Industry Focus: Maximizing the performance of your ETRM system

T. Kroh, Opportune
B. York, Opportune

Energy trading and risk management (ETRM) systems are vital for the support of business processes associated with trading energy commodities such as crude oil, refined products, natural gas, natural gas liquids (NGLs) and electric power, as well as facilitating the movement and delivery of those energy commodities and associated risk management activities.

While legacy ETRM software systems have filled critical functional gaps for the daily transaction of energy commodities over the years, many of these solutions are becoming obsolete or have not adapted to changing business conditions. Upgrading to modern concepts like cloud-centric architectures and/or digital strategies would serve companies well in that they can provide a scalable, reliable, affordable and fit-for-purpose technology stack that enables more effective trading and risk management capabilities.

What can energy companies do to stay ahead of the ETRM curve? Gas Processing & LNG (GP) spoke with Opportune’s Directors of Process and Technology Teresa Kroh (TK) and Brad York (BY) to gain their insights on what decisions go into implementing an ETRM system, the intricacies of how to stay on top of ETRM solution upgrades, and how companies can stay competitive this year, among other topics.

GP: Where does the energy industry stand today in terms of ETRM technology? What needs to be done for companies to upgrade or enhance outdated systems that may hinder operational efficiencies?

TK: There are fewer players in the market and recommended solutions for companies that share a similar business model, so most companies do not need an extensive software selection process. Most of the systems that handle enterprise-level risk and trading still require on-premises servers and custom configurations, along with a user interface typically delivered through Citrix.

Most vendors provide software upgrades for free and encourage all customers to keep current with the latest release. However, every upgrade—even minor releases—requires targeted test plans and system downtime. There is a risk to continuing operations associated with every upgrade. Every upgrade requires solid project management supported by a team of people who understand the components of a successful upgrade, including the system hardware and delivery design, along with the testing and cutover requirements.

BY: The challenge I see with many companies in the energy industry is they will implement a system and think that is all they need to do. To keep up with technology, any company, regardless of the industry, must continuously upgrade and enhance its systems. This needs to be an ongoing process. I see companies that are on a platform that is more than 10 yr old because they were hesitant to upgrade. The longer they wait to implement or upgrade, the more expensive it is to implement. Technology changes rapidly and performance alone is probably worth the upgrades.

It is a bit of a pay now or pay more later. I have worked with companies that had a history of putting off upgrades and as a result, ended up implementing a different system—twice. The cost of that implementation and changing platforms was much greater than the cost of upgrading more frequently.

GP: How do you see ETRM technologies evolving in 2022 as they enable companies to better respond to the demands of the future?

TK: The next big shift should be to true software as a service (SaaS) delivery of functionality. Most of the players who claim cloud-based solutions are just hosting individual installations by the customer on offsite servers. The next major shift should include:

  • SaaS-based solutions without the intensive server and software support teams per customer
  • Core interfaces to the basic and necessary information to feed an ETRM system, including bills of landing (BOLs), pipeline tickets and nominations, invoices, pricing services and exchange-based trades
  • Taking this one step further, the ability to confirm/approve trading activity and billing between counterparties that are using the same software without resorting to printing, email or other electronic methods.
  • BY: My experience is with one system, but I am aware of other similar systems. From my perspective, it seems that .NET technology is more flexible and easier to upgrade than older platforms. As performance improves, more complex calculations related to risk can be executed. As we talk about risk, which is important, we must also note the basics in the system must be there. If the data in the ETRM system is not reliable, there is no reason to try to use it for risk analysis.

Currently, there are only a few players, and most are a part of one company. A new software vendor will likely emerge, but it may be a bit difficult to enter the market.

GP: What are a few key things companies need to know before, during and after an ETRM system implementation?

TK: Having an experienced team dedicated to the coordination of design, testing, cutover planning and technical solutions is vital. This team requires project management, business users and server administrators, as well as developers who are all knowledgeable regarding the ETRM being implemented. Expect the first months of post-implementation to require a tremendous amount of dedicated support. Implementation teams will never discover every nuance of data or business requirement that will happen post go-live. In addition, expect continual upgrades, improvements and enhancements.

