best practices for oil gas sap solutions for the energy industry

2014 Hot Topics

© THE EVENTFUL GROUP PTY LTD 2014 PAGE | 1

2014 HOTLIST OF ISSUES

The Eventful Group recently conducted an extensive research project with stakeholders across the entire Oil

& Gas community. It included interviews with Oil & Gas organizations spanning upstream, mid-stream,

downstream and Oilfield services. It took in partners, service providers, technology businesses and SAP

thought leaders.

It included a 5-stop tour; 3 dedicated customer sessions, and discussions with SAP’s Oil & Gas Global

Advisory Council of customers (GAC). We met face to face with 35 customer organizations in order to discuss

and understand the main challenges they as a community face, with their business processes and with their

use of SAP’s solutions to support those processes.

This report outlines the Hot Topics that customers want to see discussed at the Best Practices for Oil & Gas

conference in September:

1. Indirect Supply Chain (MRO), Logistics & Procurement

2. Reliability & Asset Management

3. EH&S & Risk

4. Upstream Operations

5. Large Capital Projects

6. The Mobile Organization

7. Hydrocarbon Supply Chain

8. Finance & Capital Management

9. Getting the Most from Your People

10. Increasing the Accuracy of Decisions - Managing Data

11. Laying the Foundation for better Decision Making - Reporting & Analytics

12. Enhancing Processes and Managing Change for Productivity

13. Managing your IT Infrastructure


1. Indirect Supply Chain (MRO), Logistics &

Procurement

Logistics

Improving logistics processes is an area that organizations are constantly trying to master. Rather than 1000

deliveries per week to a site, imagine the impact of reducing that to 500 deliveries. This can be done by

simply planning better and the impact of this logistics planning can improve safety, increase productivity and

save money.

What is best practice?

How can SAP help me plan and manage my logistics?

Procurement & Spend Analytics

Most transactions happen with a very small minority of suppliers. To find efficiencies organizations need only

track these high volume suppliers for spend analytics. They are interested in learning what the optimum

balance is between how much you track in terms of detail and how much data or process you build into your

system?

What are best practices in the Oil & Gas industry?

Can the system assist organizations manage relationships with suppliers for example Outline

agreements, contracts for services, etc?

Strategies to create better partnerships with your vendors to enable more automation & what is

‘common practice’ in automation

Learn from others how they developed a deep internal partnership between operations groups and

their Supply Chain groups

What about using mobile as way to fast track requisitions, approvals and PO’s in Procurement

Contracts Management

Discipline is everything when capturing transactional data - work completed measured against what was

contracted is a vital piece of process many are grappling with. The operating business will have to pay the

Oilfield services company and should have visibility of the contract in accordance with services consumed.

How do organizations know they are getting the prices that they signed contracts for?

How do we track the procurement of services against contracts?

What if my suppliers had an automated way to self-serve?


Materials Planning

Planning what and how much material will be required at any given time is a constant issue for organizations.

This year, not only are Supply Chain professionals requesting information on SAP’s tools, but they are also

seeking to learn more about the fundamentals of MRP and integrated planning to improve their use of the

system.

Understanding and refreshing their knowledge on the basics of MRP

Strategies for optimizing you’re planning processes

Best practices for working with Vendor Managed Inventory

Specifically examining MRP for maintenance and shutdowns

Integrated Planning - How to create a strategy and direction for integrated planning

Linking Your Supply & Maintenance Organizations

Most businesses experience tension between their maintenance and supply organizations. These two groups

are often misaligned, as a result of conflicting KPI’s that drive them.

Bringing Supply & Maintenance to one table - has any organization achieved complete success?

Using SAP technology to aid the alignment - Integrating Materials Management (MM) and Plant

Maintenance (PM) or are their third-party tools in this area - what they look like and what they can

achieve?

