Falling production efficiency has become a thorn in the side of the UK North Sea oil and gas industry. Is the industry getting to grips with its efficiency issues and, some ask, is it really that bad? Elaine Maslin reports.
According to figures from the UK Department of Energy and Climate Change (DECC) and Oil & Gas UK, North Sea operators' average overall production efficiency level doesn’t look very good. From 2004-2012, production efficiency fell from around 80% to a low of 60%. In 2004-2014, some 900 MMboe was “lost” due to production inefficiency between 2004-2014, it was revealed late last year.
Around 120 MMboe of that was lost in 2014 alone, says Alastair MacLean, Brent System Manager, at TAQA, who acts as their representative on the UK industry’s Production Efficiency Task Force (PETF).
It's not a pretty picture. However, there are indications that the tide is starting to turn. According to early indications (the 2015 data will not be available until mid-year), 2015 is set to be back at about 70%, after 2013-2014 saw the rate increase to the mid 60%.
But, it’s not quite that simple. For some, at least in the past, the production lost through inefficiency hasn’t been "lost," it’s just deferred. This is no longer the case, argues MacLean. With the basin now reaching a certain maturity, it is more the case that it is actual losses, MacLean says, who was speaking at an Energy Institute event in Aberdeen in January.
Crucially, the data supplied to calculate production efficiency – and therefore benchmark operators across the basin – is coming under increasing scrutiny as to how it is calculated, as it differs between operators, clouding the picture.
What’s more, a couple of major outages, caused by say an integrity issue or even a shut down in order to tie in a new field, can be the difference between posting 80%+ efficiency to being in the low-mid 70s. In addition, when an outage happens on a key hub, it impacts all of the fields which rely on that hub for export, despite their own efficiency level otherwise potentially being 100%.
Image: North Sea production efficiency. Image from Schlumberger Business Consulting.
So what is production efficiency? Production efficiency is the difference between what could be produced and what is produced, i.e. the reality, divided by the potential, multiplied by 100 to give a percentage. Improving it is about reducing losses, MacLean says.
Production capability can be influenced by the reservoir potential, plant potential, export routes (pipeline, shuttle tanker, etc.) and contracts – i.e. market demand.
Inefficiency can be influenced by many more issues, some which are for the large part out of operators’ control, such as the oil price, and some partly in under their influence, such as platform design, asset age, network position, and well stock. Other areas, however, are within operators’ control, such as: company strategy, operating models, wrench time, reliability, maintenance philosophy, data analysis, systems, procedures…, MacLean outlines.
Looking at these areas in more detail, MacLean says that the age of the asset doesn’t actually impact performance, as has been outlined by research by McKinsey & Co. Network position does – the North Sea has become increasingly interdependent with fields reliant on third infrastructure for export. As an example, TAQA's Cormorant Alpha platform is a major hub in the northern North Sea and when it was shut-in due to a leak in one of its legs, production from some 27 fields was also shut-in.
However, the areas which are the most significant differentiators between lagging and leading operators are working practices, or maintenance and reliability procedures and approaches, MacLean says. High performing operators minimize planned down time, improve reliability by learning from failures, and create a culture of responsibility in operations, an area OE will report on in its February issue.
While it is also said that operators can’t do much about the oil price, MacLean points out they can modify their strategies so that a reaction to the low oil price doesn’t result in under spending on an asset that can cause problems in later years.
So, what is being done to tackle the production efficiency thorn? For a start, the Oil and Gas Authority, a new regulator set up following a recommendation by Sir Ian Wood in his Maximizing Recovery report from 2014, is taking a strong interest in operators’ performance. This is likely to mean it wants much more data on a much more regular basis – potentially monthly. The PETF has set a goal for the industry to get back to 80% production efficiency. While this was originally a goal to be reached in 2015, it is now likely to be somewhere closer to 2018, indicating the scale of the challenge.
There has also been work to identify where exactly industry can jointly focus its efforts. A significant area of production loss – some 15% of unplanned plant losses – was found to relate to compression systems. So a group of operators and service providers worked together and found four key areas that caused this issue; lubrication and dry gas seals, conditioning fluid used in the systems, control systems, and (one of the more prevalent issues) poor operating and maintenance practices.
A guidance document around shutdowns has also been published by Oil & Gas UK.
The PETF is also focusing on data analysis – what it is that companies measure, if indeed they do at all in some areas, and how this can be used more productively. “Are we comparing apples with pears?” MacLean asks, when it comes to the data provided by different operators and how this is used to produce industry wide production efficiency data. “Some companies don’t have a loss reporting system. It's important to get consistency so we can benchmark accurately,” he says. The PETF is working on common definitions, which will be in place ready for 2017.
This should make the production efficiency "league table" a little more realistic. According to DECC and Oil & Gas UK data, the highest performing operator is performing at around the high 90s, with the lowest at 35%. “Do we really believe there is such a gap between operators,” MacLean questions. Better data could help produce a better picture of what is going on.
It may also help to understand the impact of discrete events on production efficiency, i.e. shut downs due to leaks or tie-ins, which potentially mask underlying performance, MacLean suggests. For others, understanding how shut-in wells - which require intervention, but where such work is currently uneconomic - impact the figures would also help to better see what is going on.
While MacLean doesn’t think the figures are quite as bad as they appear, he still believes there's work to be done, both in terms of making the data and analysis clearer and more accurate, as well as improving efficiency, especially in the current cash constrained environment.
“Few are in a position to get half a billion dollars to develop something right now,” MacLean says. “You can, however, spend more on what you have got. It is clear operators need to better measure and analyze the data they have and not just rely on external data given to them. Collaboration is key. So often in the safety world, often as a result of an accident, you see collaboration, such as the work by Step Change in Safety. But do we really collaborate elsewhere? It's not as prevalent as elswhere. There is a significant prize at stake. Success is determined by the appetite people have to get at this.”
For OE, making the data more transparent might be a good start. Operators might have more appetite for improving their efficiency if the currently anonymous production efficiency league table, often shown at conferences and talks, actually named the operators - from the worst performing, at 35% production efficiency, to the top performers. Does the OGA have the appetite to make that happen?
TAQA is one of the top five producers on the UK Continental Shelf, producing around 61,000 b/d in 2014, with five operated platforms and other non-operated infrastructure and interests.
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