What role does ERP play in the oil and gas industry’s digital transformation?

Due to international gasoline prices or frequent changes in regulatory requirements, the digitaloilandgas.solutions is a volatile one. The industry is also constantly faced with unpredictable supply and demand fluctuations. Digital technologies, and especially ERP systems, can be extremely useful in an industry such as this by gaining visibility into crucial processes and giving access to remote areas in the supply chain, giving a bird’s-eye view of all processes, operations, and recording the availability of resources in real-time.

Starting at the oil well and coming all the way up to the gas station, digital infrastructure is the core of global operations and supply chain. Through various digital initiatives, there is a great deal of potential to reduce costs and increase efficiency. On the other hand, isolated digital initiatives are unlikely to be very valuable. The core ERP system of an oil and gas company must be reliable and robust.

There are too many sectors in the Oil and Gas industry to generalize it all under one large umbrella. Analyzing the sub-sectors within the oil and gas industry is important in order to better understand digital transformation in the industry. 

Oil and gas upstream

Oil and Gas Upstream is responsible for oil drilling, reprocessing the crude oil, as well as transporting crude oil to refineries. There is no doubt this industry relies heavily on assets and presents a number of operational challenges that may include extreme weather conditions and often inhospitable workplaces. 

Upstream Oil and Gas businesses require an ERP that can manage both fixed assets and procurement, as well as accounting for depreciation based on different depreciation methods, because the industry is asset-intensive and capital intensive.

There is also the issue of upstream Oil and Gas companies leasing assets and, therefore, should be able to comply with IFRS16 and its local variants in order to comply with the new lease accounting guidelines. In order for upstream oil and gas companies to undergo a successful digital transformation, it is vital that their enterprise resource planning system has the capability to support these scenarios.

The sector engages in several activities on a project basis. These activities are governed by an extremely well-defined “Authorization For Expenditure” or AFE process, in which every cost related to a given project is recorded. Thus, an Oil and Gas ERP system will allow companies operating in this field to provide specific features such as multi-stage budgeting, item and service level planning, workflow for budget approvals, capitalization of AFE, releasing materials to wells, handling item conditions, as well as many others.

In order to ensure these processes are optimized back-to-back, the solution must include a robust Project Management module or a Project System that enables companies to define and implement these processes. Last but not least, companies in the oil and gas sector are embracing emerging technologies. When IoT applications and existing ERP solutions are integrated, the advantages derived by companies from these technologies multiply multiple times. Because ERP applications provide users with the ability to view data in the context of assets or transactional data and to design alerts and process workflows based on various parameters.

Utilizing technology to its full potential

There is a widespread move to the cloud among companies across a wide range of industries. As organizations struggle to digitize their businesses, they are turning to cloud technologies and leaving legacy technologies behind. One major benefit of migrating to the cloud is the ability to maximize asset production and democratize data – putting data at the fingertips of everyone and streamlining business processes – which stem from the complete digitization of an organization. 

Although the Oil and Gas sector is far from being a perfect example of digitization, it is still a long way from becoming one. Although a lot of effort is being put into digitizing, the sector at large lags behind. Modern society has made it a norm to embrace new technologies. There is no time to waste when it comes to the Oil and Gas sector.