bouncing seismic waves in the area. For a look at patterns in well production, Hess runs a tool popular among pharmaceutical firms called Spotfire, from Tibco. Spotfire lets analysts visualize data by producing graphs, charts and other pictures, into which users can drill down with queries.

The company is also installing OSIsoft performance management software-in part to collect operations data-to measure, for example, how efficiently platforms and storage tanks are running. That project isn't finished yet. Meanwhile, Hess receives daily uploads about the performance of its joint ventures, such as one with Shell in the Gulf of Mexico, via secured FTP transfers.


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