7
Operational Excellence Programs at Oil and Gas Companies
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Introduction
Oil and gas companies are no strangers to process and operational excellence. The industry operates in some of the toughest and most politically sensitive places on earth. Any accidents that occur have a high cost in terms of human life and the environment. Meanwhile, the volatility of oil prices means that sky high oil prices won’t mask inefficient operations. That’s why oil and gas companies have always had to keep a firm eye on how they do what they do. The CEO of Norwegian oil and gas company Statoil states that "at Statoil, the way we deliver is as important as what we deliver.” But with the pursuit of new energy sources such as shale gas and ultra deepwater drilling, pursuing growth opportunities and maintaining safe operations that are both low-cost and efficient are proving to be very challenging. A successful Operational Excellence program can not only save companies millions in operating costs – it can also enhance business agility, drive innovation, improve regulator and public confidence and help attract and develop world-class talent. But achieving all of those aims is easier said than done. So how are some of the world’s leading oil and gas companies tackling the challenge? This eBook compiles information about 7 operational excellence programs at oil and gas companies and includes links to further information and materials. We hope that you find it interesting!
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Chevron “The Chevron Way”
Fast Facts: Number of Employees: 64,550 (2013) Headquartered: California, USA Oil and gas giant Chevron has been perfecting its approach to operational excellence for over two decades.
Personal Health and Safety -= "Promote a healthy workforce and mitigate significant workplace health risks"
Process Safety & Environment Stewardship - "Identify and mitigate environmental and process safety risks"
Efficiency - "Efficiently use natural resources and assets"
Reliability - "Operate with industryleading asset integrity and reliability"
Safety, not surprisingly, remains the core objective of the company’s operational excellence program with the mantra of “Do it safely or not at all” one of two key principles on which Chevron’s “Tenets of Operation are based”. The company has distilled operational excellence into a set of easy to understand (and hence follow) guidelines, and also holds leadership accountable for setting the vision and demonstrating commitment to operational excellence through workforce engagement.
The main objectives of the company’s Operational Excellence Management System (OEMS) include:
Did you know? Chevron's Tenets of Operation are based on two key principles: "Do it safety or not at all" "There is always time to do it right" Read more at: http://www.chevron.com/documents/pdf/OEMS_Overview.pdf?
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OpEx Fact: Implementing best practice operating procedures, can reduce safety incidents by up to 50% according to Bain and Co, by helping to identify and mitigate potential hazards. Find out more at www.pexnetwork.com or www.energyopexeurope.com
ExxonMobil training in best practice procedures to ensure that everyone understand the right way to do the right things.
Fast Facts: Number of Employees: 76,900 (2012) Headquartered: Texas, USA According to ExxonMobil’s 2013 Annual Report “Operational Excellence begins with exceptional employees.” Thus, the moment someone new joins the company, they receive extensive
The company reports that it delivered a return on capital employed of 17% in 2013 and cites operational excellence as the reason that upstream reliability performance is 3 percentage points higher at Exxon-operated assets than it is at those operated by third parties. Additionally, the 2013 annual report states, energy efficiency improvements have reduced cash operating costs at ExxonMobil Refineries. Read more about Exxon’s “Operations Integrity Management Systems” here: http://corporate.exxonmobil.com/~/media/Broc hures/2009/OIMS_Framework_Brochure.pdf
Watch the video about ExxonMobil and Operational Excellence > click here
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OpEx Fact: Operational excellence practices can improve machine/facility uptime, increase facility capacity, and lower maintenance and production costs. McKinsey estimates that world class oil and gas operators achieve a facility reliability of 95–98% and maintenance costs that are 30% lower than the industry average.
