A New Approach to Operational Excellence for Oil and Gas

Abstract

AbstractOrganizations generally run several improvement initiatives simultaneously targeting different aspects of their operations. These initiatives will improve the specific operation efficiency, but due to the fragmented approach don't necessarily lead the organization to lasting results. The overall effectiveness can be improved by an all-embracing program allowing all initiatives to align, leverage one another and succeed – approach commonly identified as Operational Excellence (OE) [1]. Even if a standard definition of OE is not specified, its concept has been developed around 2000 in the Quality circles [2] and rapidly spread as an evolution of the total quality management [3]. OE - due to its amplitude, requires a long-term sustained commitment from executives, senior leaders and employees. In the past this approach would have made little sense for most operations in the Oil and Gas industry due to their predictability and stability. In the last decade this industry has been under a continuous pressure due to a constant decline in the oil barrel price coupled with rising exploration, development and production costs, putting margins under significant pressure. Furthermore, the market push for risk reduction even when the industry is taking new challenges like drilling in ultra-deep-water or in the Arctic, intensive onshore operations in populated areas (like shale gas in the northeastern US) and pioneering technologies like floating liquefied natural gas terminals. Industry executives are working to define and deliver OE at such frontiers, where few benchmarks exist.The need of enterprise-wide operational effectiveness and to achieve consistently better results in the Oil and Gas industry has been also seen as market evolution from the top consulting firms that offer such dedicated services. It has been estimated that a 10% production capacity is locked up in complexity and inefficiency—a valuable opportunity for improvement [4]. Despite these opportunities, OE implementation literature in Oil and Gas is marginal and experiences have been mainly reported limited to the field of health, safety and environment [5], [6], [7].This work presents a novel approach to OE in the Oil and Gas industry, carried out at Backer Hughes, a GE Company in its Turbomachinery & Process Solutions division. This part of the organization represents a common complex case study in this industry, due its global footprint where a constellation of more than 100 manufacturing, engineering and service sites hosting more than 12000 employees. The next chapters present the assessment, selection and adoption of a standard OE model, the evaluation of current operations with respect to the model and the development of initiatives supporting it.