The energy and commodities sector is currently undergoing a significant transformation, and digitalization is at the heart of this change. The energy industry, in particular, is facing challenges brought about by geo-political and economic instability, making for a volatile market. However, where there lies uncertainty, there is undoubtedly an opportunity, and in changing times such as these, energy companies can gain more certainty in value chain modernization (VCM). This year, we are seeing this as a key trend for 2023.
At the center of this trend is data. Data is the most important resource that a company owns, and it’s the fundamental catalyst for smarter business decisions. However, smarter business decisions are only a reality when decisions are aligned along the value chain. Therefore, a unified, predictive data ecosystem across the oil and gas value chain can result in hugely transformational capabilities, such as untapped growth opportunities.
Digitalization provides companies with the tools necessary to make smarter business decisions. By unifying data, companies can gain visibility and insights into all areas of the supply chain. This, in turn, can result in cost savings, better margins, and improved operations. Given the volume of products energy companies work with, even small efficiencies can yield savings in the multi-millions.
To maintain resilience in unstable conditions, 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 costs; it can even improve margins on capital expenditure costs.
A critical first step in refocusing an organization is moving from in-house compute and data storage to the cloud, which will bring efficiency and performance gains, as well as cost savings. The cloud is the foundation on which an entire transformation strategy is built. It is also a key ingredient in allowing IT organizations to be agile in support of new value.
Moreover, digitalization is 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, customized 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.
Another key area where digitalization can help energy companies is in modernizing their CTRM (Commodity Trading and Risk Management) systems. 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. Trying to increase profits and decrease carbon footprint leads to multi-objective optimizations.
To deal with this, 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. 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.