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ConocoPhillips
Fast Facts: Number of Employees: 18,400 (2013) Headquartered: Texas, USA Operational Excellence is an important part of the company’s continuous improvement program, according to the company’s website. The company says that the mission of the operational excellence program is to “improve operational performance and deliver a sustainable competitive advantage”. As with other oil and gas companies, safety is a big focus for their operational excellence program. The company’s most recent annual report, for instance, says that in 2013, ConocoPhillips lowered its combined total
recordable safety incident rate, which has resulted in a 56 percent improvement over the past six years. Also in 2013, the company launched what it calls the “8 Life Saving Rules,” which are meant to reduce the risk of incidents and guide the behavior of employees and contractors. Read more at: http://www.conocophillips.com/sustainabledevelopment/safety-health/Pages/operationsexcellence.aspx
Creating a Center of Excellence: The ConocoPhillips Way A PEX Network Interview Greg Bussing, Director of Continuous Improvement at ConocoPhillips, discusses why his company has gone down the route of setting up a Centre of Excellence, offers his perspectives on the reasons why you’d want to set one up and identifies the potential pitfalls to avoid. Greg Bussing, Director of Continuous Improvement, ConocoPhillips
To read this interview, go to http://goo.gl/bbPg2e
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OpEx Fact: McKinsey estimates that frontline workers at operationally excellent oil and gas companies spend 50-60% of their time on value-adding activities, compared to an industry average of half that.
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BP
Fast Facts: Number of Employees: 83,900 Headquartered: London, UK While the causes of the Deepwater Horizon disaster have been endlessly discussed and debated, since the disaster, BP’s CEO Bob Dudley has publicly affirmed his commitment to placing safety and operational risk management at the heart of everything the oil giant does. In the year following the disaster, BP set up a new group called the Safety and Operational Risk Organization (S&OR), which has the remit and expertise to provide an independent assessment of operational risks. But the company is keen to stress that ultimate responsibility for safety lay with the line management at platforms, refineries, ships or chemical plants.
In a 2012 speech to the Rio Oil & Gas Conference, Richard Morrison, Vice President - Global Deepwater Response, explained that BP is "further standardizing the way we identify, quantify and review risks and execute risk action plans" right from "the Board Room to the job site." One example of a new approach that the company has introduced since Deepwater Horizon is something called “Eight Lines of Inquiry”. This technique is a specific set of questions that BP’s operational leaders can use when observing and talking with frontline staff, and is based upon the notion that there are 8 defects that contribute to industrial accidents. Read more about operational excellence and safety at BP here: http://www.bp.com/en/global/corporate/press/b p-magazine/issue-two-2012/operationalexcellence.html
BP’s “Eight Lines of Inquiry” The eight lines of inquiry mirror the eight defects that can be found to have contributed to industrial accidents. It consists of a series of questions that operational leaders can use with frontline staff. They relate to the following areas: Routine Operations:
Layers of protection
Safety-critical equipment and instrument
The capability of people performing work
Following procedures
Non-routine operations:
Preparedness for abnormal operations
Breaking containment
Avoiding overfilling or overpressurising vessels or containers
‘Right material, right place’ Find out more at www.pexnetwork.com or www.energyopexeurope.com
OpEx Fact: Bain and Co. estimates that more efficient execution of maintenance activities can lead to a reduction of emergency and reactive work by 80% to 90% in oil and gas companies. Find out more at www.pexnetwork.com or www.energyopexeurope.com
Statoil
Fast Facts: Number of Employees: Approx. 23,000 Headquartered: Stavanger, Norway In the Statoil Book, a publicly available company handbook, CEO and President Helge Lund writes that "at Statoil, the way we deliver is as important as what we deliver. The handbook goes on to outline the company’s approach to corporate governance, its operating model and corporate policies. As with other oil ad gas companies, the centrality of health and safety permeates much of the material. One thing that does set Statoil apart, though, is
its People@Statoil process, which includes an interesting approach the company calls “Ambition to Action.” Bjarte Bogsnes, VP of Performance Management Development, Statoil writes that “Ambition to Action has three purposes 1) Translate strategic choices into more concrete objectives, KPIs and actions 2) Secure flexibility and room to act and perform and 3) Activate our values and our people and leadership principles” Find out more about Statoil’s Ambition to Action here http://goo.gl/VQfs5T
Taking Reality Seriously: Towards More Self Regulating Management at Statoil There's often a gap between what leadership says it wants and the types of behaviors that their management processes actually encourage, writes Bjarte Bogsnes, VP of Performance Management Development at Statoil . Here's the story of how this Norwegian oil and gas company started to close that gap. Read the full article here: http://goo.gl/VQfs5T Bjarte Bogsnes, VP of Performance Management Development, Statoil
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Shell
Fast Facts: Number of Employees: Approximately 92,000 Headquartered: The Hague, The Netherlands Shell's 2014 strategy cites operational excellence as one of the key differentiators for its business in the year ahead. "Intense competition exists for access to upstream resources and to new downstream markets. But we believe our technology, project-delivery capability and operational excellence will remain key differentiators for our businesses," the company states on its website.
