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Creating standards for controls systems for mergers and acquisitions

Creating and following controls system standards and guidelines can help mitigate costs during a mergers, acquisitions, and expansions for the pipeline and terminals industry.


The failure to properly understand and account for control systems can result in higher unintended costs. Courtesy: Andrew B. Chambers, Atlanta Captures Photography ServicesThe pipeline and terminals industry is in a constant state of upheaval and change. In busy times, new players emerge while existing companies expand and grow. In slower times, there seems to be an increase in mergers and acquisitions. A consistent theme exists: the industry's landscape is constantly changing and increasing in complexity.

Companies spend exorbitant amounts of money investigating these growth opportunities by exploring the potential for new markets, new transportation channels, and increased throughput, and capacity. Considerations are given for the real estate, infrastructure, personnel, and existing contracts involved. The control systems involved in these mergers and expansions are often overlooked. Control systems are critical components of these facilities, and the failure to properly understand and account for them can result in higher unintended costs and philosophical compromises to properly integrate these new assets into an organization's existing systems and structures.

So how do you effectively investigate, understand, and consider control systems during potential acquisitions, mergers, and expansions? There are two critical aspects:

  1. Understanding what actually comprises a control system
  2. Establishing, maintaining, and following a strong philosophy regarding control systems. 

What is a control system?

Typically, people only associate the physical hardware and human-machine interface (HMI) screens with control systems. If you go to a facility and ask the local personnel to show you their control system, most often they show you their programmable logic controllers (PLCs), distributed control system (DCS) panels, and their operating screens. These are considered "traditional" controls systems.

While they certainly are critical components of any controls system, when dealing with expansions and mergers, a strong argument can be made that they are actually the least important aspect. If needed, they can be relatively easily upgraded or changed in a cost effective manner.

During an investigation and consideration of growth and expansion, there are other aspects of control systems that must be considered, and many oil and gas professionals need to expand their understanding of what your control system truly entails.

Failure to properly consider the holistic and comprehensive nature of controls systems is a perilous exercise. If the entire system is not completely understood and accounted for, you are doing a disservice to your company, setting your projects up for failure, and opening up the door for significant additional unexpected cost, scope creep, and major headaches and integration issues. 

Creating standards for a controls system

The primary foundation for a successful controls system is a strong and sustainable philosophy outlining a company's controls system identity. Every aspect of a controls system outlined above should have standards and guidelines that a successful company can adhere to and follow. These guidelines establish a minimum baseline for how a company is going to develop, operate, and maintain their controls systems and serve as a roadmap to assist growth, expansion, and acquisition decisions. The philosophy should be based off of how to manage and maintain control systems while accounting and supporting relevant industry regulations and standards (American Petroleum Institute, Pipeline and Hazardous Materials Safety Institution, OSHA, etc.).

At a minimum, a true controls system philosophy should include:

  • Automation philosophies—How are the assets/facilities automated? Is it a highly manual, highly automated, or hybrid process? Are the facilities locally or remotely controlled? Is there an external monitoring system involved? These standards outline the level of complexity of your systems.
  • Documentation—What documentation requirements exist? These standards mandate what documentation must be developed and maintained at all facilities. It should include standard templates and formats. Important examples include architectures, electrical drawings, input/output (I/O) lists, and data maps, among many others.
  • Hardware/software—What systems, platforms, or requirements does the company standardize with? This relates to not only PLCs, HMIs, DCSs, and their associated software platforms, but also to computer and server operating systems, versions, and patches.
  • Programming guidelines and style guides—These guidelines affect the look and feel of a company's controls system code bases. They can span from standard code modules for specific process devices (valves, pumps, tanks, etc.) to specific color schemes and layouts for visualization screens.
  • Migration and update procedures—It is critical to have a plan for migrations and updates. When hardware, firmware, or software has been upgraded or re-envisioned, how do you analyze and decide if and when to upgrade your systems? This process is extremely important to ensure that unintended incompatibilities are not introduced. Alternatively, it is imperative to make sure a system is not conditional on any obsolete or unsupported components.

