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Knowledge Management & Intranet Solutions - Conference & Exhibition

 Industry focus

The oil industry is making sophisticated operational use of KM, Campbell McCracken reports.

The oil and gas industry spends over $150 billion a year drilling and maintaining oil wells. With such large numbers, savings of a few percentage points will make a huge impact on the bottom line. Naturally the biggest savings are to be made in the areas where there is the biggest spend. In the case of oil and gas, this is in the area of 'complex services'.

Complex services are products and services that are uniquely tailored to the intent of the operation and well environment. They account for approximately 65% of all capital expenditures in exploration and production, and include such diverse services as equipment hire, cementing and the manufacture of specialist parts.

"The Government got behind the whole of the UK's oil industry and said 'The oil industry in the UK must remain competitive' and that's about driving down cost," says Stephen Birrell, marketing director of Vardus, a KM consultancy focussing on oil and gas. "The way the industry can drive down cost is by attacking the areas of huge cost which are facilities and drilling. And if everyone follows best practice and shares their learning, you won't have people making the same mistakes twice. And that ultimately saves money."

Knowledge is valuable
Tim Burnett, head of energy at Oracle's UK consulting services, agrees. "Knowledge is so important and so valuable in oil and gas 'upstream' (the stages involved between exploration and eventual delivery to the refinery) that as long as what is viewed as an overhead is in fact just the expense of making sure that the corporate knowledge has most value then it pales into complete insignificance compared to the value of that knowledge."

"The capital cost of a well is anything between $4 million and $28 million in the UK," continues Birrell. "Time is money and when you've got a $28 million well on the line you're probably paying between $100,000 and $200,000 a day. So a saving of one day because you haven't made a mistake is a lot of money."

And the impact of making mistakes is not getting any less.

"There is a general industry wide increase in the prices that companies are charging," says Stephen Cross, business development manager for manufacturing and utilities at Convera, a provider of cross-lingual, multimedia search and content management solutions.

"As the costs of the projects go up so do the costs of the mistakes."

Communities of expertise
One of the most successful methods of sharing knowledge in the oil industry is setting up knowledge communities. The size, shape and permanence of these communities can vary enormously. At one end of the spectrum, engineers embarking on a new project will invite peers to volunteer their experiences on similar projects. At the other end, companies have set up online knowledge communities either individually or collectively to provide a means and a location for the extraction and sharing of tacit knowledge.

One such community is the Common Knowledge site created by Vardus to serve the oil industry. The site uses Organik, Orbital's knowledge sharing software. Organik allows users to ask questions of the community database. If a question has already been asked then the software retrieves the answer. If the question (or a similar one) hasn't been asked or if the retrieved response doesn't satisfy the user, then Organik can escalate the question to a human expert to answer, thus facilitating the extraction of tacit knowledge from the expert. "Orbital's Organik, for us, was a great tacit knowledge and expertise tool," says Vardus' Stephen Birrell.

"The oil & gas industry is experiencing a high churn in human capital at the moment, not least because of its ageing demographic. As companies lose staff so they lose the information they hold," says Stephen Cross of Convera. Using tools such as Organik to extract tacit knowledge can help stem this loss of information.

Atofina, the petrochemical branch of merged Total, Fina and Elf, has deployed a bilingual version of Organik across its US and European research and development departments. It operates simultaneously in English and French, allowing users to find people and expertise and ask questions in either language, surpassing linguistic and cultural differences normally experienced when employees operate from disparate locations. The first phase of this deployment is currently rolling out in France, Belgium and the US to 650 employees. The rollout to a much larger user base will take place later this year.

The move towards multilingual functionality is a growing one according to IDC. "Multi-language capabilities are becoming increasingly important as organisations focus on global expansion," said Greg Dyer, IDC's senior research analyst for KM services. "While some organisations have declared English their common language, the ability of users to interact in local languages will enhance the user experience and increase buy-in."

The need for multi-language applications has been noticed by other suppliers. "One of the key areas in which Convera is noticing this demand has been in multiple language searching," says Convera's Stephen Cross. "As more companies merge and their knowledge repositories grow, so the number of languages that a repository contains will also grow." Convera offers cross-lingual searching, which is the ability to search multiple languages simultaneously as opposed to one at a time.

