Operations Excellence in the Management of Ageing

Assets

Presented at 2016 Abu Dhabi International Petroleum Exhibition & Conference

Tony Geraghty – Advisian

Operations Excellence for Mature Assets

Why is this important now?

UK GOVERNMENT PRIORITY – MAXIMIZING ECONOMIC RECOVERYMaximizing economic recovery from a mature basin has been a key Government priority in the UK. 1MIDDLE EAST – LARGEST NUMBER OF AGEING ASSETSThe Middle East has the largest proportion of assets which are now beyond their original design life.2SKILLED DEMOGRAPHIC DECREASEAdding to the age of the facilities is a challenging demographic profile for skilled people. 50% of skilled engineers will retire in the next decade.3

Sir Ian Wood, Chairman of Wood Group, was commissioned to write a report for the UK government, pertaining to:• Asset stewardship, infrastructure and

decommissioning strategy• Management of the UK Continental Shelf

natural resources• Importance of operations excellence in

management of late life and ageing assets

UK GOVERNMENT PRIORITY – MAXIMIZING ECONOMIC RECOVERYMaximizing economic recovery from a mature basin has been a key government priority in the UK. 1

MIDDLE EAST – LARGEST NUMBER OF AGEING ASSETSThe Middle East has the largest proportion of assets which are now beyond original design life.2

• It is estimated that nearly 70% of the 700-800 fixed offshore platforms and bridges in the Middle East are over 25 years old1

• Many running at maximum installed capacity• Regional demographics of assets by 2012 production2:

1 DNV GL. (2016, July 31). Middle East rises to age challenge2 Source: Rystad

68%5%

14%

13%

Middle East

Pre-19851985-19941995-2004Post 2005

38%

14%23%

26%

Rest of the World

Pre-19851985-19941995-2004Post 2005

SKILLED DEMOGRAPHIC DECREASEAdded to the age of the facilities is a challenging demographic profile for skilled people. 50% of skilled engineers will have retired in the next decade.3

Per age bracket on a global basis

More than 25% of Petrotechnical Professionals (PTPs) are over 50 years of age and a significant majority will have retired by 2016, leaving a young professional majority.

Number of PTPs on a global basis 2011-2025

3We are currently experiencing the lowest number of experienced Petrotechnical Professionals (PTPs).

SKILLED DEMOGRAPHIC DECREASEAdded to the age of the facilities is a challenging demographic profile for skilled people. 50% of skilled engineers will have retired in the next decade.

Operations Excellence Strategy: What are the key components?

Enhance production

An operations excellence strategy has three objectives and three work streams for delivery:

Advisian / 10

Reduce operating costs

Safeguard (or improve) safety performance

Text

Three ObjectivesA bespoke

approach to individual assets to

deliver ROI

Production Excellence Maintenance ExcellenceAsset Life Extension

Three Work Streams

Woven throughout these work streams is the fact that the management of your human capital will be the ultimate determinant of creating a successful and sustainable change

Example ALE studyOverall cost (estimated)• Asset Life Extension (ALE) reviews

remnant asset life to ensure ongoing reliability and integrity

• An ALE Strategy safely and cost-effectively manages assets when approaching or operating beyond design life

• Example ALE study in a client facility:‐ ALE options (Run, Repair, Rehabilitate,

Re-design, Re-rate, Replace, Retire) compared using a cost-risk optimization methodology

‐ Review of modification portfolio to reduce operations CAPEX by 15-25%

• This must be coupled with an objective measurement of the management system

Asset Life Extension

1-5 years 6-10 years 11-15 years

16-20 years

Civil Electrical I&CRotating Static

Cost

Est

imat

e (M

US$

)

• Electrical Major items – HV motors, switchgear, SCMS (ageing, obsolescence)

• I&C major items – systems upgrade (obsolescence)

Define Maximum Production Potential

(MPP)

ForecastProduction

Measure & optimize production

Review & manage

loss

Review & realize Locked In Potential (LIP)

