Introduction formation evaluation, completion, production and reservoir

IntroductionGeneral Electric (GE) operatesacross a multitude of industries, including aircraft, medical, appliances. Thisreport will investigate the current state of the IS/ IT strategy within the oiland gas subsidiary of Baker Hughes General Electric (BHGE), as they operateunder a new merger as of July 2017. Moreover, a comprehensive outline of thesubsidiary’s competitors and future recommendations will be discussed.

As GE isa multinational corporation, it is not possible to focus on the IS/ IT strategyfor each part of the business, therefore this report will investigate theiroperations in the oil and gas sector in great detail.Current IT/IS Strategy With operations in over 120 countries,BHGE deals with vast quantities of data, spanning across the planning thattakes place in the offices, to the subsea systems and drilling to extract theoil (Baker Hughes, 2017). As the first only full-stream provider of integratedoilfield products (Baker Hughes General Electric), services and digitalsolutions, BHGE are continuously providing the oil and gas industry withstate-of-the-art solutions to ensure maximum business efficiency and output.This includes providing products and services for oil drilling, formationevaluation, completion, production and reservoir consulting. Although GE havebeen in the oil and gas industry for 23 years, the merger in July 2017 withBaker Hughes transformed its oilfield services, and the overall service theyprovide.  Currently, all GE’stechnology is supported by a global network of life-of-field service centresand expertise meaning they have extended knowledge in all key technologicalareas and can make constant improvements, ensuring GE is ahead of industrialchanges. GE has joined forces with Enpro Subsea to increase production rate byintegrating technology and enabling more cost-effective delivery of services.GE have the highest level of quality and reliability with pipe deployment, aswell as, allowing customers the unique capability to design their own pipe-laysystems.

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This gives an overall positive impact with their Subsea Segment (Depthand Flexibility, 2017). The merger has resulted in BHGEbecoming the world’s second largest oilfield service by revenue, generatingroughly $23bn in annual revenue (Fortune, 2017). Mathias Schlect, the VicePresident of Technology at BHGE, said the reason for this acquisition was to”achieve sustainability in the current environment” (Boschee, 2017), meaningthat this was an integrated part of GE long-term strategy. By eliminating thecompetition, GE are able to generate sustainable income, as well as gaincompetitive intelligence due to acquiring the information relevant to thecompetitive environment of the oil and gas industry. This is in-line with oneof the three rules laid out by Jack Welch, a former boss of GE: ‘…numberthree, buy or bury the competition” (The Economist, 2017).

 However, eliminating the competition isnot enough in this highly competitive environment. PWC predicted that 2017 willbe the year oil and gas companies explore new ways to deploy technology; andgiven that technology is at the core of GE’s operations, they are continuing toembrace technological innovations within GE to gain a competitive advantage(Biscardini et al., 2017).

For example, in 2015, GE remained profitable -despite the difficult conditions in the energy market, and this is partly downto the then CIO, Anup Sharma, embracing the cloud and predictive analytics(General Electric, 2016).  This is mainly through the deploymentof Predix, a software platform developed by GE enabling the collection andanalysis of data from industrial machines. Predix is the world’s firstindustrial Internet platform, thus giving GE the first mover advantage. In2015, BP worked with GE to use their Predix software platform to connect 650wells to the Industrial Internet(General Electric, 2015).

By helping BT to potentially expand their scope to4000 BP subsea wells, GE will help them optimise their operations, and reducewhat is dreaded by any oil drilling company: unplanned downtime. Moreover, thePredix software is used across other GE industries, including aviation andhealthcare. It is essentially created for industries to optimise the use ofinter-device connectivity through the Internet of Things.

 GE’s legacy digital platforms meansthey can transfer the concept of “digital twins”, which is used in the testingof GE’s engines to the oil field. By combining data and intelligence torepresent the structure, context and behaviour of a physical system, GE cangain valuable insight into how their systems run, consequently enable insightsthrough analysis and reporting. This has been used to run the digital thread inBHGE, and has previously been described by Anup Sharma, Head of Digital Productivity, asallowing GE to “guarantee quality and improve yields’ (General Electric, 2016),thus translating to improved client relationships through an increase in trust,and increased profitability.

