IDBS Blog | 21st January 2016
Global oil and gas: what can the downstream sector learn from pharma?
As oil prices tumble below $40 a barrel, the upstream finds itself with significant challenges in terms of managing exploration and production costs, as well as the loss of IP due to downsizing. The greener alternative of biofuels (which competes against crude oil) is also suffering, as a more expensive resource. At the other end of the supply chain, the downstream petrochemical industry is leveraging the low oil price as feedstocks are cheaper and are also looking towards greater efficiencies to remain competitive. What can these organizations learn from the pharmaceutical sector? What can these organizations learn from the pharmaceutical sector?
Around 15 years ago, the management of data and IP within the pharma industry was in a similar state as the oil and gas industry. Research and development (R&D) was paper or Excel-based, meaning that data was captured and stored in notebooks or spreadsheets in the lab. IP protection was also a big challenge, with data captured in silos, making it tricky and time-consuming to find. Key process information, knowledge and experience would often leave an organization when a researcher moved on or retired. Today’s oil and gas market paints a familiar picture:
As oil prices continue to decline, all parts of the supply chain are feeling the pinch. Companies find themselves with tighter profit margins, and downstream companies may need to repurpose refineries to adapt to slightly different quality inputs, e.g. “sweet light” crude oil from the USA vs. ‘heavy’ crude oil from Saudi Arabia. Downtime to repurpose plants, along with process and plant energy inefficiency costs both time and money.
It’s all about process efficiency. Knowing the exact requisites for the creation of a specific product, for example, enables researchers to take a more targeted approach, aiming to achieve a result with fewer undesired by-products and less waste. If organisations can design a catalyst or process that is even 0.5% more efficient than a competitor process, it’s extremely valuable and is worth millions in revenue
Moving data capture and storage to an electronic system – such as those we have seen transform the pharma sector – does away with paper. Researchers can share and access information across the organisation or with external partners. Data becomes searchable in real-time rather than locked in notebooks, also preventing duplication of work.
Moreover, electronic systems helps to eliminate manual transcription of data from experimental records, technical run sheets and reports, so there is a steady information flow between the process engineers and the technicians.
For these oil and gas organizations, it isn’t just the products that are valuable, it’s the design of the catalysts and processes themselves which are strategically prized. This knowledge must be captured and stored safely as it is a vital asset for patent purposes, similar to the pharma industry’s need for IP data management i.e. to capture key metadata alongside the context of the experiment in which it was created to show proof of invention.
With the industry seeing some restructuring as a result of the decline in oil price, there is a significant risk for valuable IP and knowledge to be lost as workers are retrenched. In addition, an aging employee base means that a large number of skilled workers will retire in the next few years. If the low oil price is sustained, we also expect that M&A and joint ventures are going to become commonplace, as companies adapt to survive. In fact, around 20% of companies plan to increase collaboration in response to the decline. Being able to integrate and share expertise electronically will become a key requirement for the transfer of industry knowledge.
Amidst huge upheaval, the oil and gas industry will see key IP heading out the door if steps are not taken to protect this valuable data asset, not to mention the efficiency savings in doing away with paper-based research. The pharma industry has woken up to the benefits of paper replacement, with many organizations looking to streamline workflows and information processes as the next stage of their data management journey. Those companies that adopt an “innovate-to-compete” attitude, and who leverage the available technology to modernize their processes will be the ones that emerge from the crisis as market leaders.