Procurement Tools
The use of electronic forms and online information is another way that the oil and gas industry gathers and communicates information and streamlines its processes, especially in the procurement of complex services. Previously the plans for a project would be drawn out and paper copies passed out to subcontractors. There could be as many as five or six layers of contractors beneath prime contractor and paper plans and drawings could be passed up and down through all these layers. As amendments and suggestions were made, more drawings were produced and distributed.

"With large documents shipping backwards and forwards between engineering departments, you can't afford to run a dialog with more than a very small number of suppliers because of the overhead," says Oracle's Burnett. "There are always clarifications and modifications through that process and that's where the cost savings come in."

By putting the information on a relatively simple web-based 'design and procurement' portal you can work with more suppliers, with obvious economic benefits. Houston, Texas applications service provider Wellogix' Workflow Navigator allows operators to specify details down to individual hole sections in each well and to share access with other team members working in remote locations on a single product. Team members are given different levels of access to the project. Instead of sending our paper drawings, operators can e-mail details or refer contractors to a URL.

Another advantage of the portal approach is that it allows the smallest of operators to be included in the process too. Even in a sophisticated industry like the upstream oil industry, small organisations that might be excellent at machining valve parts may not have sophisticated IT. But they all have PCs and can all access the Internet. "It's much easier to put in information via that portal than not to, certainly much easier than paper," says Burnett.

Once the complex services have been agreed and procured, they still have to be managed. The very nature of the upstream business means that frequently the services cannot proceed as planned and quantities of materials used or time spent can often exceed what was ordered. For example, although a contractor is awarded the job of doing a particular job on a particular day, a lot of things could happen. There could be a blow-out, or more pressure than anticipated which could mean that the job could take longer. Once the job is over, there has to be some way of resolving the invoiced costs against the budgeted costs.

For example, if a job was going to be $20,000 and the invoice comes in at $30,000, a red flag goes up - why is it now $30,000? "People are saying 'I get 40,000 of these invoices every month and it takes me a long time to process them because I have to follow who signed where, when this happened, and things like that'," says Wellogix' chief knowledge officer Bill Chikirivao.

Wellogix has introduced a paperless system called eFieldTickets that provides an effective tool for reconciling invoices with purchase orders. "If you have an electronic trail you can see that this service was done on this particular day, who was there, and what the particular parameters were," says Chikirivao. "You can also see why it changed and why, when they said they were going to spend two days, they actually spent four days. It begins to merge and make sense."

Oil companies also build up their knowledge of their operations by creating 'well files'. All information on operational events, each day's activities, is captured on operational reports that go into the well file. The companies analyse these reports to improve processes, reduce costs, and reduce the risk of hazardous events during an operation. However, since this documentation is exceptionally data intensive, analysing these files is extremely time consuming and can hamper oil companies making the right decisions. Wellogix has developed an electronic version of the well file where engineers can enter information into templates that can then be saved into a virtual well file.

Data Mining
The next logical step in applying KM techniques is to put all the information gathered so far, information from procurement, operational data and financial data, into a repository. Once there, it can be used to produce operation reports on a daily basis, or be used to help calculate costs and parameters for other similar wells. "The more data you accumulate, the more data you can do analytics on, the more value that you can build into the system. So the system actually gains value with time," says Bill Chikirivao.

One problem that Wellogix came across in doing this was that the data is not actually held in a common database. "What you have is a lot of data in multiple formats, on heterogeneous systems," says Chikirivao. To get around this problem, they tag the data using WellXML.

WellXML is a specific subset of XML that allows companies to transfer information without having to reformat the data for use by other computers. By using WellXML tag sets, service providers and operators can instantly and correctly interpret and use each other's data without spending long hours duplicating data entry.

"WellXML allows us to combine the financial data, the procurement data and the operational data into a repository, or repository metadata, that allows us to do analytics on the data."

"It used to said that there were three factors in production - land, labour and capital," says Oracle's Time Burnett. "Land, labour, capital and knowledge are pretty well accepted as being a fairer representation of where organisations can get or extract shareholder value."


Common Knowledge



2001 Bizmedia Ltd under licence from Learned Information Europe Ltd

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