Transformational Improvement In Data Quality
We support the notion that Satellite Big Data advances will drive transformational improvement in the ability to remotely observe, accurately measure, and more quickly identify supply-chain trends.
Further, across the energy industry alone, we readily embrace calculations measured in tens, if not hundreds of billions of potential total global economic benefit (predominately in the form of lower waste, reduced uncertainty, and reduced price volatility). This assessment is not hype or ungrounded conjecture, but a realistic assessment of the aggregate economic benefit resulting from industry-wide behavior modification, particularly in respect to long-lived strategic capital expenditure.
Examples of valuable applications of Satellite Big Data include near real-time measurements of crude oil inventories, further correlation to vessel and cargo shipping movements, and the broader extrapolation of supply chain activity. The current system of tallying global stocks, relying on entities such as the IEA and OPEC, is plagued with delay and uncertainty via a process riddled with political bias and manual transcription error. The benefits are clear - call it low-hanging fruit - for replacing today's survey-based methodology with a system of direct observation, computer-automated, unbiased measurements.
Few Winners and Many Losers
We do not foresee equal distribution of the potentially immense absolute value creation generated by developments in Satellite Big Data. In fact, we envision that many emerging participants will fail to capture enough value to justify an independent existence. Perhaps venture capitalists may be able to surf a wave of future consolidation successfully, but many young management teams and their shareholding-employees will certainly be disappointed.
Early capital expenditure has been heavily weighted toward asset-intensive image capture, an area we feel will suffer from persistent overcapacity, in particular in non-differentiated visible spectrum acquisition. Additionally, there are a plethora of players trying to aggregate "do-everything" platforms, which can not co-exist for long without underwriting from customers who demand the platform for value-added applications. Unfortunately, business development approaches engineered primarily by management with government space and defense contractor experience, have largely prevented commercial, customer-first business practices from guiding strategy. The ultimate result is widespread adoption of a "build it, and they will come" mantra, together with the misguided mindset that platform breadth and flexibility supersedes end-market customer usability as the primary goal of a product launch.
In contrast to widespread Satellite Big Data industry practice, we believe the winners shall be those companies that provide narrow, end-to-end solutions that are readily manipulated by non-technical industry specialists. Those companies closest to the end-customers will be the consolidators, whereas those closest to data acquisition will most likely be consolidated.
Aremet Energy Consulting - Unconventional Insights
We have over 20 year's experience navigating oil and gas prices as well as public and private investment opportunities across the petroleum-based energy sector (Upstream, Midstream, Downstream and Marketing).
Our most unconventional insights include:
"Oil companies have been mislead into pursuing ineffective and overpriced hedging strategies."
"Oil markets do not trend toward equilibrium. Balanced markets only happen by accident, and disequilibrium is the norm."
"The real cost of debt (including bankruptcy risk) for companies exposed to commodity prices is far higher than advertised, leading to poor capital allocation decisions and sub-optimal strategy execution."
About the author
Matt Epstein leads Aremet Energy Consulting, an independent advisory boutique based in Greenwich, Connecticut. With over 20 years experience as an energy specialist, Mr. Epstein is regularly engaged by oil companies, investment managers, and commodity traders for assistance managing commodity-price volatility, and for innovative financial structuring solutions.
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