Hurricane Harvey was a sobering reminder that producers in Texas, Louisiana and Oklahoma – no strangers to catastrophic and costly storms – frequently face the potential for significant impacts to their business from weather-related disasters. Beyond the immediate disruption to communication infrastructure, roads, and buildings, producers must brace themselves for revenue losses due to operational interruptions, as well as commodity price fluctuations.
Next to Hurricane Katrina, Harvey was the costliest hurricane on record, making up $125 billion of the estimated $306 billion in disaster-related costs for all of 2017, and its impact is still being felt in the Houston area.
With refineries along the Texas coast shuttered for several days during the storm and its aftermath, crude oil prices climbed to their highest levels recorded by the Lundberg Survey since 2011. Alongside it, a consumer-led panic across Texas and parts of Louisiana was sparked by social media rumors of fuel shortages. This led to long lines at the pump, higher prices and price-gouging. While these price impacts were short-term, they serve as a reminder that long-term impacts to capacity can have a significant impact on consumers and businesses alike.
Producers have contended with natural disasters for a long time, and while the intensity of the impact of a storm, earthquake or fire is unpredictable, there is some sense of what to expect. What can be incalculable are the impacts of manmade threats. The rate at which technology advancements are entering the market is increasing rapidly, introducing new growth opportunities, but also new potential risks.
In April, a data network attack on gas-pipeline operators hit close to home for an industry where digital capabilities – especially wireless connectivity – is constantly evolving. Cybersecurity isn’t just a priority for big retailers and other consumer brands – producers are vulnerable to impacts on infrastructure as well as the risk of exposure of sensitive competitive data, such as trading strategies.
Continuity is critical to long-term success
Beyond the immediate impacts of such disasters is long-term recovery, which hinges on a solid, state-of-the-art business continuity plan. According to FEMA (Federal Emergency Management Agency), roughly 40 percent of businesses do not reopen following a major disaster, and 25 percent of all businesses will fail within one year.
FEMA also reports that large businesses spend on average 10 days per month on their continuity plans, which helps shield them from large-scale impacts in a disaster. While important to a business’s long-term survival, it comes at a high opportunity cost by taking staff time away from day-to-day operations.
The question then becomes, “Do we stay with an old-school DR (Disaster Recovery) plan in a physical backup facility, or do we move to the cloud?”
The cloud offers cost efficiency and speed
Many businesses still own or contract out completely separate, fully redundant physical data centers that have the capacity to operate business-as-usual in case of an emergency. While these options have proven effective for disaster recovery and backup, they can be very expensive.
To keep a “hot” secondary DR environment ready at all times in case of an emergency, a business must consider the cost of maintaining the facility, paying for the power, and purchasing any number of additional assets. That doesn’t include recovery time – which, in the energy world, can mean either saving or losing large sums of money in a matter of minutes. Cost and the need for speed in recovery are therefore leading businesses to the conclusion that a cloud-based DR system is the most cost-effective and efficient way to minimize the impacts of a disaster.
The cloud is the future of full business redundancy
Gartner recently published survey results reporting that cloud-based recovery is the preferred choice in recovery location for critical IT infrastructure services. Additionally, Gartner reports that database replication and storage-based replication are the most prevalent data protection methods.
Today’s need for data and analytics means energy businesses must have cloud-enabled trading and risk management software for full business redundancy. Then, the question becomes, “How do I choose the right software for my business?” Of course, businesses need a solution that targets every major IT system within the organization and provides the ability to perform necessary backups for possible backtracking. Additionally, businesses should check the following boxes when choosing a cloud-based DR solution:
- Protects and natively supports different systems within the same service, with multi-site availability of traditional, private cloud, and public cloud capabilities.
- Automates recovery plans within a matter of hours or minutes after a disaster.
- Provides services that cover the configuration of products installed on servers.
- Optimizes and improves productivity levels of demand in the cloud environment.
- Offers the ability to scale and speed to scale.
The takeaway: the highest DR ROI can be found in the cloud
Energy companies seeking the highest preparedness for unexpected disasters must look to the cloud for their DR plan. This will ensure complete visibility into what’s happening in their organization – from front to back offices – to not only be prepared to recover business operations quickly, but also maximize value.
Many leading oil and gas businesses – including a large number of Allegro’s energy customers – are utilizing the cloud for total backup and recovery. Obviously, they have saved costs by eliminating physical backup facilities. But what’s great about the cloud is that it doesn’t have to be an emergency-only tool. With cloud-enabled commodity trading and risk management capabilities, businesses are also reaping the daily rewards of greater portfolio visibility, risk management capabilities, and growth enablement.
Other benefits of the cloud include reduced time and cost of implementation, faster time to success through cloud development, and lower cost of ownership through product families, agile infrastructure and the smaller teams that will be required for product support.
Allegro has heavily invested in the cloud capabilities of our next-generation commodity management software, Allegro Horizon, to ensure that when customers are ready to use the cloud, they can. Many of our customers have moved pieces of their portfolio management to the cloud in phases; and most have started with using it for disaster recovery and backup to ensure full business redundancy. If your business hasn’t taken this first step in DR and cloud usage, now is the time to do it.
Mr. Cox has spent more than 20 years in the energy industry delivering product innovation with agility and quality. He has been responsible for guiding the development of Allegro’s industry-leading products for the past 15 years. Most recently, he led an energy technology startup to successfully launch an enterprise mobile commodity analytics product that provides cloud computing and web technology solutions for the commodity industry.
Oil and gas operations are commonly found in remote locations far from company headquarters. Now, it's possible to monitor pump operations, collate and analyze seismic data, and track employees around the world from almost anywhere. Whether employees are in the office or in the field, the internet and related applications enable a greater multidirectional flow of information – and control – than ever before.