Lean in Oil & Gas – Part 2
This is part 2 in a series of posts related to
applying lean to the oil and gas industry.
To read part 1, click here.
The previous post presented examples of applying lean to the
development of oil and gas wells in shale plays and in the exploration process. As further examples are presented, keep in
mind that far better and sustainable results are achieved with lean when people
gain a fundamental understanding of the philosophy, rather than copying the way
others have done it or by focusing only on the tools. This requires continually working to develop a
mindset that, whether you are a completions engineer, financial analyst, or
CEO, everything you do can be improved when you approach the work you do with a
kaizen mindset, as follows:
- What do want to happen (what is the target condition)?
- What actually happened (what is the gap between actual and target)?
- What is causing the gap?
- What will you do to close/reduce the gap – and how will you test it to be certain what you plan to do will work?
- What is the new gap and/or target condition as you continually strive for the ideal condition?
In many ways, lean is as simple as approaching business in terms
of the questions above. As written in
several previous posts, however, just because something is simple does not mean
that it is easy. There are a host of
cultural, personal, and organizational barriers that need to be addressed to
transform an organization from traditional thinking to lean thinking. To further complicate the process, as the
organization moves toward a lean mindset, there will always be a pull back to
the old way of working that will continually need to be recognized and addressed. It’s as if the lean journey is like climbing
a mountain that has no peak.
Further Examples
Commissioning of Offshore Platforms
The target condition for commissioning an offshore platform
includes handing a perfect facility to the operations team on-time and within
budget. The definition of a perfect facility should be clear from
the start of the project and, in addition to technical specifications
(gas/oil/water flow rates, tubing pressures, number of wells, etc.), should
include quality expectations (e.g., efficient layout, equipment and
instrumentation is in full working order, drawings are up-to-date, crew trained
to operate/maintain equipment, etc.).
Actual performance for commissioning and handover involves
understanding how well the target condition was met, which includes among other
things, delays, rework, equipment failure, cost overruns, and punch lists. Each of these identifies a gap that needs to
be closed – or an opportunity for kaizen.
Even if commissioning a new platform is a fairly rare occurrence for the
company, countermeasures to close the gaps can improve processes in other
areas, like maintenance and turnarounds.
One thing that becomes clearly evident during the commissioning
process is that many problems that surface during handover actually result from
work done – or not done – earlier in the development process. An appreciation for systems thinking starts
to take hold and people begin to focus on improving the upstream engineering, design,
and construction processes. When this
happens, it becomes clear where some of the lean tools and countermeasures fit
in the process, including things like establishing and managing buffers, creating
pull, implementing kanban, and maintaining dashboards. Although these types of tools can help the
operation improve toward the target condition, they can also make things worse
if the objectives and context are not clear.
Establishing Annual Plans
Every organization can benefit from utilizing kaizen – or the A3
process – to establish its annual plan. At
the organizational level, the target conditions are specific objectives for key
areas like safety, production, reserves, and costs. It is vital that the target conditions be
clearly aligned with the company’s strategy and represent the journey toward
the ideal. As an example, suppose the
total recordable incidence rate (TRIR) is running at 0.50 (one incident per 200
employees per year). If the company wants
to become one of the industry leaders in safety, it will recognize the need to
significantly improve its performance in this area. Its leaders may determine that, within three
years, TRIR needs to be down to 0.22, and that for the current year, the
company needs to improve to 0.40 (a 20% improvement). The framework for business kaizen – has now
been established as:
- Ideal Condition: TRIR < 0.22 (it is actually 0.00 – but the company has recognized that 0.22 within three years means they are on their way to a perfect operation);
- Target Condition: For the current year, the target condition is 0.40;
- Actual Condition: 0.50 (it also needs to be determined how stable TRIR performance is – if there is significant variation, the 0.50 does not mean much);
The next step in the annual planning process is to reflect on the
operation to begin to understand the root causes of safety incidents. Since a 20% improvement in TRIR is a stretch,
some type of breakthrough is needed to move the organization to a new level of
safety. Following the kaizen process,
the next step is to determine countermeasures targeted at removing or reducing
the root causes to safety incidents.
This could include such practices as standardizing the processes across
assets that are causing the most injuries and near misses, increasing site visits
by leaders and operations experts, improving training of team members on-site
in kaizen and safety, or a host of other activities. Just as with improvement of a local process, it
is important to test countermeasures before rolling them out across the organization
to assure they achieve desired results. This
is the STUDY step in the PDSA cycle,
and allows adjustments when things are not working as planned.
Detailed plans are not developed beyond a one-year timeframe in
that it allows for adjustment to keep moving toward the target condition. It is difficult to know what will interfere
with performance beyond the current quarter, much less the current year, and we
want to make sure we don’t lose sight that the objective is ultimately to achieve
results. People can get so focused on
implementing a plan that a “check the box” mentality takes over and achieving a
target becomes secondary. Within a lean
culture, leaders don’t expect people to develop perfect plans. They do, however expect people to continually
study the effects of a plan and make adjustments, when necessary to close the
gap between target and actual performance – all within the framework of
scientific method.
Leaders also need to follow the PDSA cycle on a regular basis
throughout the year to assure the gaps are closing and that improvement in one
area does not negatively affect another.
For example, an organization can increase production while negatively
affecting cost and safety. To prevent
this from happening, the organization’s leaders need to review performance at
least quarterly to keep an eye on the business.
This represents kaizen at the business level, as the annual plan itself
will require adjustment to assure organizational results are achieved.
Never-Ending Improvement
As people begin to understand the effect lean has on the way the
organization operates, they begin to see how the process never ends. As in the safety example above, although a
TRIR of 0.22 within three years is thought to be world class in today’s world, it
may not be three years from now. Besides
the fact that the industry will improve, the team will begin to understand that
perfection means that no accident is acceptable and the only acceptable target
is zero.
Further examples of lean in oil and gas will be
provided in Part 3 of Lean in Oil & Gas.
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