Oil & Gas
№ 4 (April 2007)
Denis Volyansky: We're Here to Help Oil and Gas Companies
OGE discusses the role of information technologies in the Russian oil and gas industry with the director of the Oil and Gas Department of Hewlett Packard Russia.
Denis Volyansky: Yes, it is. The presence of Hewlett Packard in Russia was initially meant to be long lasting. The fact that a permanent representative office of Hewlett Packard in the USSR was established as far back as 1969 explains it perfectly. However, our activities in Russia intensified only in the beginning of the 1990s. We defined the most promising sectors for investment - financial and oil and gas, and opened our service centers within these areas. Nine HP offices and over ten educational centers are operating in Russia today. Not long ago, in April 2005, we established the HP High Tech Solution Center, which is a site for accumulating experience in IT-projects implementation both in Russia and across the globe. In 2006 this center was given the status oil and gas expertise, first in the EMEA region (Europe, Mideast, Africa and Asia). The Center's prime objective is to support oil and gas business in Russia by providing state-of-the-art technologies developed by HP in cooperation with major manufacturers of application software. This once again proves that Russia is of the highest importance for HP management. Presently Russia is the top priority for Hewlett Packard's Oil & Gas division: it gets the bulk of investments. According to analytics, the market growth is about 20 percent, while our company's growth in this sector has been exceeding this rate over the past few years.
OGE: What is your mission in this market segment?
Volyansky: I think that our solutions should resolve the core business tasks of oil and gas companies. One of the latest developments of the HP High Tech Center in Moscow is a concept of remote computations for field simulation. It simulates automatic model settings for a given field development history. This approach is of particular importance for Russian oil companies because geographical distribution of their branch offices is quite wide. The essence of the concept is that process solutions are set to take account of specific features of a certain oil field. We have already successfully implemented a number of similar pilot projects with some Russian oil and gas companies.
OGE: Is IT in the oil and gas industry growing in importance?
Volyansky: Absolutely. In order to understand this, we can examine the stages of interaction between the IT industry and oil and gas companies. I would mark three important stages: the 1990s, from 2000 to 2005, and the present stage starting from 2005. In the first stage information technology was an auxiliary instrument of the business. It was regarded among other costs of servicing working places or networks. In the second stage the role of information changed from a business element into a business itself. The loss of information not only brought financial losses, it could lead to the collapse of the whole company, as was the case with Enron. The position of Chief Information Officer (CIO) began to appear, whose responsibility is not just some interactions, but a definite part of business processes. This position is usually the third most important within a company and is included on the board of directors. In the present stage, since the year before last, IT can represent an independent business. Today a CIO's main task is the efficient management of IT as an independent business-unit with its own key performance indicators (KPI), which are bound to the core business results. This is the efficiency of exploration, extraction and transportation, and the registered losses during transportation. Formerly all these data on extraction, processing and sales were reviewed by vice-presidents. Nowadays they are KPI within the CIO's responsibility.
OGE: What are the peculiarities of the Russian oil and gas market?
Volyansky: Today there are two types of oil and gas companies in Russia: private and state-owned. They demonstrate fundamental differences in adaptation and introduction of innovations. Private companies such as LUKOIL, TNK-BP and RussNeft have fewer benefits than state-owned companies with their strong administrative resources. It is competition that encourages them to use new information technologies everywhere in order to strengthen their market positions. Many private companies have considerable foreign capital. This means that western management principles are employed and implies an active use of IT. Among such large state-owned companies as Gazprom Neft, Rosneft, Transneft and Gazprom we are currently observing the intensification of merger and acquisition processes. Large companies are becoming even larger, and this leads management to create a global information system for companies in order to be successful. That's why HP's main fields of activity are projects on the unification, transformation and consolidation of information, on efficient data management and knowledge management, and on data protection. These processes are multiplying the IT growth rate.
OGE: How can you help these companies?
Volyansky: All the oil and gas companies try to accelerate exploration and extraction of new fields, especially in recent times, when we are observing an overall decline in oil production dynamics in Russia. This requires the interpretation of beds through the building of hydrodynamic and seismic models. In other words, solutions based on high performance computing, such as clusters for data storage and for geologic information interpretation, allowing the rapid creation of 3D or 4D models. At the moment we are the leading supplier of such solutions in Russia. Our high performance computing products and data storage systems are the best in the market. In this sphere we are actively interacting with such companies as Schlumberger, Roxar and Landmark which perform certification of our products at our High Tech Solution Center in accordance with the requirements of Russian oil and gas companies. The last parallel version of Roxar's TemPest port was tested and certified at our center. Our equipment has become the standard for similar equipment all over the world.
OGE: What helps you maintain such a strong position in the market?
Volyansky: Unlike rival companies, we chose the right strategy for developing our solutions for the oil and gas sector in 2003. The producers of geologic software started to import their solutions to Linux platforms, which automatically implied the use of Intel or AMD processors. That weakened our rivals such as Sun Microsystems and Silicon Graphics that offered solutions based on UNIX. We actually took their market share by developing high-performance clusters based on Intel, AMD and Linux. In the IT industry, a two-year time lag means withdrawing from the market (take a look at SiliconGraphics now, for instance). Now we are proud to claim that all the solutions of leading geologic software developers, such as Landmark, are certified in conjunction with our solutions, both clusters and usual servers. Hewlett Packard is an absolute leader in Russia in terms of sales and growth rate.
OGE: What's next? Where do you plan to develop?
Volyansky: We'll develop wherever the Russian oil and gas companies lead us, which could be anywhere in the world, not only in Russia. The main trend is that there are both inflows of investment into the Russian extraction industries and outflows of capital as the large oil and gas companies invest abroad. And what is most interesting, they direct investments not only to western countries but also to the East. This expansion is led mostly by Gazprom and LUKOIL, which already have a number of projects in the Middle East and recently purchased a network of filling stations in the European Union. There are also Tatneft and Rosneft which are intensively increasing its presence in the Asian market, notably in China. Russian companies are entering international markets, and they will be increasingly liable to world standards in terms of informational openness, transparency and efficiency, as well as clear interaction with investors and partners. Hewlett Packard is present in more than 170 countries and can offer the highest level of services to Russian oil and gas companies in any market they would like to enter. In addition, the Ќђ Moscow office has become a major office working with Russian oil and gas holdings abroad, since decision centers are located in Moscow. This approach is similar to that of Shell's, where all IT project decisions are made and defended in the Netherlands, while projects are implemented separately in each country. So, we are growing together with our customers both in Russia and in the international market.
OGE: Which spheres you would define as the most promising?
Volyansky: The oil business is not only extraction, but also processing and sales of oil products, which are undergoing progressive development. These sectors are already attracting significant investments, and they will continue to grow in the future. Oil and gas companies are actively investing in the processing sector, improving oil refinement in order to increase the quality of petroleum products, oils, mazut and others. What does it mean for IT? This is a huge opportunity and a major field of activity, because any petroleum refinery cannot operate without elementary resource planning, such as an ERP system. And here we are proud to say that 80 percent of oil refinement plants in Russia use ERP on HP platforms on UNIX or Windows operating systems. As for sales, in the peceding and the current year, companies have increased investments into the retail sphere and into IT support of filling stations. A filling station turns into a supermarket with a laundry, internet cafe and other services, which promise to be even more profitable than selling fuel. Last year we had several projects involving the automation of filling stations, which meant the creation of a mini-IT center at each filling station. Now we see that this part of our business is just starting to gain pace.