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High oil prices don’t simplify oil and gas operations complexity.
|Integrating real-time and historical information into field workflow processes in a secure and collaborative online environment diminishes operational difficulty and lowers apparent complexity.|
As of this writing, the price of a barrel of oil flirts with the US $100 levels, and the industry continues to enjoy broad growth. Yet something is amiss in this long-awaited industry resurgence.
The laws of economics — the dismal science — continue to haunt operators, consumers and service providers. The run-up in commodity prices has been followed by increases in the cost of doing business, personnel shortages and scarcity of expertise as well as looming governmental activism.
In other words, management’s daily chores are basically the same as they always have been — high prices are not the panacea many thought they would be.
Managing daily operations and associated maintenance has always been about basic blocking and tackling. In today’s environment, these challenges seem more daunting due to the increasing complexity of operational processes coupled with shortages across the board: equipment, materials and personnel (Figure 1).
Most would agree that early 21st century life is increasingly complex and becoming seemingly more Byzantine all the time. Today’s executives must not only maximize production performance but deal with new and changing regulatory landscapes as well as a dynamic market growing in volatility.
This apparent complexity is a function of the rapid pace of today’s operational processes inevitably involving large numbers of variables and constituencies. Charging headlong into this chaotic situation is much the same as the sailor whose boat is plowing into the wind and waves and taking the brunt of the pounding. In this situation, the apparent wind and wave forces are quite high.
However, if the sailor turns his boat and runs with the wind and sea, the apparent complexity of his situation is greatly eased.
Coupling expertise with critical timely information helps this nautical navigator plot a course that accomplishes the goal of safe and timely passage. As the sailor assimilates large amounts of real-time and historical information into a single mental model, the apparent complexity of his navigation challenges lessen. Had he faced numerous disjointed sources of information on different systems, his ability to make good timely decisions would have been greatly impaired — and his happy outcome might have been dramatically altered for the worse.
Reducing apparent complexity
Similarly, operating and maintaining an oil and gas production asset requires good timely decisions every day. When management is bombarded with disjointed information throughout the work process, navigating the treacherous waters of the current petroleum production environment becomes problematic, just like our mariner beating into the restless wind and wave.
Information available in a format that all members of the decision team, including the extended supply chain, can use across all aspects of the operations and maintenance process diminishes the level of operational difficulty and lowers the apparent complexity.
Figure 2 illustrates how vital real-time and historical information can be assimilated and integrated into field workflow processes.
This significantly reduces the problems of disjointed, outdated, inaccurate and missing information that contribute to the apparent complexity many firms endure to the detriment of field performance and profitability.
Operators using this approach to navigate field issues will be able to handle larger and more daunting challenges than those firms struggling with older business models that force them to beat directly into strong macro forces.
Capitalizing on available resources
The definition of economics is the study of how we maximize scarce resources. Today, oil and gas field material, equipment and talent are all in short supply. And capital usage is always an important aspect in the decision-making process.
For example, a common challenge to operating efficiently and cost-effectively in the field is the fundamental issue of keeping up with material and equipment located in remote and hostile environments and subject to frequent movement from location to location. Calculating true costs of operations; maintaining real-time inventory levels; and ensuring the upkeep and maintenance of far-flung, scattered and many times scarce and expensive physical assets can be nearly impossible without integrated processes.
One such aid to simplification is real-time and historical information tracking and retrieval capabilities afforded by RFID (radio frequency identification) technology and associated information sharing systems and concurrent processes.
If organizations increase the performance levels of their knowledge holders, they effectively increase the level of apparent expertise available to address operations and maintenance process issues. Likewise, with a better understanding of equipment readiness and status, including location, apparent access is better than without this knowledge. The same can be said for material.
In summary, if organizations are able to reduce the apparent complexity of operations and maintenance and simultaneously increase the apparent resource level, the effective value proposition is that they are able to do more with less.
Firms are realizing the economic value described above using the following five-step process.
1. Develop an understanding of operational work processes, their linkages and process owners (both inside and outside the organization).
While this sounds like a simple task, it is the most difficult. Assessing the daily workflow and requirements necessary to reduce apparent complexity and leverage resources more effectively requires a candid self-assessment and willingness to make the needed changes.
2. Determine the information and data required at each stage of the work process as well as who needs it and how they would use it.
All operations require two types of information; structured (such as in an electronic data base) and unstructured (paper-based, core samples, etc.). Generally, this information suite has not been treated holistically, and this mindset must change to realize the full economic value.
3. Agree that your operations and maintenance system will be online.
The current state of the art for online systems is highly robust and secure. These systems can hold both structured and unstructured (digitized or scanned) information and make it available on demand.
4. Recognize that this is not an information technology solution; it should be treated like other technologies deployed into the field.
Information has always been a lynchpin for operations and maintenance decision-making processes. Information technology is not a mystery; it’s simply a tool available to management to maximize asset performance.
5. Understand this model is an organizational life style change.
Organizations can phase themselves into this model slowly and deliberately, but once adopted this is a new way of doing business.
Change management processes will be needed to transform the organization effectively.
In this article, we have described the economics of a new business model that enables field operations to do more with less. The five-step process subsequently developed is relatively straightforward. Most organizations can implement it quickly and effectively and realize value within one business cycle.
While this is a relatively new model, some early adopters have reported savings of 40 to 60% in field operating costs and a substantial reduction in the number of required personnel. When apparent complexity is reduced, direct cost savings and reduced personnel levels free scarce expertise to accomplish other tasks, creating the economic advantage companies need to remain competitive.
Operations and maintenance are the bread and butter that underpin economic success throughout the life cycle of the field. This is one approach that will ensure that operations hum.