Have An Edge: Validere Helps Take The Guesswork Out Of Tracking Marketing Opportunities

Crude oil and condensate are highly variable, and useful information around factors such as price, transportation and quality equalization are not easily attainable, making it difficult for producers to determine where best to deliver their bbls. Validere has produced a solution with Edge.

“It’s a centralized platform. We’re an unbiased participant. We’re not a producer, we’re not a trader, we’re not a refinery and we’re not a midstream company. We’re a tech company taking vast amounts of data and putting it into our algorithms to produce meaningful results for every participant in this space,” says Nick Reid, Validere’s business development director.

He adds: “Our models on the Edge platform are as sophisticated as you can possibly get, and far beyond that of a spreadsheet or linear modelling-type program.”

The cloud-based Edge platform uses predictive machine learning and quality data sharing to track marketing and trading opportunities to match buyers with a specific quality of oil or liquids needed from sellers, as opposed to purchasing and transporting products with limited information, which can result in significant product waste and underutilization of infrastructure.

A client can access the software via any web browser, and Validere is currently working on a mobile app as well.

Identifying win-win buying and selling connections, the Edge platform matches trading counterparties and identifies quality pairings leading to arbitrage opportunities in an effort to make the supply chain more efficient.

“People try to do what we are doing today, but usually using very limited data sets and low-tech computing power,” says Reid. “If you think of a trading company, the data they’re limited to is the data within their portfolio, public data and subscribed data. If you think of a midstream company, the data they’re limited to are the barrels they’re already buying and maybe some barrels in their periphery.

“For a producer, the data they’re typically limited to are the barrels they’re actually producing. Most all participants rely on clunky spreadsheet models to make high value marketing and trading decisions.

“With Edge, it’s a platform that opens up the entire world of barrels for users of the platform. And so, it’s a much bigger dataset that works across users on the platform. We have all of the transportation costs to get those barrels to market, and we’re getting live pricing from the market to populate our platform.”

Product quality governs the value of crude or condensate and where it can be delivered — fundamental data when optimizing the path to end markets and getting more value for Canada’s energy products, or for any products along the global supply chain, according to the company.

Despite this importance, product quality data is often unavailable, inaccurate or underused, leading to ineffective decisions and underutilized infrastructure, leading companies to make their marketing and trading decisions independently and with little comprehensive view of their options and relevant variables.

Reid says: “That’s the problem Edge is solving. It takes mass amounts of data that currently exist in silos across the market, putting it all together in one place, using sophisticated algorithms to determine blended quality, then adding in, transportation and pricing data to generate the optimal outcome for every barrel and infrastructure asset on our platform.”

Data from where?

Data on the Edge platform comes from the users. As clients sign up, says Reid, Validere gathers their information. Clients can also elect to have data feed Edge directly from the Validere 360 real-time quality measurement platform at their sites. This software integration allows clients to utilize their own real time operational data in their marketing and trading decisions.

“Our data isn’t publicly available at all. Site specific quality data isn’t something available in the public domain. We get it from each individual user of the platform. The data is also not static, it’s constantly changing and Edge can act as a central repository for our users to store and manage their quality data. We’ll even do the physical testing for them and manage their entire quality testing program to ensure quality specifications are always up to date.”

Not only does the Edge platform use algorithms to highlight arbitrage opportunities across its user base, but users can input whatever information they want onto the platform to do their own analytics, he adds. “The platform is a place where we as Validere will use our algorithms and our deep understanding of the physical crude-oil trading market to calculate arbitrage opportunities for users, but we don’t just limit users to that. It’s as much an analytics tool as it is an optimization engine.”

Edge also helps reduce trucking distances for crude and condensate bbls, because the platform identifies through its users what is the most optimal delivery location for a particular bbl. It can track those distances travelled for ESG purposes. Validere is part of the Digital Innovation in Clean Energy (DICE) program through Alberta Innovates.

Public or private? User’s choice

Whenever a user puts data onto the Edge platform, that user can choose whether that data is public or private. If it is made public, then Validere will match a user up with other users on the platform where other arbitrage opportunities exist. If the user decides to make the quality information private, then no matching will occur.

