Comment: Operational Excellence: maximising asset value
Bjorn Ewers and Jean-Christophe Bernardini, of the Boston Consulting Group (BCG) Middle East, believe OE is foundational to mitigating risks and delivering objectives
Operational excellence (OE) has always been a core strategy in oil and gas. Having said that, major industry players are looking to accelerate their operational efficiency through new initiatives that promise to sustain the results of various recent cost reduction programmes. In an aim to engage the new waves of initiatives, international majors and national oil companies are currently challenging their operations excellence programmes to maximise the value of their assets and ensure sustainable competiveness.
Such programmes are based on an integrated approach with a framework that includes six dimensions: the operating philosophy of the company, core business processes leveraging digital solutions, organisation defining roles and responsibilities, competencies securing the availability of key capabilities, performance management systems to control and monitor performance, and a continuous improvement culture focusing on high performance.
An effective OE programme is based on value delivery cascading strategic objectives to the overall operational processes. In health, safety and environment domains, we observed major improvements in performance by reducing the time taken to implement adapted solutions to correct downgraded situations or streamlining permit to work processes, thus improving safety while increasing efficiency. In fact, we witnessed sustainable gains of 10% to 15% in the productivity of workers when mitigation measures, in relation to the risks of each activity, were implemented.
On the production front, an efficient OE programme will deliver a consistent and systematic approach to increasing production efficiency. We observed positive impact of 3% to 5% on production efficiency by improving and harmonising the definition of the maximum delivery potential.
We also found a number of other factors impacting production efficiency: these include performing a systematic identification and root cause analysis of day-to-day production and injection losses, which are supported by short to mid-term actions to resolve operations issues - such as recurrent failures of gas compressors or debottlenecking initiatives to reduce production constraints.
OE is also essential to the development of cost improvements - such as reducing operational expenditure by 20% to 50% - by transforming the operating model through core process optimisation for which we have several examples from our recent projects with majors. These include elements such as spare parts management, operations scheduling and planning.
An integrated OE programme
To derive tangible benefits and to ensure that improvements actually stick, oil and gas companies should implement an integrated and effective model for operational excellence. In the Middle East, we have witnessed effective programmes drive operational effectiveness, compliance and continuous improvement.
These programmes should be business, and not compliance, driven as such programmes are used to optimally manage the business, as opposed to complying with the norms. The key to success is having sponsorship and ownership of the initiative from the executive management team. When successful, such programmes ensure rigorous business risk management, balanced governance and process management improvement in key areas, and an overall increase in the alignment of organisational objectives.
Such programmes need to be standardised, simple and clear. They are a tool used to drive corporate principles and core values across operations within an organisation. And while they aim to standardise, they should also allow for specificity at local asset level driven by geography, technical and non-technical risk, conventional and unconventional operations, and governance structures. Simultaneously, in implementing such programmes, oil and gas players must keep their company culture in mind.
A well implemented OE programme is adaptive to portfolio and environment dynamics. For example, digitalisation is already changing the nature of such programmes to drive further cost improvements. Additionally, digitalisation increases oil recovery by better characterising reservoir behaviours through big data analytics, and improving uptime and productivity by reducing unplanned losses through leveraging predictive analytics and artificial intelligence.
When done right, an OE programme enables continuous improvement and learning. Moreover, engaging business expertise is key to avoiding a document-centred approach, and ensuring the effective mobilisation of the organisation when it comes to executing communications plans, training programmes, help desks and the like.
Five key steps
There are five key steps to rolling out a successful OE management system: firstly, there should be a well-defined vision, which is supported by company leadership and all levels of the organisation. Moreover, the programme should contain an annual plan with clear and specific objectives to avoid being an elusive goal and to be clear upfront on the expectations.
Then the programme needs to set up a clear scope to define clear roles and responsibilities, and evaluate a baseline to assess the level of maturity of the organisation and define a specific roadmap for each discipline.
Thirdly, there is a requirement to identify best practices to build on the company’s strengths and facilitate ownership by adopting a bottom up approach. A well-structured programme would then pilot key processes quickly and avoid spending too much time in design phase, but engage users early. It would leverage quick wins to promote impact and value delivered to also fund the rest of the programme journey.
The final step is to adopt and deploy a multiyear plan creating a proven platform for continuous improvement.
Last but most definitely not least, the best OE programmes include a systematic process to ensure high performance and identify adjustments where necessary by setting clear objectives and measurable targets, performing systematic health-checks to assess gaps and performance against the company’s model and targets.
This can be done and the value at stake is significant.