Upgrades require re-implementation of any portions of the capabilities that were not translated one-to-one into the newer technology and require extensive testing of all custom interfaces or extensions. An upgrade provides an excellent opportunity to re-examine design or process decisions made during the original implementation. Look for opportunities for improvement that will enhance not just operations but business knowledge and processes.

BY: The most important thing any company needs with a software implementation is ownership and buy-in to the new or upgraded system. In general, people do not like change; if they are fighting change, it makes any implementation much more difficult. When implementing a system, dedicate the best employees to the project full-time. Most companies have key employees they do not think they can operate without, but those key employees could leave any day. Take the risk and put good people on the project. This will help ensure the right decisions are made during the implementation, and the best people are the ones that should know the system and they will if they are intimately involved in the system. When I say good people, this does not only apply to the people in the business, but also the information technology (IT) people who will be supporting the system after go-live.

An ETRM implementation is an excellent opportunity to clean up old reference data and to implement new processes. Implementation is not just about the system—it is also about the data they are starting with and the processes that can be a big improvement. If you are implementing a new ETRM system, be sure to select the right system for the business. The petroleum industry is very transparent as to which system it is using. Look around at your competitors and see what they are using and if they are using it successfully.

GP: How should technology impact a company’s investment decision in ETRM systems?

TK: Performance is key to the successful use of an ETRM solution. Newer technologies typically provide better performance, freeing up the system and the people to go beyond logging the transactions necessary for operations and move towards using the data for analysis of a company’s efficiencies and financial risk. Older versions of an ETRM system usually require older versions of all related supporting software. Upgrading allows the company to take advantage of a suite of upgrades across the database, server hardware and operating systems, and even Microsoft Word or Excel.

As an example, many companies are sitting on an older version of ION RightAngle. These older versions require outdated technologies and two user interfaces to access the portions of the software that have been ported. ION, like most major software companies, will not provide updates or fixes to these older versions. For many years, the releases were just ports of old functionality to newer technologies without any enhancements in capabilities. Without upgrading, companies cannot expect full support from the software vendor, and they will be unable to take advantage of enhancements.

BY: The investment is worth the dollars put into a system. Sometimes, it may bring efficiencies; however, the better way to look at implementation is not to reduce the employee count but to make the current people more efficient so they can provide better information for better decision-making. As mentioned earlier, a continuing investment will cost less in the long run than putting off investing in systems in the short term.

GP: What kinds of things should IT teams know before companies commit to upgrading ETRM systems in 2022?

TK: Design of the software delivery architecture is key to success. The biggest complaint around large ETRM software implementations is slow responsiveness. This slowness not only frustrates or impedes the users, but it can also snowball into software errors and issues in the background processors, which can cause data and interface issues. Our organization understands the importance of the correct server configuration and has worked with multiple clients to design the delivery architecture in a manner that will deliver the performance necessary for both user experience and software viability.

BY: As far as RightAngle goes, the important part to know is if they are in a version that is still partially in Powerbuilder; the switch to .NET is a big plus. Future upgrades are much easier to perform once the platform is all .NET. As with any initial implementation, an upgrade is also an opportunity to look at current processes and make some improvements. When any company does an initial implementation, it is a huge change to the entire organization. No matter how many training classes are given to the users, they cannot learn the system until they have used it for a while. Additional training during an upgrade gives the users a chance to learn things they may not have been told originally or were just too much to absorb.

Implementing or upgrading also allows a company to clean up and validate its reference data. Additionally, it is a good chance to make sure all inventory balances are correct.

GP: Why is quality control or developing a risk-informed testing strategy important when implementing or upgrading an ETRM system?

TK: Companies should maintain a set of well-documented test cases with expected outcomes. This documentation should continually be enhanced as processes change, interfaces are developed or issues are discovered. High-risk areas of functionality should have the most thorough testing requirements, with the level of risk defined by the severity of the impact to the business if a failure occurs or operations are interrupted. During an implementation, all test cases should be performed and signed off by business users. During an upgrade, more targeted testing can be performed with a concentration on known changes and high-risk components.

