By Mel Duvall  |  Posted 2006-05-06 Print this article Print

Rocketing oil prices are driving the nation's big oil companies to record profits. And ExxonMobil stands out in the industry. By investing in proprietary systems and ensuring that technology is tightly aligned with its top goals of finding more oil and ga

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In many ways, the Syncrude story of technology overcoming basic business challenges represents the larger Exxon story and the future of oil exploration.

Lessons learned since the operation produced its first barrel in 1978, such as how to network automated controls that can open and close valves, or ensure that the right amounts of oil sands are loaded into the giant crushers, are about to be applied to a new, massive separate oil sands venture being planned by Exxon farther north. Slated to begin construction in 2007, the $6.5 billion Kearl Lake oil sands project will eventually produce as many as 300,000 barrels of heavy oil a day.

"There is no doubt that the easy stuff is gone," says Steve Comstock, manager of upstream information technology for Exxon's upstream computing division. In industry jargon, "upstream" encompasses all operations involved in finding, drilling and producing oil until it reaches the refinery. "Downstream" refers to the operations from the refinery to the gas pump.

"The easy stuff has been identified and for the most part produced," Comstock says. "Having said that, if you look back just 20 years, you never would have imagined that we would be able to do some of the things that we have done. Back in the '70s or '80s, the thought of drilling a well in 1,000 feet of water was like going to the moon. Now, we have production from places [with] five and six times that water depth.

"We do the equivalent of a moon shot once every decade."

Moon shots, of course, require money. In 2006, Exxon says it will spend about $20 billion on capital projects, up from $18 billion in 2005. But whether it comes to building out its operations or its information technology, insiders and outsiders alike attribute much of Exxon's success to its ability to maintain a razor-sharp focus on business goals and profits.

In the wake of hurricanes Rita and Katrina, President Bush called on the country's big oil companies to build new refineries to avert future gasoline crunches.

Not necessary, chief executive Tillerson responded plainly. Exxon has been able to build the equivalent of a new refinery every three years by raising capacity at existing facilities. Technology investments in bigger cokers to break down heavier oils into more valuable components like gasoline and propane; larger sulfur extraction plants, which remove sulfur from oil and gas for later use in fertilizers; and more highly networked(and automated) supervisory control and data acquisition (SCADA) systems to automate plant functions, have allowed Exxon to pump more from its existing refineries along the Gulf Coast with fewer employees.

While other big oil companies like BP attempt to put a "green" face on their capital spending by touting how much they're investing in wind, solar or other so-called clean energies, Exxon doesn't pretend to be interested. It will invest in these energies only when, and if, they are profitable, Tillerson told the senators in March.

Oil is the name of the game for now and the foreseeable future.

"They don't pretend to be interested in something for the sake of public relations," says Peter Tertzakian, chief energy economist for oil investment firm ARC Financial of Calgary, Alberta, and a former geophysicist with Chevron. "Their core competency is finding oil and gas, and there's a lot of merit in sticking to what you know." Tertzakian is the author of a book released this spring called A Thousand Barrels a Second, referring to the world's appetite for oil.

That discipline permeates the company's operations, including its approach to technology deployments.

The alignment between technology and business goals was best exemplified in the 1980s and early 1990s, when Exxon became one of the first companies to implement enterprise resource planning software from SAP on a global basis. It recognized that efficiencies could be gained using a system that could standardize and integrate global operations, even though the scale of the task was frightening by any standard.

Andy Hayler worked on the SAP implementation in the late 1980s at Exxon's British operations, later moving on to senior I.T. positions at Shell before founding Kalido, an enterprise data warehousing vendor based in Burlington, Mass. Hayler says the SAP implementation was demanding by every measure, and complicated by the fact that many of the screens were still written in German.

Had it been attempted at practically any other global enterprise, it might have failed, he says, but the corporate culture at Exxon wouldn't allow it.

"I suggest that if Shell had tried to roll it out at the same time [as Exxon did in the 1980s], they might have given up," he says, noting that Shell has a much more decentralized management structure.

"Exxon is a company that can be very difficult to get a new product into," he says. "They have an extremely stringent process for adding anything new to the infrastructure and take their time in coming to a decision. But once they make a decision, they are relentless at execution."

Comstock agrees that Exxon takes its time when making technology decisions, but says that is also a direct reflection of the fact that once the company makes a decision, it standardizes on that application throughout. In September 2003, for example, it went live on a suite of spend management applications from Ariba to handle everything from the purchase of supplies and materials for its operations, to analyzing purchases and automating employee expense and travel reports.

The Ariba applications were rolled out globally, using standard templates and dashboards.

Patricia Hewlett, vice president of information technology, who is responsible for the enterprise business systems used by Exxon to run its worldwide operations, said in a recent question-and-answer interview in CIO Today magazine that the constant focus is on maximizing the contribution to Exxon's bottom line. The company strives to stay ahead of the competition not only through developing proprietary systems to find new oil and gas deposits, she said, but also in the efficient delivery of core computing services.

Comstock says that beyond business systems like SAP and Ariba, Exxon also aims to deliver uniform computing systems to its engineers and geoscientists, such as standard applications for interpreting data from drilling activities. The reason: to get more productivity for less cost.

According to Hayler, Exxon took an "excruciatingly" long time to decide on DB2 from IBM as its database standard, for example, but once it was chosen, the technology was implemented throughout the corporation. "That was another key difference-they were absolute zealots on standardizing on infrastructure products," he says.

"Exxon has a very strong corporate culture that is driven from the top down. They say, we're doing it this way, and everyone follows."

That doesn't necessarily mean Exxon is right all the time, Hayler is quick to add. Sometimes, an "ask-no-questions" culture means a square peg gets driven into a round hole. It also means best-of-breed applications can get passed over in favor of standardization.

"That's the trade-off," Hayler says. "If your objective is low-cost, take the Exxon approach. If it's innovation, take the best-of-breed approach."

Story Guide:
Straight shooter: CEO Rex Tillerson Doesn't Play Games

Contributing Editor
Mel Duvall is a veteran business and technology journalist, having written for a variety of daily newspapers and magazines for 17 years. Most recently he was the Business Commerce Editor for Interactive Week, and previously served as a senior business writer for The Financial Post.


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