Why Downstream Energy Needs Operational Intelligence

The one thing you can count on within the downstream oil and gas industry is volatility.

In the past year, geopolitical conflicts, supply disruptions, and administrative mandates to secure supply while transitioning to cleaner energy have clashed with softer-than-expected demand resulting in margin compression.

To reduce risk and improve margins, downstream companies are in a constant race to quickly access the latest market data and insights and then confidently act upon new opportunities. This competitive edge is Operational Intelligence.

Operational Intelligence is the next evolution in big data analytics. Delivering real-time data and analytics improves situational awareness and supports critical business decisions as market conditions change. Compared with Business Intelligence, which focuses on historical data and trends analysis, Operational Intelligence integrates data streams to deliver more timely insights.

This article outlines why the downstream industry needs Operational Intelligence.

 

Faster insights on volatile market data

Good decisions require good data. In rapidly evolving conditions, having near real-time insights can inform more confident decisions.

Traditionally, the industry weighs year-over-year and past performance data as benchmarks for predicting demand, while relying on the weekly U.S. EIA refined fuels report on national demand and production levels (and bi-monthly for state-level sales data).

Stop and think about that further: The industry makes narrow margin decisions for large volume trades based on week-old data and unrelated past performances—while daily demand figures may fluctuate by as much as 10k gallons due to unpredicted influences.

The same challenges exist for fuel buyers. Prices often change multiple times a day due to supply variances, changes to supplier policies, or even the operating status of terminals. Fuel buyers and sellers who rely on outdated information are often caught off-guard. Meanwhile, those with access to real-time insights are better able to adjust their strategies.

 

Improves situational awareness with contextualized data

Data without context may be informative but not necessarily powerful. As example, suppliers know their internal inventory management — but what if that information was benchmarked and updated in real-time against total market supply, logistics status, and weather conditions?

The increased value from Operational Intelligence stems from the ability to deliver real-time analytics with integrated data providing contextual awareness.

Another example has an energy supplier aggressively reducing prices to shed excess inventory, yielding a 4% increase in volumes over four days. However, contextual insights may indicate that total market volume increased by 6.4% over the same period, indicating that demand was greater than expected.

In this case the supplier could have reduced their financial risk, possibly maintaining original margins. With intraday visibility into actual demand, the market becomes less hazy. Instead of educated guesses, suppliers can make informed, confident decisions.

Daily market-level demand figures offer insights to many players in the downstream market with the right context. Wholesalers can enhance decisions when timing product availability for export or moving in/out of storage. Operations managers can use the same information to better manage the timing and placement of products during seasonal spec changes. Some energy companies have reported that real-time rack-rate data provides better insights into competitor positions.

Using an Operational Intelligence platform, like DTN FuelsHub, delivers contextual, industry insights, integrating demand data with other information, such as near real-time view of market conditions and transactions, real-time weather analytics, supply inventory, and trading positions. The right information at the right time lets companies uncover and capitalize on opportunities — not just by the day, but often by the hour.

 

Optimizes action for real-time triggers

Downstream oil and gas buyers constantly look to expand their supply options. In much the same way, sellers seek optimal moments to make a move. Each side of every transaction simultaneously considers numerous factors related to supply, location, price, and product quality.

Using an Operational Intelligence platform, like DTN FuelsHub, delivers contextual, industry insights, integrating demand data with other information, such as near real-time view of market conditions and transactions, real-time weather analytics, supply inventory, and trading positions.

Using an online, streamlined marketplace puts the right data in the right place at the right time. Fuel sellers and suppliers can set pricing or selling triggers that automatically adjust with market spikes or fluctuations. Automatic uploads of sales orders directly into ETRM create additional time to pursue spot deals and arbitrage.

Using Operational Intelligence with integrated data feeds that can automate on pricing parameters for specific customers increases transactional velocity and reduces risk from sudden market shifts caused by factors beyond the buyer or seller’s control; e.g., a refinery shut-in or pipeline cybersecurity threat.

 

Enables advanced digitalization

While digital modernization is a top goal for the downstream oil and gas industry — rivaling revenue growth according to this Forrester study — only 43% report investing in digital infrastructure. Many companies cite not having the right tools or skills in place to implement digital modernization.

Operational Intelligence supports digitalization with solutions that deliver advanced insights without requiring large data science teams. This is due to the heavy technical lifting needed to generate real-time insights, e.g. constantly collecting, synthesizing, and modeling numerous complex data sets require cloud-based computing.

Vast amounts of data analysis require advanced algorithms, such as machine learning. Developers then must create dashboards and visualization tools so an end-user can access the output and take action.

Operational Intelligence offers multiple advantages for downstream companies, including better data and contextual analytics, broader market insights, and faster problem-solving.

These robust processes are delivered through interface programs (APIs) that easily integrate with a company’s existing system or are delivered through a software platform. This means that an energy company doesn’t have to design, build, and maintain its own data operation hub to advance its digitalization journey.

Operational Intelligence offers multiple advantages for downstream companies, including better data and contextual analytics, broader market insights, and faster problem-solving.

For those that have already integrated Operational Intelligence into their daily operations, they report improved analytics of market dynamics, useful insights for identifying emerging supply trends, and improved operational efficiencies.

Learn more about Operational Intelligence delivered through the DTN FuelsHub.