Is operational excellence now becoming a crucial part of oil and gas companies’ core strategies?
We have seen recently that OE strategies are not only a part of sustainable development programmes of O&G companies, but rather a core of it – an essential element of success in today’s highly competitive, unpredictable and rapidly changing environment. It has been proved that focusing on enhancing existing processes and designing new facilities with optimisation already in mind is showing significant results in our industry – in terms of costs, margins, reliability, and safety etc. However, in order to really benefit from achieving Excellence levels, a company should implement a proactive (predictive) approach that will help consider market trends, emerging instruments and technologies and utilise them in a proactive way before it becomes a common practice in the industry. This way an industry player becomes a pacesetter and not a simple follower of business patterns. Looking into new products, ways of manufacturing and marketing, cooperation with other industries (engineering, R&D, logistics, etc.) has actually become a part of OE activity, while before it mostly focussed on such issues as HSE, Energy Efficiency, Maintenance and other rather specific technical subjects. Efficiency can and should be achieved throughout the entire network of company’s facilities, its supply chain and organisation structure and operations.
Would the recent oil price downturn and the general view of the “lower for longer” oil price have helped to accelerate the adoption of operational excellence strategies?
As stated in our articles on this topic before, low crude price environment is really the driving force for reorganising corporate processes and procedures. First, it was crucial to minimise losses – and we saw major companies adjusting their course of actions just in time feel much more secure than those who decided to take a ‘wait and see’ position. Now it is all about choosing the right combination of best industry practices and company’s own lessons learned and adapting those to a new way of doing business – mindful, conscious, but innovative instead of cautious. Even though companies can no longer reap extra margins from price difference, there is still a potential to grow (not necessarily in an expansive form, but to intensify existing advantages). While before the crisis, there was no real economic incentive for larger companies to invest funds in perspectives such as digitisation or any other ‘popular’ disciplines, in 2017-2018 companies prefer to spend more on research of areas where any improvement is possible before the gap between current state and industry benchmark leaders becomes too wide. What has really changed in the approach, is that companies truly bought into the idea of OE – even state-owned entities – and started exchanging expertise and ideas with their colleagues. So hopefully soon we will observe an updated situation, with companies being much more integrated, open and flexible to change – this process should have started earlier, in late 2000s, but better later than never.
What would be the key outcomes and benefits aimed for by the implementation of company-wide operational excellence?
In general, success factors of OE approach for companies are the following:
- Excellent safety environment
- Optimised production processes
- Process complexity
- Process capability
- Lean support structures
- Empowered workforce
- Cost effective predictive maintenance policies
- Timely, accurate, results orientated management system
- Productive contractor partnerships
- Clear roles and accountabilities
- Continuous improvement culture
- Customer service focus
Current issues at O&G facilities that need to be addressed (applicable to any area of the supply chain)
- Relatively poor asset availability → Lost Margin
- Lack of effective cost control → Overspend of operational and capital budgets
- Changing fuel specs, gas and oil crude prices → Significant investment required to align with the change
- Highly competitive marketing environment → Low Margins
- High Inflation
- Supply balance – market changes, product specifications, product portfolio – needs to be re-estimated
Large-scale organisational change can be disruptive – what are the main hurdles standing in the way of successful operational excellence initiatives?
Any change requires significant effort, so an integrated project team that is responsible for developing and implementing the OE programme is needed. Mindset and mentality of employees could work as a catalyst to change within the organisation, but usually it is a stop-factor to many innovations that management would like to install. To change the overall approach of workers, many instruments and techniques are available, starting from workshops and training to leadership role in the process. We always highlight the importance of people that participate in the programme and coordination within the company. One option that was indeed useful for our clients was to devote some time to mobilisation phase before the actual work on the OE strategy starts and organise several coordination meetings during implementation – so everyone is on board with the proposed course of action to be taken. This method of review and updating allows the members of the project to become actively involved and to give it direction. In addition, this approach allows to demonstrate to the rest of the organisation the importance of the project and their personal commitment towards it. Mobilisation is a process that involves all relevant members of the organisation in resourcing, planning and scheduling the project activities, including readying the stakeholders. Mobilisation also allows all members of the organisation to accelerate the achievement of organisational goals. This element pulls the implementation plan together. Communication is a subset of mobilisation. It includes making a communication plan that identifies key stakeholder groups and the required engagement processes. The communications will need to be of high impact and two-way; providing well-planned, coordinated information-sharing to drive a bias towards action and accelerate change.
Connected to the above question, are there any regional variations in the enthusiasm for, and acceptance of, operational excellence as a fundamental tool to drive industrial operators forwards? In other words, do you see firms in the Middle East keen to implement it?
Taking a position of both consulting and conference organiser company, we can retrospect on OE in ME: we have been organising OpEx events for this region for several years now, and it is clearly visible that interest in this area and related subjects is progressively growing. The idea behind these conference was to bring together key industry players and solutions providers to initiate discussions, to update O&G companies on what is new in the world of excellence and what others do to reach the goals. Initially , it was more like a large-scale workshop for specialists deeply involved in this process and spoke the same ‘language’ in terms of methods, terminology, etc. We didn’t actually expect it to expand on such a pace and scale within a couple of years – the reason for that was the interest of companies in operational efficiency and all its elements. Today it is no more a symposium for ‘initiated’ professionals, but a full-scale industry platform for almost everyone that is somehow connected with the idea of OE (and as we mentioned before, most workers inside companies can now somehow relate their job functions and actions to corporate progress in this sphere). We saw the similar trend with HSE events, with deep conversion technologies and catalysts, and we can state that OpEx all around the world is among top-level subjects and gets more coverage in the media than ever. The number of companies on the market and people attending such training, courses, events and roundtables speak for themselves.
A recent survey carried out within the energy sector/hazardous industries observed that “digitalisation is no longer just a tool for operational excellence adoption – it is driving its evolution.” Is digitalisation the key element in the journey to effective operational excellence strategies?
If looking at it from different perspectives, the answer might be yes and no. Definitely, the number of solutions that suppliers offer that include Industry 4.0 principles, cloud-based instruments, big data, augmented reality, online monitoring, etc. is amazing. IT and automation in our industry has never strived as much before, and we couldn’t neglect this fact. Taking into account the complexity of processes, amount of data to be processed, synergy effects and so on, simple methods are no longer applicable for the purpose – therefore companies invest in hardware, software and tools that will create a balanced and effective system. So, digitalisation in O&G has taken a while to get into full swing, especially in downstream, but as of today it does not have a ‘wow-effect’ for clients, it has almost become a routine practice for many progressive companies. Nevertheless, everything (and automation as well) has its limits. As one of our friends and clients – a refinery GD – once said, ‘You can buy dozens of measurement tools, indicators that will cost millions of dollars and make the plant look like a Christmas tree, but at the end of the day it is not about measurement in itself, the key is to know what to measure and how to interpret the data correctly and make conclusions’. This saying explains in simple words the concept of implementing any advanced technologies wisely.
So whether one uses digitalisation developments or any other tools to enhance operations, people that actually perform the work are the key to success. To reach the desired level of excellence having the most up-to-date and sophisticated system is not enough. Still, we cannot deploy it without human resources – and those should be considered top priority. If a company manages to win ‘hearts, minds’ and, most importantly, ‘hands’ of the employees, they will drive innovation within the organisation, define the areas where it is really needed and use the data and results of monitoring the right way.