Digitizing the AFE Process
For today’s oil and gas producers and executives, it has never been a more exciting—and more tense—time to be in business.
The excitement is a result of the dawn of a new era in the enterprise: the digitalization of assets, the connectivity between people and technology, and revolutionary ways to interact with customers.
The tension is a result of economic pressures, and perhaps not knowing exactly how to embrace and use all of this.
None of this is new at all, but how businesses do all of this in an increasingly digital environment with lower oil prices is.
Oil and gas companies can reap considerable value by developing a cost-effective digital strategy that includes enterprise technology solutions that will lay the foundation for data integration and accessibility across the enterprise with an aim to optimizing operations, and creating new value.
Let’s take a look at a common business process within oil and gas: The Authorization for Expenditure (AFE) business process. This involves funding and gaining approval of capital projects, like drilling a new well.
The typical drilling project kicks off with an engineer submitting a detailed construction cost estimate to accounting for approval, let’s just say he sends this data over in Microsoft Excel. Once approved by accounting, suppliers are notified and start sending bids to accounting – and for purposes of this explanation, let’s say the pipe supplier for this project was in the area and decided to drop his paper invoice off to the accounting department.
Land sends there lease documents in pdfs to accounting, and JV Partners are emailed a copy of the AFE.
And this is just a snapshot at the on-set of the process, this does not include all of the back and forth these participants will go through to complete the AFE approval process.
This flow of information is pushing and pulling data from multiple systems: accounting systems, well systems and other systems that hold budgeting, well and lease information used in the AFE Process.
According to Deloitte’s study by Andrew Slaughter, Gregory Bean and Anshu Mittal, Connected barrels: Transforming oil and gas strategies with the Internet of Things, It has been estimated that only 1 percent of the information gathered is being made available to O&G decision makers.
Prior to our engagement, many of our clients struggled with data scattered across the organization. They had valuable data in spreadsheets and on personal desktops– with no way to access it. As you can understand from the scenario just described.
Oil companies are producing massive amounts of data. In the AFE process alone you have data produced by engineers, multiple suppliers, accounting, land and legal departments. Some companies even bring in data from their well header system to auto populate fields when the AFE is created.
With all of this data being produced by multiple parties, in multiple formats, and pushed and pulled across a variety of different systems and applications (like Excel) not all parties involved in the AFE lifecycle have visibility and accessibility to the data they need for analytics and business insight. For some of them, by the time this data is pulled together and analyzed, it becomes stale and un-useful to the business.
What this translates to for the business is not only limited visibility and a lack of accessibility to data but also no integration strategy or automation and lost opportunities.
So what is the solution? Technology.
Almost all things can be connected and work together to provide better business outcomes and improved efficiency with technology solutions.
Entire industries are already changing as they start to connect business process, business systems and departments.
Imagine if all the moving parts of funding and gaining approval for capital projects were connected with a simple, cost effective AFE solution that automatically alerted the correct participants when an AFE is close to running over budget. This alert could be scheduled to go out to multiple destinations: to employees via an app on their phones or tablets, to JV Partners, etc.
That’s just the beginning—in addition, the data that’s generated from all of this activity is extremely valuable: it lets the company get insight on operations, helps them to innovate, spot trends in the data and even create new business models.
Interested in learning more? Join our free AFE Webinar on September 15th where Mike Welch, Altius Senior Solutions Architect, will go into more detail and demonstrate a cost effective AFE solution that provides automation and increased efficiency for the business. Register here.