Integrating Plant Maintenance, Purchasing, Inventory Management and Warehousing

Spares control and management to meet maintenance needs

Stores optimization and setting minimum - maximum levels

Managing an aging refinery or site, preparing for decay and redundancy on spares levels over time

Identifying and managing redundant stock - linkage to equipment decommissioning


2. Reliability & Asset Management

When a business processes 700 000 barrels per day, 1% increase in reliability would yield an additional 7000

barrels. Reducing decline and pulling small margin forward is very attractive, and reliability improvements

are a very tangible way to effectively achieve this. The Oil & Gas business is one in which price can’t be

impacted, only production throughput to impact on margins. SAP has a powerful but complex suite of

capabilities which can be daunting to understand and apply. Many customers have moved from best of

breed solutions to the SAP PM/EAM solution.

How do I properly use the functionality to increase reliability?

How do I drive adoption and usability (including mobility for certain processes/transactions)?

How do I leverage the integration of EAM and supply chain and finance?

Maintenance Scheduling

Effective work scheduling is obviously critical to effective work management and execution. In recent years

graphical scheduling tools have become available within SAP, joining the suite of available third-party tools.

Whichever tool you use, effective scheduling and capacity planning remains a huge challenge, embracing

both the system capability and the business processes used.

Tools - overview and experiences of the available scheduling tools - Planning Board (SAP capacity

planning), MRS (SAP multi-resource scheduling), GWOS (Prometheus Graphical Work Order

Scheduler), interfaces to third-party scheduling tools (Excel, Project, Primavera)

Integrated production and maintenance planning

Job prioritization based on asset criticality and risk

Successful approaches for job planning and scheduling in an SAP environment end to end processes,

organization/roles/responsibilities, integrating contract planners/schedulers

Designs for Enterprise Asset Management (EAM)

An organization’s assets must be managed as well as just maintained is growing every year, and in 2014

there is strong interest in how SAP can support the organization’s efforts in asset management.

Where is SAP headed? SAP’s development direction with asset management, asset performance

analysis

What tools and technology are available to manage asset lifecycle management?

Aligning SAP data and processes with ISO55000 requirements


Understand how SAP’s integration capabilities supports a holistic view of asset management as

depicted in the upcoming ISO standard 55000

Budgeting & Cost Management

Reliability & Asset Management professionals want to hear what tools and reports are available to manage

budgets and spend - MCB (Maintenance Cost Budgeting), BPC (Business Planning and Consolidation), WBS

(Work Breakdown Structures), internal orders, cost centers, third-party tools and interfaces.

Using Asset History for Better Decisions

Ensuring quality of data is critical to any organization with the objective of executing high level work

management and asset management - no system can achieve good results without it. The range of master

data extends from the assets themselves (functional locations, equipment) through their attributes

(classification, BOMs), to their routines (task lists, maintenance plans).

Mobile Maintenance Teams

More organizations are looking to harness the power of mobile technology to help drive the operational

efficiencies and workforce productivity. Customers are starting to understand the business case, and would

love to see a case study of an organization who has demonstrated the business value.

Mobile for field data capture and field maintenance, time capture and inventory lookup to improve

wrench time and mitigate unplanned downtime of assets

What is SAP’s Roadmap and plans for the future with its Mobility Technology?

Overcoming security concerns


3. EH&S & Risk

From a process perspective Oil & Gas industry customers feel ahead of the trends on EH&S reporting. This is

a major issue of focus in the industry. Could there be an industry Oil & gas organizations could learn from?

Organizations were interested in what SAP could deliver in the EH&S space by way of solutions. Given that

companies already have solutions today (often not integrated best of breed solutions), they were interested

in why they should go with SAPs EHS - would it be better and what benefit would it provide?

It was felt that with statutory reporting requirements changing nearly annually, they might be better served

to implement cost effective third-party solutions for reporting and start again next year. They wondered if

incurring the expense to bring this solution into the SAP suit of tools would offer an ROI.

