We just completed a new piece of research focused on Energy Trading and Risk Management (ETRM) (Technology Assessment: ETRM in a Postrecession Environment, Document #EI224023). The report presents the results of the IDC's 2010 Vertical Group Survey of oil and gas companies. Overall, the survey indicated that nearly a third of oil and gas companies have not implemented an information technology (IT) solution to manage their ETRM operations. And, 2010 IT budgets remain under pressure and generally a
The economics for the market remain volatile and traditional metrics of market health remain out of alignment; however, fundamentals are much stronger than 2009, and it is reflected in the size and number of deals for energy trading and risk management (ETRM) applications. In 2010, oil and gas companies are dependent on ETRM applications to get a complete view of their portfolios, which supports greater transparency and understanding of the level of risk the enterprise is exposed to as market conditions continue to fluctuate.
In the current environment, the supermajors have really trimmed down their portfolios, and there is no indication that the mood is changing for the largest oil and gas companies. For midtier energy companies, vendors are seeing a much higher level of activity, in part due to refiners. In the tight margins of the downstream segment, there has been a continued demand for systems that support an improved view of their P&Ls.
For the smaller energy companies, but ones that have large consumption patterns or distribution networks, there has been an increased amount of participation. These energy companies are increasingly in the market to acquire a system. However, these deals can fall apart quickly due to their dependency on cash flow at the company. Meanwhile, among midstream companies (pipeline), there has also been an increased level of activity.
Interestingly, there has been more churn than we would have expected in the down market. However, at the same time, there are noticeable exceptions. Interviews with ETRM vendors indicated that there were a handful of incidents that resulted in some large oil and gas companies halting the bid process for new applications. In these instances, large energy companies may have gone through a full system evaluation and then did not execute the bid process.
At the same time, several vendors noted that deals in the last six months were not always budgeted including several large size deals. Vendors need to be aware that in some cases, oil and gas companies are approving deals despite the lack of IT budget.
Additionally, the report includes data on spend for ETRM in North America; importance of ETRM to oil and gas companies; and how oil and gas companies consume ETRM.
Are you seeing similar conditions in the market? Completed any deals that were not budgeted?