Process intelligence for the Oil & Gas industry
Six tenets of intelligent process improvement
Oil & Gas companies need to be increasingly agile to achieve results as the industry continues to experience commodity price volatility, technological innovation, and regulatory uncertainty. Process improvement efforts can be deployed quickly and return results in the near term. However, companies that do this can also take a long term view and recognize the need for continual process improvement efforts to address evolving market conditions.
Think beyond what is currently "known"
People often “know” which process improvement methodologies work, and they approach those methodologies the same as they have for decades. Yet despite those decades of history to learn from, companies are still struggling to realize success from their process improvement efforts.1
Why do some process improvement efforts succeed and others do not? This paper outlines six tenets to help companies think beyond what is currently “known” and bring more “intelligence” to process improvement.
1 3rd Biennial PEX Network Report: State of the Industry, Trends and Success Factors in Business Process Excellence,” PEX Network, Fall 2013, http://www.processexcellencenetwork.com/downloadContent.cfm?ID=1697.
Challenge conventional wisdom
Oil & Gas companies are challenged with navigating an environment where volatile demand, rapid technological advancements, multibillion dollar capital projects, and evolving regulatory requirements are all considered par for the course. Given these conditions, it is understandable that some Oil & Gas companies question the applicability of a standardized process improvement methodology. However, the proper application of these principles can help drive value in even the most dynamic environments.
Refinery inventory management, for example, is an area in which challenging the status quo may have a significant impact to the bottom line. Underestimating inventory requirements forces refineries to slow production while overestimating these requirements ties up valuable capital. By following a standardized "intelligent" approach to develop targets, the speed and quality of the analysis will likely improve, potentially reducing inventory costs and more favorable refinery utilization.
Stretch beyond process mapping
Continuous production processes are highly integrated, and altering a process without understanding all of its interdependencies may jeopardize the integrity of the system. Maintaining process integrity is especially important in the Oil & Gas industry in which process failures pose serious safety, environmental, and regulatory risks.
Traditional process mapping techniques provide limited quantitative data as they often lack the rigor needed to capture multiple permutations of process steps.
As an alternative, highly complex processes, such as capital project execution, asset turnarounds, and production operations, should consider process intelligent tools to perform advanced analytics. Detailed value stream mapping can capture the flow of material and information throughout a process and also obtain resource requirements and cycle time data at each step to detect and prioritize improvement opportunities.
Follow the facts
Similar to other industries, Oil & Gas companies are benefiting from the big data revolution. Advanced sensors and telemetry provide real-time data across the industry, from upstream measurement while drilling to remote monitoring of retail station inventory levels.
The sheer magnitude of data produced creates a new set of challenges. Investments in IT infrastructure and business intelligence solutions are needed to capture and analyze the data. Companies will also need to invest in training for effective use of these tools. Capable employees are necessary for testing hypotheses and deriving meaningful insights.
Oil field production data can be analyzed to help improve selection of new development sites. Midstream operators can now minimize downtime by using supervisory control and data acquisition systems to direct preventative maintenance activities. As data becomes more ubiquitous, the question will likely shift from what can you measure to what should you measure.
Buy runs, not players
In the movie Moneyball,2 a statistician suggests the following: "People who run ball clubs, they think in terms of buying players. Your goal shouldn’t be to buy players; your goal should be to buy wins. And in order to buy wins, you need to buy runs. Baseball thinking is medieval. They are asking all the wrong questions." The same is true in process improvement.
The Oil & Gas industry has been trending toward increased collaboration through vertical integration, marketing alliances, strategic partnerships, and joint ventures that present opportunities to streamline processes across the Oil & Gas value chain. To realize these benefits, companies may have to reevaluate how they currently assess process performance.
Siloed operating models create barriers to collaboration both within and across organizations. Business units compete amongst themselves for scarce resources. Departments seek to optimize their own performance without considering broader organizational impacts.
To overcome these challenges, process improvement teams need to build a case for change. Highlighting opportunities through objective, fact-based analysis and including cross-functional team members in analysis development brings additional clout to the recommended approach.
2 Moneyball. Dir. Bennett Miller. Perf. Brad Pitt and Jonah Hill. Columbia Pictures, 2011.
Carry it across the goal line
The stakes for project execution have never been higher as the supermajors and the larger independents are undertaking multiple billion dollar megaprojects. For these high-visibility projects, it can be difficult to obtain resources and executive sponsorship to execute process improvement projects.
Stakeholder analyses are necessary to identify individuals whose support will be vital to project execution. Soliciting input from these stakeholders and conducting intermediate stage gates helps maintain alignment and momentum throughout the course of the project. After completion of a project, having a benefit tracking and reporting process to demonstrate tangible results can provide credibility and increase sustainability of the process improvement program.
Two heads are better than one
The Oil & Gas industry first began applying Lean Six Sigma in the early 2000s, with the supermajors leading the way. Today, business process improvement programs are more common and exist in a variety of forms. More mature programs have centers of excellence with dedicated staff, formal training and certification programs, and verified benefits totaling in the hundreds of millions.
Regardless of where companies are on their journey for continuous process improvement, a mentorship model should be incorporated into their approach. The Department of Labor estimates that 50 percent of the industry's workforce will be up for retirement within the next five to 10 years.3 Without investments in training or in mentorship programs, companies may risk losing process improvement capabilities as skilled employees leave the workforce.
Download the PDF towards the top of the page for more on the six tenants, including several case studies, to help you on your journey in bringing more "intelligence" to process improvement.
Also, check out our other perspectives on Process Intelligence, which draws upon time-tested techniques like Lean Six Sigma that are enhanced with proprietary analytical tools and deep experience to help clients make breakthrough improvements.
3 Jill Tennant, "Making informed human resources decisions based on workforce outlook," World Oil Online, September 2012, http://www.worldoil.com/September-2012-Making-informed-human-resources-decisions-based-on-workforce-outlook.html