If an organization goes with the SAP solution, what is the integration like? That would be the primary driver

for going SAP and if that isn’t perfect yet, then should they wait? What is the business case to go SAP? Is

SAP’s GRC solution the answer for EH&S?

Managing Risk and Safety - Job risk matrices for safety, environment and production

Job risk assessments and Job Safety Analysis (JSA)

Identifying and managing statutory and other critical work

Work Clearance Management

Certification, permits to work and clearances management

Safety for contractors on major projects/ shutdowns - what is best practice?


4. Upstream Operations

Successful Upstream community members are those that reduce risk, optimize material resources and

reduce costs across the board. In a commodity market such as Oil & Gas - the producers are unable to

augment the price of the product - thereby placing the profitability focus solely on reducing the production

cost per barrel. Organizations are eager for solutions that will allow them to close the gaps in the decision

making loop, integrate across functions, and make confident real-time decisions in the field. Understanding

that effectively leveraging the interdependency across functions is essential to driving operational integrity

and excellence.

What is SAPs offering in this space? Customers are interested in hearing what SAP and Accenture can

offer up together as they deliver a solution that brings them closer to the well

While the backbone of the solution is still Pi or SCADA data coming off the operation, SAP now have an

offering in production forecasting, target setting, dealing with production loss and improvement, actual

quantities.

Customers are interested in hearing from other customers who have gone live with it already or at

very least who have piloted the solution

What is SAPs offering in remote logistics management?

How can we more effectively capture and validate field data to drive timelier and efficient decision

making?

What tools are available to standardize and automate functions such as procurement to pay and

spare, transportation, warehouse and resource management?

How can we better coordinate field logistics?

How can we reduce time and effort required to order, track and report on ordering and delivery of

field services?


5. Large Capital Projects

Investments in risk-mitigated, strategic and well-orchestrated capital projects are the linchpins for growth in

Oil & Gas companies. The most successful organizations are those that have married the business strategy

with a capital projects program that can be impeccably executed. With the consequences of poorly planned

and executed capital projects being catastrophic and potentially fatal, the need to ensure that capital funds

are properly channeled and utilized is paramount to gaining a competitive advantage, ensuring return on

investment and driving shareholder value. Organizations are searching for solutions to empower them to

more effectively improve the management and execution of their capital investments through a focus on

optimizing the integrated portfolio plan, leveraging the complex supplier/vendor ecosystem and streamlining

the procurement and sourcing processes. Questions posed by the community are:

How do we run a shale development as a capital project, just like we would run an offshore platform

construction?

Are there customer case studies of Oil & Gas businesses who have done this?

How can technology be utilized to more effectively plan large scale capital projects?

What SAP solutions are available to drive end-to-end supplier management and continuous supplier

development?

How can automation and access to real-time data lead to greater efficiency in the procurement and

sourcing processes?

How can we eliminate failure and rework through a more clearly defined and executed procurement

process?

What is the best practice in terms of using SAP to run large Capital projects? What tools should be

used?

Are any customers able to get real time analytics from these projects rather than looking in the

rearview mirror?

6. The Mobile Organization

Customers are interested in mobility as a mechanism to help field operator enablement in asset

management and supply chain.

Empowering maintenance workers

Field data capture

Contractor & service companies


7. Hydrocarbon Supply Chain

Commodity Management

SAP have just developed and made available an Oil & Gas commodity management solution late in 2013.

This is as a result of SAP customers demanding a solution, so as to integrate a Commodity Management

solution into their SAP back-end.

Traditionally SAP have suggested that customers utilize Triple Point for this function, many customers have

gone down that path.

What is best practice in trading?

What is best practice in integrating a third-party solution to SAP?

What is SAP’s roadmap for commodity management?

Hydrocarbon Inventory Movement & Tracking

Moving bulk crude and hydrocarbons from the point of origin to the point of delivery is another key process

that logistics teams at SAP customer organizations want to hear solutions around. They must make decisions

around how best to move product, what port to move it to and the like.