“That data will only be used for them for analytical purposes on our platform,” says Reid. “We allow users to build blends on our platform using our sophisticated tools and algorithms.”

He adds: “The cool part about it is that a user can put in a long list of private information, build a complex model, and then push that model out to the Edge universe to seek out public barrels that might fit well with that blend, while still protecting the confidentiality of the data that was initially set as private.”

According to Reid, Edge is a useful tool for midstream companies bringing in multiple crude qualities to their terminals, and whose crudes might come from non-Edge sources.

“A midstream client can populate their account with, say, 20 different [crude] locations that do not currently exist on Edge, create a unique blend with those 20 locations, push the blend to the public Edge universe, and get matched with other sellers on the platform, while still keeping all 20 locations private.

“The result will show the midstream company what public barrels exist on the Edge Platform to combine with its 20 private locations to drive its throughput, quality and profit to an optimal level.”

Not only will the midstream asset owner receive that list of products to help generate a higher profit, but the sellers that have those bbls will get notification that an opportunity exists at the midstream terminal as well. This software removes the purchasing and transportation guesswork by mapping out the North American logistics options and predicting sales point commingled qualities, says Reid.

“This platform is for all participants across the supply chain. Every midstream company should want to be on this platform, because it will tell them what barrels they should source into their facilities to generate the most value.

“Every trading company should want to be on this platform, because they can populate data into the platform to optimize their portfolio, take on risk where value is the greatest, and then figure out what’s the optimal mix for the clients within their entire portfolio.

“Every refinery should want to be on here, because they can figure out what blends of crudes look like from a distillation profile perspective that they can run at their refineries. And, of course, all producers should want to be on this platform because it opens up a world of information and data analytics designed to drive margins higher.”

A useful tool for producers

Edge produces optimal results for a producer, according to Reid, helping them extract more value for every bbl produced, which is particularly important in the current economic environment.

“We have seen a lot of transactions taking place because of information that has been produced on Edge. It has helped producers see things they haven’t been able to see before, which comes down to the fact that before they were dealing with a limited dataset without access to the right analytics tools.”

Non-integrated producers typically focus on the exploration and production side of the business, Reid notes, and not so much on what other assets may exist around them that when comingled with their products create more valuable blends.

“Honestly, Edge is a game-changer,” he says, adding that as a former trader he always wondered why this part of the market had not been able to harness the power of technology to drive optimization. “It comes down to the fact the physical market is all about the granular details, and building algorithms to factor-in all of those details is extremely difficult and will also change drastically as you move to different oil producing regions of the world.

“It’s difficult but not impossible. We’ve proven our algorithms in Canada and we are starting to prove them out in several regions of the U.S. as well.

“When I saw Edge for the first time, I knew right away that it was filling a huge void in the market. It basically took huge amounts of data, a detailed understanding of regional markets, combined that with pricing and transportation data to produce real actionable opportunities to users on the platform — amazing.”

The story of Edge

Validere as a company has been around for five years with Edge being its latest product which is about 1.5 years old. The company is backed by some of the largest venture capital firms in Silicon Valley and the energy industry. It has offices in Houston, Calgary and Toronto.

The company has 46 staff comprised of engineers, data scientists, industry experts and investment bankers. Validere currently has a team of 20-25 people focused solely on the Edge platform. Most of the development features on the platform come internally from Validere’s own internal expertise, but also from direct customer feedback.

“We make a very specific point about soliciting feedback from all of our customers on a regular basis,” Reid says, noting the Validere team responds quickly to customer feedback that consistently suggests new desired features. “We have a powerhouse of developers who can turn around new valuable features in a matter of weeks.”

He adds: “We realize a lot of suboptimal decisions have been and continue to be made in the physical crude-oil trading space. It doesn’t need to be that way. Simply taking data analytics, machine learning, sophisticated algorithms, and putting that technology in place to generate meaningful results can create value for users across this complex supply chain.”