Once a company has established its controls philosophy and identity, it is imperative to maintain it and hold true to those principles. Courtesy: Andrew B. Chambers, Atlanta Captures Photography ServicesEstablishing a robust controls philosophy is only the first step. Most importantly, once a company has established their philosophy and controls identity, it is imperative to stand by it. It does not make sense to invest in developing standards and guidelines, only to deviate from them or consistently make exceptions. The value in having a comprehensive philosophy resides in the ability for a company to standardize and maintain a baseline set of requirements to consider when making expansion and growth decisions. Additionally, when a strong controls philosophy is in place, more flexibility is available for system support. Assets across a company are developed and maintained using standard documentation, hardware, and code bases. Tribal knowledge and single points of failure are minimized, if not eliminated entirely, through standardization. When done correctly, companies should be able to seamlessly maintain their facilities with little issue and more efficiently grow, without finding themselves forcibly bound to any individual employee or contractor for system support. 

Controls systems' external connections

The external connections are arguably the most important. External connections refer to anything that extends outside of the fence line of a facility. These connections include a company's enterprise or corporate systems (accounting, inventory, scheduling, etc.) and interactions and integration to customer systems. External connections have major implications not only to how a terminal or pipeline company makes money (customer systems), but also to how that money is tracked, accounted for, and collected (enterprise and corporate systems). These interactions must occur for any facility to properly function. As such, the failure to account for these systems during an expansion or growth decision can incur significant cost to modify systems to properly integrate the new asset.

With respect to a controls system's external connections, when making expansion and growth decisions some critical things to comprehensively consider include:

  • Operational requirements—What is the intended operational intent of the facility? What must your control system do in order to operate in the manner that it needs to operate in? Does the potential acquisition already provide that, or will it need to be modified, and to what extent?
  • Information requirements—Depending on the facility, this could include customer information, tickets, reports, orders, schedules, manifests, etc. What do your corporate systems require? What do the facility's existing customers require? Are those requirements compatible?
  • Data availability—Do you even have access to all of the information that your corporate systems require to include access to customer info that you need to process tickets/orders? Are there existing customer agreements in place that you will need to abide by if the acquisition goes through? Do new agreements need to be reached?
  • Data compatibility—Assuming you have access to all of the data that you require, to what extent is that data going to need to be manipulated in order to integrate it into your systems? Will you require middleware, either off the shelf or custom? Companies that grow via acquisition normally are faced with integrating disparate systems. How does your company's controls philosophy dictate that integration?
  • Security—It is imperative that any existing connections meet-or can meet-your company's security requirements.
  • Information access control—When sharing info with customers, it is critical to be sure that they only see or access what they are supposed to. It is also important to be sure that your corporate systems can properly access what they require, as well.

During an expansion or acquisition, companies will undoubtedly be encountered with a challenge associated with an external connection to their control system, be it during a due diligence period or following the growth decision. Failure to properly address these issues proactively may result in decreased efficiencies, unbudgeted efforts to remedy an issue, or compromised controls philosophies. Any of these problems will ultimately cost money. Decreased operational efficiency and facility throughput may be the biggest risk.

Operational processes will need to rely on manual methods if a facility is unable to:

  • Properly, accurately, and efficiently receive schedules/orders
  • Process tickets
  • Receive or update accurate manifests, bills of lading, or authorized driver lists.

In order to continue to operate, the local team's workload will have to increase to accommodate the more manual process. As opposed to being able to rely on the successful operation of the controls systems, operators must be manually processing, communicating, and validating all of their information and operations. Increasing their workload can lead to a need for additional manpower or increased operator errors.

Data and information errors may also occur if external connections are not properly considered. Errors or trouble with schedules, orders, or tickets will directly impact operations and create accounting issues that will require investigation and remediation. Additional systems or middleware may be required to ensure that this information is properly received, processed, and tracked. Data security and unintentional information exposure risks are potentially looming, as well.

Finally, a significant concern of poorly planned external connections to a controls system is complicated supportability and unnecessary complexity. If there are 14 facilities with 14 different local inventory/tracking systems, you need to be able to support all of them. If it is an off-the-shelf system, the company will need someone familiar with it. If it is a custom system, the company may be tethered to a contractor or third-party who built it.

Additionally, any time that a controls system is heavily dependent on middleware to properly integrate local systems into corporate enterprise systems, there is unnecessary complexity and points of failure that will also need to be supported. If growth is not properly navigated, a company could find themselves forced into an unintended reliance on a single person or contractor. 

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