The plummeting oil price has exerted huge financial pressures on the oil industry, forcing companies to identify areas where costs can be cut and savings made. The battle to shore up finances and compensate for the loss of revenue means the industry is seeking innovative ways of streamlining operations and working more efficiently.
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Image from Halliburton. |
Hitachi Consulting, the management consulting and technology services arm of Hitachi, has worked on a number of offshore oil and gas projects around the globe and has had considerable success adapting the business models of key industry players to meet the challenge of a lower oil price. Here David Delvin, vice president of EMEA for Hitachi Consulting’s oil sector, pinpoints the top 10 offshore inefficiencies that companies must tackle as a matter of urgency if they are to remain lean and competitive.
1. “Wrench-time” (Productivity)- “Wrench-times” of between 30-40% have been reported consistently across the industry – a range that amounts to a significant loss in labour efficiency. Causes are many and varied, including poor planning and work preparation, quality of supervision and a reduction in management oversight. Tackling the problem requires an industry-wide strategy to address ‘systemic’ issues – these include taking a unified and robust approach to measuring ‘wrench-time,’ sharing data and working collaboratively to address a variety of underlying causes.
2. Planning- Poor planning is often cited as a significant cause of work execution inefficiency. The impact is two-fold: firstly, poor planning impacts productivity, therefore reducing work execution capacity. Secondly, it is a contributing factor in cases of job over-runs, which in turn can impact production output when reinstatement of production-critical equipment is delayed. ‘Poor planning’ is often the result of a lack of detail and understanding of task and /or resource requirements. Shortfalls become apparent during execution, resulting in delays to job completion. Short-term, there is a need to better scrutinize planning quality and to make better use of experienced personnel to mentor and transfer knowledge to less experienced staff. Longer-term, there is a need to develop more explicit standards for planning quality that would form the basis of an industry-wide education program.
3. Crew-to-crew variation in working practices- Offshore working practices can vary considerably from crew to crew. Examples include the number and timing of meetings, the purpose of those meetings, the issuing of permits and can extend to how work is planned and prepared. Inefficiencies arise when crew members and third party contractors constantly switch between different ways of working. Tackling the problem requires a change in industry mindset and the resolve to tackle the human aspects of change, particularly in dealing with practices that are often deeply embedded.
4. Permit Issue- The timely issue of permits has been a longstanding issue for many operators and one that continues to impact ‘wrench-time’ due to delays in getting work-fronts underway in a timely a manner. Small delays when aggregated across the workforce can soon mount up to a significant proportion of the working day and when annualized can amount to a very considerable sum of money as well as lost efficiency. The majority of PTW systems can provide data on permit issuing, however few operators scrutinize this data to better understand work execution performance.
5. Meetings- The O&G industry is not alone in falling into the ‘meetings’ trap. The problem is often expressed as ‘too many meetings’, however the number of meetings held is not always the problem but rather the design and effectiveness of meetings. Too often meetings either lack purpose or clear objectives or suffer from a lack of discipline, meaning that objectives aren’t always met. Poor meeting effectiveness means that problems are left unresolved.
6. Materials Management- There are two broad areas of inefficiency when looking at materials management. The first is operational and is to do with the impact on the plan when materials are not available on time, especially if resources have been scheduled and committed to commence work in anticipation of materials arriving. This is not an uncommon situation and when it occurs, it can be very disruptive. It consumes time and effort and is largely avoidable if good processes are in place and adhered to. In some cases, job owners don’t have the systems to give them line of sight of where materials are, in which case materials tracking can be difficult. Poor discipline in the materials issuing process can also be responsible for some inefficiency, particularly when materials have been shipped in for a specific job but are consumed through ‘free issue’. There is a need to de-clutter, to adopt more of a LEAN approach to materials management and to increase sharing of stock across the industry.
7. Production Efficiency- The causes of production inefficiencies are many and varied, however the causes of prolonged or repeat losses can be more easily tackled. Problems often boil down to one or both of the following: (1) the lack of credible data with which to diagnose production related losses and (2) the absence of a systematic approach to problem solving and resolution. Although there is rarely a shortage of data on losses, clear and concise categorization is often lacking. If there is no workflow for systematically managing losses, then problems are unlikely to be resolved in anything other than an ad-hoc manner. A well designed workflow will also take into manage priorities to ensure that the ‘right’ problems are being worked at all times.
8. Behaviors - Behaviors are possibly the most overlooked source of inefficiency as the majority of inefficiencies are, to some extent, self-inflicted and the result of poor compliance. We have been conditioned to believe that inefficiencies can be eliminated only through design of better processes, use of more sophisticated tools, adoption of ‘best practices’ and so on. This is partly true, however getting the best from the ‘best’ process, tool and practice depends entirely on users fully engaging in the use of processes, using tools in the way they were intended to be used and embedding ‘best practices’ into the fabric of the operation.
9. Organization- ‘Organization’ represents another broad category of opportunity to improve efficiency, however one aspect of organization is particularly worth mentioning and that is to do with roles having unclear responsibilities and accountabilities. It is somewhat taken for granted that accountabilities and responsibilities are clear in most organizations, however it is surprising to find how often this is not the case. The temptation is often to ‘tighten’ job descriptions however this rarely works. The solution is to address this through individual performance contracts, making sure that with responsibility and accountability there is corresponding authority and adequate resources to deliver on what is expected.
10. Management - Organizations that consistently achieve high levels of efficiency do so through focussed, systematic effort. Although Management may not be directly responsible for inefficiencies, it is down to management to orchestrate improvement efforts and to mobilize resources to systematically root out inefficiencies wherever as and when they arise.
David Delvin has over 20 years of experience in the oil and gas industry and has significant knowledge of the opportunities and challenges facing the industry. He has worked extensively with both oil and gas supermajors and growing independents and specializes in working with senior industry executives to develop large-scale transformation programs, which deliver significant improvements to business performance. He has supported the deployment of operational excellence, asset management, organizational restructuring and supply chain optimisation and worked across the entire value chain from upstream exploration and production, midstream to downstream refining and marketing.
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