 Most importantly, if GE can predict thebehaviour of their machines, they can prevent unplanned disruptions andcomplications in the system from occurring, such as the Deepwater Horizon OilSpill in 2010. The result of this costly event resulted in 11 deaths, 17injuries (Crace, 2010), as well as having a knock-on effect on tourism, jobs,and real estate. Therefore, in the long-run BHGE should focus on theintelligence and information being their main selling point, as this is wherethe value lies. Their competitors may have similar resources, but value willarise from applying their business knowledge to predict the behaviour of themachines, thus preventing loss-making accidents from occurring.

 GE’s current strategyinvolves a technology solutions centre which involves focusing on technologieswhich can improve the performance of the business. By having the solutionscentre, GE can constantly improve the systems and technology in its oil and gasbusiness. The centre will help to lower costs by reducing unplanned downtime,meaning improved productivity throughout the company.

Also, the centre willincrease asset integrity, as well as, reduce the cost of compliance anddecrease corrosion costs by up to 30%. By having this plan of action in place,GE can guarantee improvements will be made regularly and customers will alwaysbe happy with the service received. Activities involved at the centre include aproduct showcase with the latest hardware and software inspections, applicationdevelopment to drive new production design solutions, targeted training andthought leadership including innovations in additives, composites and castings.

(Inspection Technology Customer Solutions Centre, 2017). GE also provides an eliteteam which can help to achieve superior operational efficiency and return onthe investments customers have made. Oilfield production products include aBall Launching System which improves fracturing operations and is a uniquetechnology which reduces costs, as well as, increasing fracturing timeproductivity. As well as, Level Transmitters which have smart filtering whichis engineered for efficiency, upgradeability and reliability allowing GE toprovide the best service to customers (Oilfield Production, 2017).The oil and gas industryare currently challenged with economic pressures due to lower oil prices,meaning companies are having to double their efforts to gain a competitiveadvantage through efficiency improvements and streamlining of operations. GEhave improved refinery performance through digital transformation. Oneadvantage for GE is operational performance and reliability.

The study ofReliability and Maintenance Effectiveness (RAM) shows that RAM performance is asignificant differentiator. GE incorporates the study into their business toprevent any additional costs and unnecessary maintenance activities. (ImprovingRefinery Performance through Digital Transformation, 2017) Economic State Despite the economic turmoil and the deep oil sector contraction, GEexpects a growth of their firm in its global industrial business during theyear 2016. During the year 2015, GE lost $6.1 million due to cost restructuring. However,they ended the fourth quarter with a 22.3% gain in net earnings, at $6.3billion (France-Presse, 2016).

GE has discovered that the oil andgas sector business has declined during 2014, when the oil price decreased, forcingcutbacks in exploration and production.  According to GE’s 2015annual reports, they have been operating in China for 100 years. In spite ofChina’s economic slowdown, the revenues and profits in the fourth quarter of2015 were strong in their aviation division in which they provide aircraftengines and equipment. Additionally, GE transportation – especially the railwayequipment was also strong. The only underperforming department was GE’s powergeneration, renewable energy and oil and gas (Immelt, 2015). In the oil and gassector, GE stated that 80% of their businesses in long-term projects are lessaffected by the crash in oil prices so far.

