Why oil and gas CIOs need to spend money now

With so much pressure to contain costs, now would seem like a prudent time to pull back on new investments in IT areas like mobile, cloud and analytics. But new, strategic IT spending can actually help save money in this tight fiscal environment.

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Canada’s oil and gas sector is hurting.

The price of oil has plummeted by more than 70 per cent in the past 18 months. As a result, capital spending in Canada’s oil and gas industry will fall from $81 billion in 2014 to just $31 billion in 2016, according to a forecast just released by the Canadian Association of Petroleum Producers (CAPP). That 62 per cent drop is the largest two-year decline in capital spending since CAPP started keeping figures in 1947.

This dire situation is driving energy firms to cut costs wherever they can, including IT. When IDC surveyed 29 oil and gas CIOs last August, 60 per cent said they were cutting their budgets.

It’s no surprise, then, that those same oil and gas CIOs ranked reducing costs as their top priority for IT spending. With so much pressure to contain costs, now would seem like a prudent time to pull back on new investments in IT areas like mobile, cloud and analytics.

But Vasudha Ghosal begs to differ.

“An oil depression scenario is the perfect situation to go mobile,” he asserted in an interview with Oil and Gas IQ.

Ghosal is manager of mobility and enterprise architecture at Tetra Technologies, a Texas-based firm that provides the oil and gas sector with services ranging from well testing to offshore rig cooling. He said energy and resource CIOs should consider how new, strategic IT spending can actually help them save money in this tight fiscal environment. “It is a myth that (IT) deployments have to be high-cost projects,” he said.

Ghosal described how manual data gathering (a.k.a. ye olde pen and paper) is still fairly common in offshore or other remote work sites with no data centre or Internet access. Since multiple people usually end up transferring the data from paper to electronic systems, it’s incredibly inefficient, vulnerable to human error and tough to reconcile the various data points and formats, he said.

In those situations, “(smart)phones and tablets could become the primary means of gathering data,” Ghosal suggested. “These are really very simple tools that are inexpensive.”

In addition, he noted that most smartphones and tablets have built-in technology to easily capture time and geo-positional coordinates so they can be “synced up with servers or backup systems later on.”

Is this the long-term, killer mobile deployment that every energy CIO dreams about? Of course not. But Ghosal estimates it could yield ROI in as little as three months. That’s a lot sooner than the three years many analysts predict it will take for oil prices to fully bounce back.

In his most recent forecast (from February 2016, to be exact), IDC’s Chris Niven wrote that this type of strategic IT investment could make or break an oil and gas firm during the next few tough years.

“The companies that will survive and prosper are the ones that know how to leverage enabling technologies like cloud and mobility to help automate and optimize processes and apply analytics to improve operations output,” wrote Niven, research director at IDC Energy Insights.

Think about how quickly technology advances these days. If an oil and gas company reduces its IT investment to just keeping the lights on for the next few years, how far behind will it be once oil prices do recover?

Niven similarly pondered this point in another research note last fall, reminding energy CIOs that “the industry needs to keep a focus on innovation to be ready for whatever comes next.”

With digital technology moving so quickly, cutting IT investment far too deeply today just isn’t worth it tomorrow.

Image courtesy of Free Digital Photos

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