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Valuation Models for Intelligent Strategies
Govia, Delfina M. (Resources2 Energy) | Carpenter, Kevin (Decision Strategies)
Abstract There is intrinsic value in the application of intelligent strategies. Pockets of "value" have been calculated in isolated situations. Yet the resistance to change has created a strong barrier to execution. Robust models for valuing intelligent strategies do not appear to be prominent. At the Digital Energy Conference in Houston in April, several presenters from large oil companies publicly admitted to not having a process in place to quantify the results of their efforts. This paper seeks to provide suggested models to pave the path forward. This paper will especially highlight the critical success factors for effective valuation:Valuation that supports integrated decision management Valuation that takes into account uncertainties Valuation that clearly models risk vs. reward Valuation that speaks to the organizations multiple levels of stakeholders (Executive/ Investor, Mid-level management, Field Operators) Introduction Unlike most industries, the routine decisions we make at all levels of any given operating company carry multi-million dollar price tags. Add to this the inherent danger of our operations, and then top it off with the risks and uncertainties of outside influences. It is no wonder we run our business on KPIs, and don't make changes to proven procedures without overwhelming and convincing value propositions. Fueling the Adoption Cycle Across the globe we, as an industry, have recognized that our greatest challenge in effecting successful intelligent strategies is not the reliability of the technology solution, but in convincing ourselves to change the way we have always operated. We will admit that there is intrinsic value in these strategies, especially given the need to disperse our knowledge and resources further and further around the globe. However, resistance to change has created a strong barrier to execution. The adoption cycle generally begins with an executive decision to act followed by some sort of incentive to implement the act. In this case, the act is to undertake an intelligent strategy. But for that strategy to take hold and continue to be executed, we must have some indication that it is meeting success, hence we define a set of key performance indicators (KPIs) to measure results. Those results must then be communicated back to the executive decision makers who then provide additional incentives and continue to support the intelligent strategy that will then yield additional results. Valuation, which includes the measurement and communication of benefit, becomes the critical component to fueling the adoption cycle.
Intelligent Strategies In LNG
Rangnow, Darrell (Resources2 Energy) | Govia, Delfina M. (Resources2 Energy)
Abstract The vision for Intelligent Strategies in the oil industry is defined by the optimal integration of business processes and advanced technologies, supported by organizational alignment, to deliver a new standard for decision making. The greatest challenge we have all discovered is in effectively delivering the required change management, and therefore, greenfield opportunities deliver the easiest and the most rapid successes. The segment of the hydrocarbon supply chain where greenfield sites are prominent is in LNG. Many aspects of LNG business processes and operations are unique. The paper will discuss the uniqueness of business processes stemming from LNG commercial models and the resulting requirement for tight interaction between Supply Chain and Operations, which is executed through the deployment of real-time data and information technologies. Additionally, the paper will explore how intelligent strategies are especially significant in this industry due to the ownership structures. LNG is a highly fragmented industry, with different players in each segment of the value chain. The fragmentation is further complicated by different company stakes in assets as owners, operators, and suppliers and off takers of the LNG terminal assets. Intelligent strategies deliver the required world-class communication and collaboration capabilities. Introduction Increasing supplies of stranded natural gas reserves and favorable liquefied natural gas LNG economics have been driving forces for building many new LNG liquefaction plants and receiving terminals. Globally, the LNG market has grown by 33 percent over the last five years and more than $4 billion has been invested in that effort, according to the International Energy Agency in Paris. As favorable economics continue to drive the build-out, the deployment of intelligent strategies becomes critical to both the LNG business and as learning ground for the entire petroleum industry. To achieve an appropriate level of granularity in describing the multiple aspects of an intelligent strategy, we will focus this paper on a rapidly growing sector of the LNG value chain that is experiencing increasing levels of complexity: the LNG Terminal. The Imperative for Intelligence LNG is a highly fragmented industry, with different players in each segment of the value chain. The fragmentation is further complicated by different company stakes in assets as owners, operators, and suppliers and off takers of the LNG terminal assets. The sixty terminals in operation are operated by over forty different companies. In the past, LNG terminals typically only served one commercial customer. The few terminals that occasionally allowed access to additional (third party) customers only did so in situations where the terminal operator substantially controlled the downstream markets and the third party users did not represent a competitive threat.