BY: Quality control is very important because if the outputs from a system are not correct, bad decisions can be made based on that data, which could be costly. Investment in a new system can be expensive, but if the implementation is not done well, the investment may be wasted. A quality implementation can make all the difference in how well an ETRM system works for an entity.

GP: What are some key considerations companies need to know when supporting their ETRM system? What might be some key IT enablers?

TK: ETRM systems require 24-hr support and monitoring. Resources must be assigned to respond to process failures to keep the system healthy. Most implementations are chugging through data or processes around the clock, so downtime means that there is now a backlog of processing, and it can be difficult to recover. Active notifications of failures should be implemented, when possible, instead of relying on monitoring to discover issues.

BY: Supporting an ETRM system should not just be about keeping it running, it should also be constantly considering enhancements. A support group should keep a prioritized list of enhancements requested by the business. Ideally, IT should facilitate brainstorming sessions with user groups as to how they can improve efficiencies. Involvement by the business with the vendor, if that is a possibility, is also a big plus. ION has user groups by domain, but many organizations have IT as the point of contact and the business is not connected. To make this relationship more effective, the schedulers, accountants and risk analysts should be attending the meetings conducted by the vendor, not just IT. Getting the business more involved in IT decisions helps the business buy-in and results in a better outcome.

Keeping the reference data correct is also important when it comes to supporting an ETRM system. The best results come from well-defined processes around any kind of reference data.

GP: What do you think the ideal ETRM system of the future will—or needs—to look like for companies to transform their business operations, enhance efficiencies, differentiate themselves from the competition and uncover new monetization opportunities? In other words, does the ideal ETRM system of the future require Internet of Things (IoT), cloud, automation, etc. capabilities, any one of them, or a combination of all of them? Why or why not?

TK: As previously mentioned, I can imagine an ETRM solution that involves a combination of the technologies listed and starts with IoT solutions to provide standard and readily available operational data from the pipeline, truck and rail operations that are shared across subscribers to an SaaS solution that communicates and confirms cross-subscriber activity, including physical transactions and billing.

With these technological advances, we could eliminate much of the cost associated with ETRM implementation, including custom interfaces, large software/hardware support teams and the processing required to communicate with counterparties. Companies could transform their business by analyzing readily available accurate operational data and concentrate on the core of their business profitability model instead of logging the operations in the supporting software.

BY: It is an interesting statement about the systems differentiating the companies from their competition. In past years, some companies believed their system was their differentiation, but as more companies have gone to package software and certain segments use the same system, that does not seem to be the case. I believe it is not the system but how well a company uses the system. The ETRM system is at the core of business operations, but many companies have add-on systems of some sort that help them to better utilize package software. I believe there are some big opportunities to use some web-based portals to communicate with customers. These allow the business partners to access information and keep the company’s employees from spending all their time answering questions or sending out statements.

When the cloud was first introduced to ETRM, it did not work very well. However, it seems to be working much better now, and the concept of extra processing capacity when needed is great. The IoT could have more connectivity to gather quicker information such as meter readings and inventory levels. As ETRM technology gets more affordable, the ideal situation would be for data to flow from the field much more quickly than today. GP

Author Pic Kroh

TERESA KROH is a Director of Opportune’s Process and Technology practice. She has spent more than 30 yr in the oil and gas industry in various roles, including project management, software implementation, IT management, process analysis, software design and development. She has more than 20 yr of experience in all aspects of ION RightAngle, with an emphasis on trading and risk management.





Author Pic York

BRAD YORK is a Director of Opportune’s Process and Technology practice in Tulsa, Oklahoma. He has 19 yr of experience in the energy industry, with 23 yr of experience in RightAngle. Before Opportune, Mr. York was a Business Services Director/Senior Business Services Director at OpenLink/ION where he executed upgrade assessments evaluating clients’ needs, worked closely with product management to define the direction of the software and managed eight consultants in the scheduling domain, among other duties. He earned a BS degree in accounting from The University of Tulsa.


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