TSW is SAPs solution that can help with this. Customers want to hear from others who are mastering

this process and also using the TSW tool well.

What is best practice in scheduling?

Are there any third-party tools available in this space and what are customers using effectively?

Oil & Gas Secondary Distribution

This refers to refined product storage and distribution. Customers want to learn how to optimize delivery

and invoicing of refined products. Customers want to reduce their DSO (Day Sales Outstanding) so as to

bolster cash flow.

SAP have a great solution in this space and many European customers, but not a large amount of adoption in

North America. What is the business case?


8. Finance & Capital Management

How do I manage the complexity of Authority for Expenditure (AFE)? Is this a technology question or a

matter of discipline? There is a whole industry of workflow tools that helps you get these approvals across all

Joint Venture partners. How do I get as good at capital management as the best industries out there?

Clearing out open ARs is not a priority in Oil & Gas. It is not perceived as a value to operations, but this leads

to poor practices around spend visibility.

In the case of an operator spending $10m on a well, how do they get that capital allocated? They’ll have to

track, record and show the workings.

AFE is owned by Operations and accounting for the AFE is owned by Finance. The systems lives between

them and internal approvals are required. The complexity is that the land is owned by a number of

organizations and so the operating organization needs to get the other Oil & Gas investor companies to

contribute too. If they can’t issue an invoice in time then the operating organization pays up front. The

problem is that the operator can end up with millions of dollars of unbilled costs.

How do I go from strategic capital planning and the allocation of capital to the execution of capital and to the

ability to show a return, as an integrated closed loop process? Are there SAP tools that can help me achieve

this? What role does SAP’s BPC tool play? What about SAP BusinessObjects?

Month end - how to have more soft close type functionality built in through the month vs. surprises at

month end.

Joint Venture Accounting & Production Revenue Accounting

For every barrel of oil that an organization produces, it must spend money and collect money. Very often

there are numerous stakeholders from the operating Oil & Gas business through to partner organizations,

The state, Federal government, the native (tribal) owners of the land - how do I use SAP’s PRA solution to

work out what to pay to whom?

There are some smart third-party bolt on solutions who partner with SAP around land management.

Organizations want to know how they use what they have to manage this better. What is best

practice? What is tried and tested?

What is SAP’s PRA roadmap and what is the vision for its integration into field data capture systems?

Globalization of PRA - can we get the industry to support a PRA system that can work globally?


9. Getting the Most from Your People

It is universally accepted that managing your people, attracting and retaining teams and building and

nurturing your culture is the biggest and most important investment you can make. In an industry with a

need to introduce the younger generations, how do organizations manage this cross generational divide in

work style and ethic?

How do you get your HR team to find the necessary skills required to operate in your business and to support

the technologies you have chosen?

Training

What is the right amount of spending when it comes to initial SAP training in your business? Most

organizations have this investment as a part of the project budget, but what happens after the project is

completed? How do you transfer knowledge from the project phase to the business-as-usual phase?

How do companies encapsulate all the knowledge they have in their working community?

What about 10 years post SAP go-live. When staff have turned over, and the implementation partner

has gone. Is my training still up to speed? For many organizations, after the project, training and KM

falls into the lap of IT - but should it?

Recruitment, Hiring & Retaining Talent

How to attract and select the right talent

How to motivate talented individuals to perform and to stay

Best practices for on-boarding new hires and streamlining the process


Supporting & Empowering Users of Systems

The system is only as good as the people driving it. It’s about user training and it’s about the engagement

model. Yes, tools are a big piece of the puzzle but highly skilled and engaged employees are of paramount

importance.

Best strategies for encouraging people to embrace technology

Clever ways to drive technology adoption by people who were “Born Before Technology” (BBTs!)

How do companies manage change and communication optimally?

Effective communication - the right message for the right audience focused on the right outcome -

what are companies doing well?

Change management - best practices

Talent Management

There seem to be new trends and paradigms driving global talent management.

