Fabio Kuhn, founder of market intelligence & data analytics company Vortexa, explains how energy markets are rapidly increasing the use of data in their trading operations and why storage operators need to accelerate adoption of data into their processes
By 2020, data-driven businesses will gain $1.2 trillion annually over businesses within the same industry that don't have data at the core of their decision-making process, according to Forrester Research.
For the energy industry, including storage, the re-allocation of the pie is in the order of $24 billion per year – and this number is significantly accelerating. This means that those who are data-driven will be winners, and those who don't will lose out to the tune of $24 billion per year, a sobering thought.
Around 90% of global data has been generated in the last two years. According to this study done by IDC, the data also becomes increasingly real-time and embedded in devices, equipment and assets. For our industry, the increase in data has primarily come from satellites and the Internet of Things (IoT).
The space industry is going through their own revolution with lower costs of producing and launching satellites. More than 9,000 new satellites are launching in the next decade, up from 1500 in the last 10 years. The forecast from SpaceWorks for last year was 182 and ended up being more than 300. By 2022, the company is forecasting between 460-679 satellites launching.
I was in Silicon Valley a few weeks ago talking to some of our satellite partners and they told me those projections are still very conservative and they are probably going to exceed them again. Three years ago, the Earth's landmass was pictured in its entirety about twice a month on average. Less than six months ago, we started having images every day – some areas even twice a day. As a user, I could see a five-fold collapse in satellite data costs over the last two years.
The other major source of data and perhaps the biggest one is IoT. It is the network of physical devices, vehicles, home appliances and other items embedded with electronics, software, sensors, actuators, and connectivity which enables these objects to connect and exchange data. The IoT world is growing at a breath-taking pace. According to Intel, we've come from two billion objects in 2006 to a projected 200 billion by 2020 - that will be around 26 smart objects for every human being on Earth.
Bill Braun, chief information officer of Chevron, was recently quoted by the FT saying that the volume of data the company handles has been doubling every 12-18 months. The expansion of its Tengiz oilfield in Kazakhstan, scheduled to start production in 2022, will include about one million sensors measuring the flow of oil, pressure and so on. This will become the norm not the exception in our industry.
The power of data in the storage industry becomes more prominent in commercial and operational activities – the effective optimisation of assets according to changes in supply and demand market conditions on time, product and location, significantly impacts the bottom-line.
Data's role in energy markets
Energy markets are changing fast. As a real-time, global view of seaborn cargos and flows of crude oil and refined products became available and achieved critical mass over the last year, together with daily tank storage figures worldwide, energy traders and operators have massively accelerated the use of data in their trading and optimisation decision-making processes. With a few exceptions, their counterparts in the storage industry are still in early stages of incorporating data as a core component of their decision-making processes – to their own detriment.
This paradigm shift is already defining the competitiveness of storage companies. Many times, the symptoms are not obvious in the moment, but they manifest gradually, contract by contract against better-informed energy traders who pay less than fair market value for storage given the current/forward supply and demand. Or conversely, contracts are lost when storage companies overvalue its capacity relative to market conditions, which are better understood by other asset operators and trading counterparts.
There is no status-quo. The longer organisations take to adapt the harder it gets to catch up, until it becomes impossible to. For those companies increasing the use of data as part of their operating model, there are immense opportunities ahead – this is your time.
Kuhn will be talking more about the impact data is having on energy and storage markets globally on the morning of the third day of the StocExpo Europe conference from March 26 - 28 at the Ahoy Rotterdam. For more information, visit www.stocexpo.com.
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