 They have also mentioned in their annual report that exploration is the weakestpart in the industry, as it accounts for only small part of GE’s business. CEOJeffrey Immelt said that the company’s global existence assists it balance thefinancial turmoil, depreciation of currency and regional collapses (France-Presse, 2016) According to GE’s 2016annual report, they still strive for global expansion by operating and buildingrelationships in different countries around the world. The fact that theydeveloped creative financing solutions and joint ventures that have given thema critical edge in economies, thus allowing them to grow as a business. GE operatesglobally and locally, which allows the business to compete in almost 180countries worldwide (Immelt, 2016).             Competitors GE strives to attain aglobal competitive advantage in light of using a variety of strategies to doso. GE faces a major competitive challenge, considering competitors such asSiemens, Shell and Schlumberger. A top competitor for GEis Siemens; one of the leading partners in the oil industry, with approximately372,000 employees in more than 200 countries. In 2015, their UK turnover was £5billion (Siemens.

co.uk, 2017). At the end of September 2017 in Fiscal, Siemensworldwide revenue of $83 billion (Siemens.com, 2017).

Recently, Siemens havebought Rolls-Royce aero derivative turbine business and acquired Dresser-Rand(LNG World Wide News, 2017). This acquisition gave Siemens a competitiveadvantage to reduce costs (Rolls-Royce, 2017), as the mechanical and electricaldrives become smaller in response to the scarcity of space on oil platforms andpipeline stations.  An example of new andcreative technology by Siemens is making it possible for users to be able tovisualise themselves in a 3D model (W3.siemens.com, 2017). The virtual trainingsessions enables employees to prepare themselves for maintenance work (Siemens,2017).

This is done in real-time whilst still receiving an available accuratedisplayed look at all the equipment in any system. A crew of an offshore oilprocessing platform in Europe had the opportunity to begin their training on avirtual model while their future workplace was still under construction.Therefore, the crew knew the equipment even before it actually existed. This newtechnology reduces the time spent on training session on board, so is savingcustomers real money (Software, 2017). Furthermore, in the future, Siemens are planning todeploy more machines to control the valves within their operations, thus tryingto bring more automation of technology and use data analysis in a smarter way(Kleinschmidt, 2016). Another competitor isShell, who have been operating in the UK since 1897, and are ranked second inthe Fortune Global 500, 2014 list (Fortune, 2017).

Having global operations inmore than 80 countries and employing an average of 93,000 people across theworld (Shell.co.uk, 2017), the company relies on how their established brandrecognition. For example, Shell V-Power and the Shell FuelSave allow customersto benefit from the new fuel economy formula (Vivoenergy, 2017), making itharder for new entrants. A vertical integrationgrowth strategy has been employed by Shell (Financial Times, 2016). Thisinvolves merging with companies at different levels of operations, having asignificant influence on its supply chain (Amobi, 2017).

This will increase thespeed of developing new technologies for the company. For example, Shellproposed a merger with the British gas producer, BG group for £36 billion(Bousso, 2016). Despite the low oil prices remaining a challenge in the shortterm, it is likely for the oil price to gradually recover (Better WorldSolutions, 2017).

Shell would still remain profitable as they will still beable to pay the traditional dividend. Furthermore, Shell has anumber of on-going projects around the world being segmented into the industry,as shown in Figure 1. Shell is trying new ways of using technology to try andincrease their position in the market but also gain a competitive advantage.Figure 1: Projects Shellis involved in. (Source: Shell, 2016)Another competitor isSchlumberger Limited, the world’s largest oilfield service company. In 2016,the company generated a revenue of $27.8 billion.

They employ approximately100,000 people, representing more than 140 nationalities working in more than85 countries (Schlumberger, 2016). Schlumberger (SLB.N), is investing billionsinto stakes in customers’ oil and gas projects. This is where they areinvesting in the same ventures it supplies with equipment and expertise.

   For example, Schlumbergerhas bought into oilfields to gain an input in the drilling decision, managementand hiring other Schlumberger units for service contracts. Therefore, thecompany can carry out the entire project without being a bidder on the varietyof narrow jobs that go into the production of oil. This approach means it winssome contracts on a given project while losing out on other bids to competitors(Cunningham, 2017). GE has considered whether to adopt similar strategies. Baker Hughes reserves itsproducts and services for the global petroleum market. The company has 32, 000employees whom work in 80 countries.

Mostly help and deliver solutions, inwhich help the industry operators make the most of their reservoirs(Bakerhughes.com, 2017). 

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