The company has been using Lean and Six Sigma methodologies as part of its operational excellence program for many years, but the focus has moved from experts doing Lean and Six Sigma to the business to something that is embedded within the business itself. “I think the big shift in Shell in the last five or six years has been enabling the business line and building capability within those lines through coaching skills,” explains Phillip Sullivan, Senior Consultant - Process Leadership at Shell.
Shell’s Philip Sullivan on the Evolving Role of the Process Professional Oil giant Shell has been finding success by looking at ways of getting process improvement out of the heads of a few subject matter experts and into the hands of everyone in the business. “By moving away from project models only and working with the people to look at their work [...] you embed the capabilities and the operational performance management into the way people work,” says Phillip Sullivan Senior Consultant, Process Leadership, at Shell. “That sets people up to continually look for improvement opportunities with the process that they're operating.” In this interview, Sullivan offers his advice on enabling that cultural shift about the impact this shift has had on the skills required by process professionals. To read this interview, go to http://goo.gl/hWkk5q
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Philip Sullivan Senior Consultant, Shell Process Leadership
ENI
Fast Facts: Number of Employees: 82,300 Headquartered: Rome, Italy Italian energy company eni says that “the constant and systematic search for operational excellence is a fundamental component of eni’s culture and a key value to sustain its competitive advantage and guarantee constant attention to safety, health and environmental protection.”
In a short booklet that details the company’s approach to operational excellence the company briefly describes what it sees as the “culture of operational excellence” as well as the keys to reaching it. It includes “encouraging the dissemination of operational excellence culture at all levels,” setting, monitoring and “remodulating” performance targets, and the planning and development of competency training.
Eni’s Culture of Operational Excellence (Extracted from eni’s operational excellence policy booklet)
“eni considers innovation as a key element for operational excellence and stimulates creative processes providing incentives for virtuous behaviours.
eni pursues the continuous improvement of processes, competencies and products as a lever to enhance operational performance.
eni is committed to increasing the efficiency of its activities while promoting respect for health, safety and the environment, paying constant attention to the effectiveness and reliability of the company’s processes.”
Read the full policy here: http://goo.gl/OTtWLF
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Delivering best in class operational performance is no longer an option – it's a central imperative. Taking place in London, September 23rd-25th, this year’s event provides a unique opportunity for the industry’s operational excellence leaders to share proven best practices for operations performance transformation, including how to: Achieve operational excellence across the value chain to ensure capital and operational efficiency Improve collaboration with oilfield services to improve logistics Create value in multi-field operations Use operational excellence to improve refinery processes Secure frontline engagement from the start Make the connection between improved data management and process improvements Use metrics as a "vital sign" of the effectiveness and the efficiency of operational improvement efforts
Hear from Statoil, Shell, Centrica, GDF Suez Create networks of excellence and enable knowledge transfer to maximise process excellence Enable predictable business results with improved project information control and more! Use high performing OE tools to assess capital investment risk
Featured speakers include:
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Join 95,000 + process professionals by becoming a member of PEX Network today! PEX Network is a free to join online network, with a library of multimedia resources from top executives on BPM, Operational Excellence, Lean Six Sigma, Continuous Improvement and other process excellence related topics. Becoming a member is easy and lets you instantly tap into insight and information from your peers from around the world! In addition to online resources, PEX Network organizes 30+ targeted face-to-face events globally per year with industry specific focuses on Financial Services, Telecoms & Utilities, and Energy. We also hold major cross industry summits on process excellence in Orlando, FL (PEX Week) and in London, England (Process Transformation Week) every January and May.
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