Digi-OE: the merger that every energy company should do
Merging digital technologies with operations excellence is the new lever for performance improvement
Over the last few decades, operational excellence (OE) programmes have been an important way that oil and gas companies have sought to enhance their performance. Such programmes, built on the foundations of process excellence techniques such as Lean and Six Sigma, whipped around organisations, optimising processes and taking out cost. But, despite some success, most did not realise the full performance potential of their assets and operations.
Often a high manual effort was required to sustain the benefits, such as in gathering and presenting data to analyse and control process performance. Other times the programmes failed to integrate, and therefore optimise, across end-to-end workflows. Such challenges were compounded by a lack of real-time and detailed data to optimise processes. Possibly the greatest obstacle has been organisational; a focus on specific departments and domains in isolation, rather than aiming at an overall target, an essential requirement for coherent workflows that span departments.
Recently, a number of key technologies have demonstrated their market-readiness in the oil and gas sector. These include data and analytics platforms, machine learning techniques and industrialised field mobility systems. These previously experimental platforms are now ready for full-scale production. As a consequence, oil and gas companies have put more emphasis on adopting digital solutions as a mechanism to improve performance.
However, this has typically been approached piecemeal; adopted enthusiastically by those functions that rely heavily on data, but not at all by others. A reliance on software vendors (who often specialise in narrow verticals) to package new technologies has further reinforced the functional barriers within organisations. In other instances, improvements have been too reliant on individuals.
In one example of an original-type OE programme, a major operator achieved notable success in safety, integrity and production performance by basing its global improvement programme on the concepts of top quartile performance and Lean process improvement. However, the resulting performance gains were very closely linked to the people that had implemented them—so when they moved on to other positions, performance dropped.
Another major oil and gas company transformed its operational performance with a programme that involved a strong technology component, drawing on realtime data for production management and integrated asset modelling. But the effort to deploy and integrate these solutions in very different physical environments was significant. And this was compounded by a failure to address directly the ‘not invented here’ mindset that often makes it harder to bring successful changes to different assets.
Many of these operational excellence programmes have delivered a good measure of success around some common traits, optimising some distinct core processes and providing a focus on the process and team aspects of performance. Some have also brought a focus on the data required to understand, control and optimise performance and have embedded information technology to support this. However, the lack of maturity of some of the tools to stream, integrate and analyse this data has held them back, as have lack of cross-functional scope and an overreliance on individuals who manage the programmes.
The future of performance enhancement
We believe the critical next step in achieving efficiency will be merging operational excellence and digital advancements across organisations.
Digi-OE addresses cross functional challenges, employs more and broader data sets and sophisticated algorithms, and joins up engineering models— where no data is available—with real-world data to deliver previously unavailable optimisations. In doing so it engages teams across the end-to-end workflow, liberating them from silo-specific monitoring. Such Digi-OE teams will dominate, as the distinction between operational excellence and digital strategies rapidly fades.
Data will be the glue connecting digital with operations improvement. This should be exciting news for operational experts that have spent decades implementing best practice across their businesses and are searching for a new lever for performance improvement. In the examples above, process improvements depended upon human behaviour and focus to be maintained.
The next wave of improvements will solve this sustainability question by ‘people-proofing’ innovations in a real life ‘closed-loop control’ of process that do not require human interference. These processes will rely on real-time data, they will liberate data and shine a data-oriented perspective on where an organisation is, rather than allowing subjective opinion to dominate. The risk, as ever, is that companies begin to adopt these innovations alongside their existing operations and retrofit new digital infrastructure on top of incumbent systems.
Such an approach may have been sufficient in the past, but the value of Digi-OE lies in its ability to be truly embedded and integrated into workflows, operations and even the company’s cultures right across the organisation. Ultimately, this approach offers the ability to reimagine ways of working, starting with the goal and re-orchestrating the cross-functional workflows and processes to efficiently deliver better performance. By merging digital and operational elements from the start, companies can break the retrofit loop and force themselves to create efficient digitally enabled ways of working from the start of new operations.
What does this mean in practice?
Clearly the full range of OE-Digi capabilities does not need to be applied to all existing assets, but when a new technology is shown to work, companies must have the discipline to make it a standard, so that the success is ‘baked in’ to the next asset.
This will also reduce the risk that technologies are implemented for their own sake, without sufficient reference to the actual business case or need. Speed is also key. Oil and gas companies need to match this ambition with a pace of implementation that makes projects bearable. If you can do this, then a joined-up approach to digital implementation means that organisations are more likely to achieve a worthwhile return on investment.
One of the most promising of the recent waves of digital programmes is BP’s modernisation and transformation programme, joining up digital solutions with ‘agility’ and a commercial ‘mindset’. The goal is to improve and simplify the company’s processes with a focus on margin. As a consequence, BP says it completed the planning and drilling of a deepwater well in the Gulf of Mexico in 13 weeks, half the time of its benchmark.
And, in Trinidad, the company completed a well plan in 4 weeks compared with its usual 4 months—a 75pc reduction. The company is using digital twins of its platforms to send fewer people offshore for inspections, a move that saved it $450,000 over a three-month span last year in Trinidad. The digital twin was also credited with delivering an additional 19,000bl/d to BP’s baseline production. ¹Another innovative operator, AkerBP, has lead the way in becoming a truly digital oil and gas producer. As part of their companywide digitisation initiative, Eureka, they have re-imagined the subsurface domain through a digital lens, breaking down application siloes and creating space for digital innovation.²
Due to its scope, Digi-OE is to a large degree not a technological challenge but a structural and cultural one.
We believe successful organisations will be those that can bring together operational and digital teams to develop a joined up ‘Digi-OE team’, which can deploy approaches and tools from both disciplines. The clearly delineated role of a chief digital officer should converge with that of the digitally savvy asset manager who can deliver well-rounded and targeted Digi-OE programmes. As the distinction between the two disciplines blurs from the topdown, they will be able to create new opportunities. For all its innovation and curiosity, the digital world can sometimes become detached from business realities. By contrast, those focused on operations have tended to be less experimental.
By taking the best of both cultures, Digi-OE teams will digitally reimagine processes and set new performance benchmarks across the organisation; they will be business-relevant and agile. As a result, this next phase of technology adoption cannot be pushed just by digital teams. It must be led by the senior leadership and weaved into the fabric of company decision-making. The opportunity and reward for thinking differently have never been higher.
Figure: Digi-OE – Merging digital technologies with operational excellence
Silas O’Dea, Partner, Resources – Digital, Baringa Partners
Gavin Hall, Partner, Resources – Operations Excellence, Baringa Partners
Sources: 1) https://bit.ly/2pV7Hyk