From days to minutes: Naftogaz achieves faster, greener, digitalized energy trading with Hitachi ABB Power Grids

Challenge

Naftogaz is a vertically integrated oil and gas company engaged in the full cycle of exploration and development, production, exploratory drilling, transport, storage, and supply of natural gas and liquified petroleum gas to consumers. The deregulation of the Ukrainian gas market in 2020 gave Naftogaz the opportunity to become an active market participant.

To optimize its gas market trading, the company needed to increase control and efficiency of sales operations while improving commercial risk management and the quality of its commercial decisions. The company found that its many manual and siloed production, and business processes hindered its success.

The company is also increasing its investment in sustainability efforts. Naftogaz is one of the 62 companies representing 30 percent of the world’s oil and gas production that form the Oil and Gas Methane Partnership 2.0, a voluntary global industrial initiative to reduce methane emissions and improve monitoring and reporting. This effort runs in parallel with Ukrainian policy, which is aligned with the European Union’s Green Deal and supports establishing a carbon emissions trading scheme to help further reduce greenhouse gas emissions.

Hitachi ABB Power Grids has been helping Naftogaz to tackle these operational challenges with innovative digital solutions.

Solution

Naftogaz and Naftogaz Digital Technologies (a subsidiary of Naftogaz, and Ukraine’s first public sector insourcing IT, whose main task is to automate the business processes of Naftogaz Group) are working with Hitachi ABB Power Grids to implement TRMTracker, an integrated Energy Trading and Risk Management (ETRM) system, as part of their digital transformation strategy. This system provides integrated deal capture, nomination, risk reporting, and back-office functionality in an integrated fashion to support straight-through-processing and establish a highly automated gas trade life cycle. The solution is also designed to integrate and optimize many different elements into a single system, removing inefficiencies caused by siloed operations.

Hitachi ABB Power Grids’ TRMTracker helps customers achieve these goals by building a unified database of counterparties, contracts, and agreements to exchange real-time data among front, middle, and back-office, legal, security, compliance, risk management, and financial control functions.

In addition, TRMTracker captures physical (power and oil) as well as financial deals. In its corporate strategy-2025, Naftogaz envisages the future is based on three business platforms – "Gas Business," "B2C / Utility" and "Low Carbon Businesses" – as it works to contribute to Ukraine’s decarbonization goals. Should an Emission Trading Scheme be in place in Ukraine by 2025, TRMTracker will provide Naftogaz with the functionality to support the capture and trading of emissions allowances. 

“Hitachi ABB Power Grids’ TRMTracker is a ‘live,’ real-time and highly flexible ETRM system, delivering intuitive workflow, innovative reporting, and industry-leading modeling and risk assessment capabilities. It allowed us to automate our processes and enable users to operate in a single environment, reducing operational risk,” said Svetlana Ragulina, head of coordination and operational activity management at Naftogaz. “That’s what we were looking for to meet our critical success factors of efficiency, commercial improvement, and digitalization. Now we are working on further back-office automation and increasing the speed of reports, printed forms, and configuration changes development to address the changes in business and capture all the benefits from TRMTracker flexibility.”

“ETRM systems are indispensable tools for global energy traders, especially during this time of great change,” said Uday Baral, global head, energy portfolio management at Hitachi ABB Power Grids. “We are proud to support Naftogaz, our first ETRM customer in Ukraine, on its digitalization journey as it transforms their operations through automation and integration.”

Impact

Through the redesign, automation, and digitalization of gas trading processes, Naftogaz sees a significant breakdown of organizational silos. The company can now manage their gas portfolio in real-time while considering commercial risks, with automated control over counterparty, contract, and dealer approval.

The company also experienced a significant reduction in the time it took to make commercial decisions. For instance, it previously required about 20 signatures and several days to approve a gas sale or purchase contract. Now automated, that process could be completed within 15-20 minutes.

‘’This is a significant step towards the digital transformation and full automation of all business processes of the Naftogaz Group divisions. Implementation of the ETRM system has helped businesses to overcome the constraints caused by COVID-19 by automating the interaction between departments and external platforms,’’ said Marina Kvashnina, CEO, Naftogaz Digital Technologies and CIO, Naftogaz Group.