Part 1- Managing Growth and Staying Competitive
Digital transformation in the oilfield is bringing new levels of operational and cost efficiency to the highly complex business of tracking both the physical and accounting movement of crude, natural gas, and natural gas liquids (NGL) through a labyrinthine network of gathering systems, processing facilities, storage hubs, and transportation pipelines. In the last blog in this series on trends in digital pipeline innovation, I discussed why liquids transportation is undergoing rapid change and how digital transformation is key to growth.
Liquids transportation is customer-oriented with business drivers that focus on maximizing transactions, business development, and retaining contracts. As such, digital innovation in this space is helping midstream companies not only manage their growing pains but attract customers and hone their competitive edge, the topic of this post.
The Complex Business of Moving Hydrocarbon Liquids
The task of moving crude, NGL, and refined products along hundreds or even thousands of miles of pipeline is a complex business involving complicated settlement terms between shippers and a midstream service provider. In some instances, it is akin to collecting tolls along a highway where all customers are treated equally and the further hydrocarbons are shipped the more tolls are accrued. However, in other cases, the midstream service provider and customers have pre-arranged contractual terms for billing each with their own unique set of terms. Those contracts determine fee structure and formulas used to calculate a monthly settlement charge to each shipper. In addition, each fee whether tariff or contractual can have unique escalations, which are the periodic adjustments to fees based on inflation.
Midstream companies who operate a pipeline system, hauling service, and other forms of hydrocarbon liquids transportation face an ongoing accounting challenge to accurately track, allocate, and invoice shippers based on the unique billing terms within each operating system. Adding complexity, in an attempt to level the playing field in highly competitive markets, the Federal Energy Regulatory Commission (FERC) sets tariff rates for interstate liquids transportation as well as some state agencies determining rates for intrastate transportation. This means that midstream service providers must be able to account for contract- and tariff-based shipments.
Scaling Up Without Slowing Down
Given the high volume of transactions and complex accounting involved, liquids transportation service providers have long relied on computing power to keep pace. However, accounting systems tend to be custom, one-off solutions built for a “steady state” market where meters, contracts, and formulas are essentially static over time. Because these systems are resource-intensive to manage and often built with legacy code, scaling up when service companies need to grow is a non-trivial effort.
What is needed in liquids transportation and liquids management, in general, are flexible accounting solutions that easily scale as needed with the ability to match business needs without having to re-engineer code for each new scenario. That is precisely what W Energy Software’s liquids transportation solution does. Our software is purpose-built for tracking crude, NGL, and refined product transactions, contracts, escalations, and nominations, all in one unified platform built to modern standards in the cloud.
W Energy Software’s user-friendly screens enable your team to quickly scale as needed with easy to use contract management, reporting, and invoicing tools. Easily update pricing, formulas, and escalations. Plus, web-based tools for shippers provide fast and easy access to their inventory with tools to manage nominations and confirmations.
With W Energy Software, service providers are simplifying liquids transportation, navigating growth, and accelerating business performance. The agility they gain provides a competitive edge that creates new value and efficiencies for their customers.
Be sure to catch the next installment in this blog series. Our next post will delve into the build versus buy software problem and we will conclude with an overall look at why midstream should move liquids management to a unified platform on the cloud.
Ready to learn more? Let’s talk.
This is part 1 of our blog series, 3 Trends in Digital Pipeline Innovation: Liquids Management Simplified. To read the introduction, click here.
Author: Michael Ferrante, VP of Transportation
Michael earned a B.S. in business administration from Oklahoma State University. Since joining our team, he has helped build various modules within our software, ranging from marketing to gas balancing to land administration. Michael has lead implementation projects in many business areas of the industry and is currently focused on expanding the Transportation practice area with new pipeline and terminal clients.