Is there an Oil & Gas organization case study about how Cloud technology has been deployed to help

with this?


10. Increasing the Accuracy of Decisions -

Managing Data

The data that one puts into an SAP system and the way in which one approaches data, creates a framework

on which your data strategy hangs. The method with which one governs and standardizes data, will yield the

reporting on the other end. Customer organizations face significant challenges with getting the data piece

correct. Being predictive is an elusive mirage for many, due to bad data being so intermingled with the good

data. The culture of your organization and the importance that leadership places on data, sets the tone for

the disciplines around data. The data issues are more about people and process and less about technology.

Customers are desperate to hear:

Best practices on how to govern master data

Best practices on how to manage (technically) master data

Best practices on how to “re-clean” master data for customers who have been on an SAP platform

for a decade or more

Best practices on how to create rules and processes to govern master data

Best practices on how to define master data objects in a standardized format

Best practices on how to create a tangible business case for investing in master data management -

The benefits are less tangible and harder to sell then the business case for example of digging

another well or debottlenecking a refinery. How do we put the business case forward in terms that

decision makers (for project allocation) care about?

How does one match data across disparate data sources or systems?

Who is responsible for the data? Business or IT?

How to handle mergers, acquisitions and divestures data

Before customers can embrace HANA and all the great wins that making meaning out of Big Data in

real-time has to offer, they need to get their fundamentals right

Whether one is looking at vendor, supplier or customer data. Or whether the issue you face is focused on

material master data, a decision must be made as to whether you centralize or decentralize the

management of it. Both have their merits.

It would be useful to know where else across functions your master data shows up. This would help an

owner of a type of data make decisions based on the impact that these decisions have across the

organization. Is there a best practice for the cross functional governance of data?


Many customers would love to hear about how organizations use visual clues. What about organizations

using statisticians to draw conclusions and make meaning from imperfect data?

Dealing with Data Off the Back of a Merger & Acquisition

With M&A activity being a fact of life in the Oil & Gas industry, customers discussed how they each dealt

with the data challenges surrounding M&A's and divestitures.

How do we carve out a whole complete business? What is the impact on the data? Some just “clone

& go”

Would any companies share how they have managed major acquisitions from a data and systems

perspective?

When configuring systems from different businesses - what is best practice? Do we need to merge

them?

What is best practice when duct taping & surgically removing?


11. Laying the Foundation for Better Decision Making -

Reporting & Analytics

Successful Business Analytics relies on good quality data. In fact, reports based on unclean data are useless

and only serve to drive a wedge between business and IT and undermine future credibility and willingness to

make critical business decisions. Data management is a continuous thorn in the side of nearly every

organization with a number of tools and techniques available to SAP and SAP BusinessObjects customers and

some confusion over which is best. There is a desire to better understand where the organization is going

wrong with data quality. With regards to reporting customers want to hear:

Best practices on toolset for performance and adoption

Best practices for heterogeneous reporting and analytics (combining SAP & non-SAP data)

Best practices on governance

Best practices on adoption - an organization may have the greatest and latest BI tools, but without

proper user adoption, those tools can be ineffective. Through managing user expectations, effective

user training and offering self-service reporting, BI teams can really engage their users and achieve

greater buy-in, user adoption and ROI

There are different reporting UI’s for different roles - executives may have different dashboards and

functionality needs than field engineers

There are many common user frustrations - report development speed, usability and costs. There is

a reason why so many users will turn to Excel. How can you help drive your BI team to provide a tool

that is more usable and appealing?

SAP’s Tools - SAP’s Business Intelligence toolset has been in a state of flux in recent years. Although the

innovation that has taken place has vastly improved SAP’s offerings in this space, it has caused some

confusion in the community regarding what each tool should be used for. Organizations are looking for

clarity in this area so that they can utilize the right tool and deliver optimal ROI.

