Lean has become a thought-leadership topic for oil and gas executives lately, particularly as E&P companies review their asset holdings under current economic and environmental conditions and increased market competition. Seeking to approximate “flawless execution,” many oil and gas companies have turned to Lean as an operating philosophy for achieving zero-defect performance while maintaining a necessary degree of flexibility and responsiveness. Success depends on managing Lean from design through implementation, particularly in the face of oilfield resistance.

What is Lean?
What distinguishes Lean from other management principles is that it requires reengineering all interrelated and supporting processes at the same time. Lean presents the most comprehensive way of thinking about business and operating improvements while fully accounting for each process, system, and organization and its requirements for an integrated solution.

The approach to improvement is very different between Lean and other change initiatives such as Six Sigma. Instead of viewing a process through measurement and analysis of variations and under-performance, (e.g., design, measure, analyze, improve, and control), it systematically looks for value in a process from beginning to end, tracing all the way through the process. Lean offers a more robust approach that includes trial and error and creates more sustainable results. It also leverages higher order management systems for control of processes and standardization of operating procedures. Such metric guidance serves to better direct the workforce on a daily, shift-by-shift, area-by-area basis.

Lean in the oil, gas industry
Responding to intense international competition and cost pressure, Lean principles have been applied in most major industries. Oil and gas companies, however, have been reluctant to adopt the principles out of concern for lost flexibility in the face of the unknown. As any oil and gas executive knows, each piece of information secured during an exploration, development, or production optimization effort can dictate an unanticipated course of action.With so many scenarios to manage, how can an organization implement Lean principles?

Successful change programs focus on both the technical and the change dimensions of a Lean deployment. (Image courtesy of Celerant Consulting)

A core business process is supported by several “support” processes and sub-processes. Upon rigorous investigation, many of these can be improved and standardized to some degree, collectively resulting in breakthrough performance for the core process. Lean not only applies to repetitive processes such as well drilling and well repairs but also to one-off processes such as capital projects and greenfield developments.

Many Lean program leaders fail to recognize how important it is for top management to get the entire workforce to openly embrace the challenge of breakthrough performance, visibly demonstrating management’s alignment and support for them.

In addition, some programs employ months of extensive training, pilot programs, or statistical analysis, stalling momentum and delaying tangible solutions and results for which management can claim victory. The faster and more effectively Lean can be integrated into operations, the faster business transformation will occur. Hence, the concept of “value velocity” comes into play. Value velocity is about getting rapid results to win buy-in and commitment from middle management and frontline supervision for the strategic importance of a Lean initiative.

Significant improvements in the oil patch
In the exploration process many support and subprocesses are infamous for causing delays, such as rework and unnecessary movement of people and equipment. Whether waiting on seismic interpretations, permits, infrastructure build-outs, or final exploratory drilling prognoses, the overall performance of the exploration process often is constrained by the performance of its many parts. By improving each of the parts, the core process can be improved to a meaningful degree. Additional ways oil and gas companies can successfully apply Lean are:

-Lean developmental drilling, including more than technical limit specifications to total depth as well as the processes between rig movements, from nipple-up to nipple-down, for all location preparation and surface equipment installations and for all while-drilling processes related to contracted service companies and material providers;

-Offshore drilling and operations logistics relating to all people, material, and equipment, including Lean processes for integrating supply bases, boats, and helicopters used to transport employees and service company contractors, with the main emphasis on 100% on-time and in-full delivery and arrival at minimal costs and inventory levels;

-Well-completion processes for onshore gas, particularly shale gas operations, to include Lean optimization and coordination of formation fracturing and/or gravel packing jobs with the proppant and fluid requirements as constrained by multiple factors such as transport mode mix, water availability, road hauling integrity, injection permitting requirements, etc.;

-Producing well-optimization and workover programs to include Lean processes for predicting, prioritizing, and sequencing through-tubing repairs and well pullings with the objective of minimizing well downtime and restoring production at the lowest cost (including rig lease requirements); and

-Gas gathering and compression system optimization, including integration of customer tie-ins and new well hookup cycle times, compressor station uptime, and cross-system gas balancing requirements, all for optimizing customer well drawdown and gas delivery.

Overcoming cultural resistance
In a survey in iSixSigma Magazine, the biggest challenge companies face in implementing Lean is “changing the culture,” cited by 20% of the 515 survey respondents (September 2009). When attempting to change organizational culture, it is important to realize that cultures cannot be changed overnight. It requires years to convert the many beliefs, artifacts, rituals, and norms prevalent throughout the business. Expecting “real cultural change” to become part of the organization’s DNA is simply not going to happen in a short space of time. This is where another profound shift in thinking is needed.

Sustainable Lean performance is much more about people and their behaviors than it is about technical fixes or plants and equipment. The process of change must consider the reality of the situation in which people work. To change behaviors, management must engage the organization around desired behavioral norms to demonstrate the benefits of changing behavior. In the oil patch, particularly in the field, change can be met with stiff resistance – whether basedon a company’s historical success, enduring myths about personalities, or perceived risks associated with change, especially when safety and environmental performance are of the highest priority.

Guiding organizational behaviors requires a strong sense of purpose and must be led from the top down, with specific focus on engaging middle managers for their complete commitment to the new targets for improvement. Management also must set strong expectations for driving through obscurities and meeting demanding timelines while providing sufficient support structures and resources needed to break through the barriers of insufficient or misunderstood data.

Bringing real bottom-line benefits
Achieving significant success through Lean relies on finding the right fit, charting a robust roadmap to the end, measuring success along the way, and winning genuine senior level commitment. The workforce must fully grasp its short-, medium-, and long-term targets and objectives for the program and understand how results will be measured and reported to upper management. By emphasizing value velocity, initial results should come quickly, keeping momentum moving forward.

The company that accurately identifies opportunities, engages its workforce, and builds the right systems to measure performance and ensure continuous improvement can iterate the value stream cycle faster, thereby getting more out of its organization over time.

When combined with the right focus on changing behaviors and getting buy-in from employees with rapid, visible, measurable results, Lean can bring oil and gas companies real bottom-line benefits.