10 performance improvement areas for Oil & Gas industry

14 January 2016 Consultancy.uk 6 min. read
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The low oil price has destabilised the business models of some of the oil and gas industry’s most established players, forcing them to cut costs to ensure their long-term survival. Inevitably, the drive to reduce overheads and to stay profitable has led to mass layoffs, numerous asset disposals and steep reductions in capital expenditure. While this approach has proven effective at bringing down costs, it risks neglecting the large and immediate savings that can also be made from increasing efficiency and enhancing productivity. Indeed, the current climate presents a unique opportunity for companies to tackle a host of inefficiencies that are endemic to the industry.

At Hitachi Consulting, the management consulting and technology services arm of Hitachi, we have worked on a significant number of offshore oil and gas projects around the globe and have had considerable success maximising efficiencies to enable key industry players to meet the challenge of a lower oil price. Having worked with 9 of the 10 top industry leaders, we believe there are 10 offshore inefficiencies that companies must engage with as a matter of urgency if they are to remain lean and competitive in this new environment.

Oil and Gas

The first inefficiency we have detected relates to the ‘wrench-times’ of between 30 and 40 per cent that have been reported consistently across the industry – a range that amounts to a significant loss in labour efficiency. The causes are many and varied, including poor planning and work preparation, quality of supervision and a reduction in management oversight. Tackling the problem requires a strategy to address ‘systemic’ issues – these include taking a unified and robust approach to measuring ‘wrench-time’, sharing data and working collaboratively.

The next inefficiency on my hit-list would have to be poor planning. The impact of it is two-fold: firstly, poor planning impacts productivity, therefore reducing work execution capacity. Secondly, it is a contributing factor in cases of job over-runs, which in turn can impact production output when reinstatement of production-critical equipment is delayed. Short-term, there is a need to better scrutinise planning quality and to make better use of experienced personnel to mentor and transfer knowledge to less experienced staff. Longer-term, there is a need to develop more explicit standards for planning quality.

Thirdly, offshore working practices can vary considerably from crew to crew. Examples include the number and timing of meetings, the purpose of those meetings, the issuing of permits and can extend to how work is planned and prepared. Tackling the problem requires a change in industry mindset. In fact, the timely issue of permits has been a longstanding issue for many operators and is the fourth most pressing inefficiency I’ve had cause to identify. It continues to impact ‘wrench-time’ due to delays in getting work-fronts underway in a timely a manner. The majority of PTW systems can provide data on permit issuing, however few operators scrutinise this data to better understand work execution performance.

The Oil & Gas industry faces a meetings inefficiency

The O&G industry is not alone in falling into the ‘meetings’ trap so I am obliged to put it at number five on my list of Top 10 inefficiencies. The problem is often expressed as ‘too many meetings’, however the number of meetings held is not always the problem but rather the design and effectiveness of them. Too often they either lack purpose or clear objectives or suffer from a lack of discipline.

There are two broad areas of inefficiency when looking at materials management, meaning it occupies sixth place in my ranking of inefficiencies. The first is operational and is to do with the impact on the plan when materials are not available on time. It consumes time and effort and is largely avoidable if good processes are in place and adhered to. Poor discipline in the materials issuing process can also be responsible for some inefficiency. There is a need to de-clutter, to adopt more of a LEAN approach to materials management and to increase sharing of stock across the industry. 

Production flaws are the seventh inefficiency I would wish to draw attention to. Problems often boil down to one or both of the following: (1) the lack of credible data with which to diagnose production related losses and (2) the absence of a systematic approach to problem solving and resolution. Although there is rarely a shortage of data on losses, clear and concise categorisation is often lacking.

David Delvin - Hitachi Consulting

Eighth on my inefficiency index is behaviours. Behaviours are possibly the most overlooked source of inefficiency as the majority of inefficiencies are, to some extent, self-inflicted. We have been conditioned to believe that inefficiencies can be eliminated only through design of better processes, use of more sophisticated tools, adoption of ‘best practices’ and so on. This is partly true, however, getting the most from the ‘best’ process, tool and practice depends entirely on users fully engaging in the use of processes, using tools in the way they were intended to be used and embedding ‘best practices’ into the fabric of the operation.

The ninth inefficiency to be remedied has to do with organisation. It represents another broad category of opportunity to improve efficiency, however one aspect of organisation is particularly worth mentioning and that is to do with roles having unclear responsibilities and accountabilities. The solution is to address this through individual performance contracts, making sure that with responsibility and accountability there is corresponding authority and adequate resources to deliver on what is expected.

Finally, organisations that consistently achieve high levels of efficiency do so through focussed, systematic effort. Although Management may not be directly responsible for inefficiencies, it is down to management to orchestrate improvement efforts and to mobilise resources to systematically root out inefficiencies wherever they arise.

An article by David Delvin, Vice President EMEA, Head of Energy Industry at Hitachi Consulting.