An outline of which tool should be used for which business situation, including tools in Analytics,

Business Intelligence, Data Warehousing and Information Management

How to manage source data coming from different systems

What presentation mechanism/tool do successful organizations adopt when delivering information

to the C-Suit


12. Enhancing Processes and Managing Change for

Productivity

Process Enhancement & Change Management

Organizations should implement tools and capabilities in concert with the way the business wants to operate.

It needs to be fundamentally aligned with the goal of the business. If I can connect a project with a business

goal, I have knocked down one barrier. There is then no “why are you doing this?” question being asked by

the operations. Then it is just a matter of how do I drive adoption? Organizations also tend to end projects

too early.

Are you tracking the benefit realization back to the objective?

Organizations should consider where the stewardship for the project lies and how they set up the

projects KPIs

A very valid point made is that processes being cleaned up by the accounting team on the back end is sub-

optimal. Forward looking preventative measures are a better approach.

Setting up COEs

What value can Solution Manager, SAP ALM & ARIS add?

Executive Sponsorship & ROI Demonstration

Organizations need not only derive business benefits quickly, they need to be able to show said benefits. It is

the visibility of ROI that leads to top down support and more buy-in for additional projects.

We hear terms like “keeping the value management top of mind”.

Establishing the correct KPIs and measuring against them will allow you to demonstrate a project’s value to

the organization. Stabilization is not the goal, it’s getting past the stable phase and delivering the promised

business value. If you can create an integrated system that helps to truly develop an integrate operation,

that is what you should be aiming for.

Customers relayed that there is a difference between getting leadership to say "yes, go ahead" and actually

demonstrating their commitment to the process.


The User Experience/Usability

The user experience is a function of a number of key things - that an organization has the correct work

processes in place and embedded; that the design and architecture of their solution is optimal and that all

the users’ needs have been understood and met, when architecting the system.

The issue at hand is that organizations want to capture data when and where that data happens.

Organizations need to develop a useable workflow, if they don’t, they know that they will automatically lose

accuracy in the data. This is where organizations lose value - they don’t get good data and they don’t get it

early on. Operators in the field aren’t looking for ways to use technology, so if it appears too hard, they

won’t use these tools. They are comparing the ease of use with iPad or Amazon - industry-leading consumer

user experiences which provide easy interaction and intuitive functionality. What they get instead is

intimidating, confusing and cluttered screens.

What is SAPs User Interface strategy and their Mobile strategy?

How do the tools on offer all fit together to achieve the right fit for your business.

Customers want an overview of FIORI and Personas

Understanding which tool could work best to meet your business requirements and calculate the

cost comparison for each of them

Find out from organizations already using these technologies - hear how they have benefitted the

business, created a seamless interface, reached their business case and their lessons learned.

Which third-party user tools are available and the impact of potential interface issues - including

Microsoft SharePoint

Do some Oil & Gas organizations implement a Bring Your Own Device (BYOD) policy and what are the

implications of that policy?

Where should an organization focus usability projects - including where to apply mobility as a

solution? There was significant discussion among customers about which processes/transactions had

the highest impact when focusing on applying some type of productivity solution


13. Managing your IT Infrastructure - Asset Life-Cycle

Management

Integration is the reason we all chose SAP. How do I continue to support my environment to get the most

out of my integrated solution? Customers are keen to hear what best practices are in:

Managing updates

Testing new functionality

Managing the size of my instance

Archiving and destroying documents appropriately

How do we know what is changing or will change, and how do we better understand the impact of

those changes on our integrated parts?

Conclusion

The challenges and Hot Topics facing the Oil & Gas community have been uncovered and listed above. This

research report will form the blue print for the community gathering in Houston in September at the Best

Practices for Oil & Gas conference. It is important to note that the story tellers offering up their experiences

in Houston will predominantly be business process owners and users of technology, rather than the IT

groups that support them. The community is at its most powerful when service providers, practitioners and

technologists collaborate to sketch the best path forward towards best practice.

best practices for oil gas sap solutions for the energy industry

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