INSIGHTS FROM AMPHORA
Automation and digitisation: cutting costs and speeding timelines in commodity and energy trading
An interview with Doug Gyani, President & Managing Director Principia Consulting
Intelligent technology is enhancing decision making, driving operational transparency that is cutting costs and creating financing opportunities. Doug Gyani discusses with Amphora’s Ivan O’Toole how the oil and gas sector is adopting and benefiting from automation.
Intelligent use of data and machine learning is driving a shift from reactive to proactive workflow management, providing decision support that can save millions of dollars. This is not about predicting price fluctuations. It is about providing the right information at the right time.
That could be predicting potential machine failures in an LNG facility or in a wind farm. Or, identifying erroneous postings in accounting and helping the accounting reconciliation process by applying artificial intelligence (AI) data from CTRM and ERP systems. Data ranging from risk limit alerts or trade finance triggers, presented as decision trees or workflows, is increasingly supporting decision making.
For example, an airline will have options as to whether to refuel aircraft at a certain airport, or fly to their next destination and take on additional fuel. AI tools can help make that decision. But when it comes to other types of freight management, such as shipping, that process is still surprisingly manual.
In the chartering and shipping business, AI can help optimise the route between the ballast and laden side of a voyage and spot opportunities for a higher utilisation rate on a ship, rather than returning to a port empty. Some of the bigger shipping organisations are starting to adopt the technology and see these benefits, but fear of the unknown stops many shipping companies from investing in AI.
The other factor slowing adoption is that no one’s really productised these tools yet. There’s a lot of talk about AI and machine learning and all the cool things it can do. But no one has come to market with a product that is an 80% fit for a shipper, while offering to build out the remaining 20% fine-tuned to individual businesses’ goals and challenges.
Tangible ROI on optimising shipping comes from shrinking the deal-to-cash timeline even by a few days – freeing up capital for a business that is constantly trading bank lines to maximise the number of cargoes or the volume of business that they can do. Saving several days on either end of the deal-to-cash timeline means another trade or two that could be done. Automation and innovation around workflow to help reduce that timeline is a quick win.
Maximising the bottom line
In addition, blockchain technologies are becoming much more readily available, providing transparency all the way up to the bank and trade finance companies. Giving them visibility of the trades creates greater levels of trust and transparency, resulting in better access to credit. That transparency can support leveraging payment out against receivables, where saving six or seven days of time could save several million dollars in capital.
Improving visibility opens up freight management, chartering and fixture notes, enabling financiers to manage and hedge all of those positions as well. This is particularly true in the LNG asset class, particularly now we have headed above the 400 vessel fleet size for global LNG. Additionally, new shipping routes create multiple arbitrage opportunities where traders will maximise their bottom line.
Technology speeds up timelines. But more important than reducing time is reducing error. Start peeling back that onion and it soon becomes clear that it’s small mistakes that introduce unplanned demurrage or delays in payment. And all of those things are eating away at margins that are already depleted.
In the oil business, or any commodity business, margins have shrunk over the past few years. One mistake at $20,000 a day in demurrage fees is a significant amount of money to lose. Automation is one of the ways to prevent that. You can create tasks, reminders, alerts, and a workbench that says anytime we do this cargo, and it’s loading in the Gulf Coast, or it’s discharging in XYZ port, these steps have to be followed. Every time the system initiates this activity, we can automatically notify operations staff and make sure they manage all of these dates proactively to prevent the slippage of profitability.
The human side of the equation
Digitalisation in the oil and gas industry tends to focus on upstream capability. The retail side is less well explored. But some players are automating tasks which, in the past, would have necessitated a large team to do the operations and trading and logistics component of, of a trade. However, it’s about maximising productivity from each employee, not replacing the staff. Intelligent technologies are best supported by intelligent people.
Increased revenue is not the best measure of success. A more crucial indicator is how effective the operations are that have leveraged intelligent technology. Technology is an enabler of productivity, lowering the total cost of ownership.
Digitalisation is, without doubt, reducing cost. There is a shift away from million dollar enterprise class systems towards looking at a best of breed approach – and offering CTRM, ERP and other ecosystem elements as a service on cloud or hosted environments. Vendors in this complex technology landscape are becoming trusted partners and increasingly vendors that are part of the same solution are coming out of their siloes and working together.
There is no need for big bang transformation projects, with all the risk they entail. Incremental improvement with a firm eye on ROI is king. Ultimately that is good for the customer and the future of the industry.
In a market with price fluctuations and oversupply, it is challenging to maintain revenues and manage credit risk management. A single view of the commodity supply chain is vital.
Amphora is a unique provider in today's LNG marketplace. We offer CTRM and Shipping services under one roof, allowing LNG clients to go to market quicker and for significantly lower cost. In October 2020 Amphora set up a strategic partnership with nGenue, the market leader in Natural Gas ETRM and retail operations software. For more information, please visit amphora.net.
Doug S. Gyan – President & Managing Director Principia Consulting
Over an illustrious 25 year career within the E/C – TRM industry, Doug Gyani has transformed the software and services space through innovation and a steadfast dedication to understanding the needs of his clients and prospects. Doug Gyani is both a founding partner as well as executive principle consultant within the organization. Leveraging on the many years of industry experience; Mr. Gyani brings to his client base the world’s foremost specialized TRM consultancy solutions through Principia Consulting.
Prior to building the vision for Principia Consulting, Mr. Gyani served in several capacities at the leading ETRM Software Solutions provider – OpenLink. Mr. Gyani joined OpenLink in 2000 and since functioned in several capacities within the organization including product vision, sales process lifecycle management, as well as Director for OpenLink’s Asia-Pacific office. He is credited with some of the major milestones in the successful history of OpenLink including the Shell “Blue Print” Project as well as BP GTEL, Stat-Oil, Chevron and many others.
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