Generate opportunities

Concentrate on high priority issues Prioritize next steps SummarizeUnderstand assets

constraints

Production Management Framework (PMF) is a complementary set of tools that seeks to

embed operations excellence into the day-to-day running of the business

An example PMF within the UAE:• Majority of losses (including LIP) were

found to be hidden from leadership• Developed understanding of true

technical limits and measured operational efficiency against technical constraint

• Teams able to identify threats to production

• Methodology identified 60k BOED of LIP not being aggressively targeted and a true daily level of daily losses up to 40K BOED

• Losses were identified through Produce the Limit (PtL) Workshop and our Production Management Healthcheck

Production Excellence

Production Excellence means paying attention to everything!

PMF

• The choke model illustrates where effort needs to go to secure improvement

• In the model below, the lowest choke is the commercial one

• However, daily performance is well below that point – hence described as a performance loss

• If the commercial choke could be raised to the next level, this is counted as a Potential Loss

• The choke model is then deployed at the centre of the management system

• It becomes the benchmark against which all production performance can be judged

• It is characterized by a ruthless attention to detail

• We have seen uplifts of 10 to 15% in daily production once this is in place

Production Excellence

Production Management Framework requires the use of an accurate and updated Choke Model

• We use a process called Production Management Healthcheck to give a clear and unbiased view

• This allows a client to see exactly what needs to be worked on

• Experience has shown that we aim first for compliance

• For organizations that have simply reported daily production prior to this, it represents a profound change

The reason this is so hard is that upstream companies have never really been set up to reward such behaviors – prior to this it was all about project execution

Securing improvement starts with an objective measurement of the current level of achievement.

Production Excellence

Example client Healthcheck result

*ECS = Execution Control System

Define Potential (Production Delivery)

Production Forecasting

Loss Management (PLMS)

Measures & Optimize Performance

Locked In Potential (LIP)

Production ECS* Management System

0%

50%

100%

Excellence Lower limit Excellence Upper limit Compliance

Maintenance Excellence

Implementing true Maintenance Excellence accesses a very rich area for improvement

In the 1970s, the civil aviation industry created a process called ‘Reliability Centred Maintenance’ (RCM) which allowed them to ensure they were doing the right things, at the right time, and did so without wasting money.They describe it as,

“A process used to determine what must be done so that a physical asset continues to fulfil its intended functions within its present operating context.”

Many operators are either unaware of or have forgotten critical elements of the intended functions which has a profound effect on the selection of the appropriate maintenance policy.Moreover, the operating context of the plant will have changed so much during its operational life that the original maintenance choices are unlikely to be suitable for today’s challenges.

The Challenge• Planned instrument maintenance costs were too high• ISO 9000 accreditation had made the planned

maintenance program very expensive• Any changes would need to satisfy the UK offshore

regulators prior to any implementation

Approach• A thorough examination of the instrumentation with a

view to:• their criticality• their dominant failure modes• their target availability

• Developed a completely new program with the asset team

• Managed the process with the HSE offshore safety branch to ensure regulatory compliance and acceptance

• Implemented the changes offshore

Benefits• Reduced the instrumentation planned maintenance

program from 15,000 man-hours a year to just 1,800 man-hours a year

• Reduction in POB• A marked reduction in the number of spurious trips

IOC 1 (inst Man-hours)

After

Before

1,800

15,000-88%

Maintenance Excellence

For instance, are all your “Critical Instruments” still “Critical”?

The Challenge• Their business model for industrial turbine packages

has been redefined by the move to long term service agreements (LTSAs) where they now pay for the cost of maintenance

Approach• The Client asked Advisian to assist in reviewing and

re-defining the work programmes to ensure that each task was sensible, defensible and occurred at the appropriate interval.

• The analysis also examined possibilities to make design changes to facilitate better maintenance.

• In all, the engagement delivered a valuable reduction in the maintenance programme, coupled with a new approach to control and protection philosophy, allowing the Client to de-tune overly sensitive instrumentation to provide the End-User with Alarms as opposed to Trips.

International OEM 1 (inst Man-hours)

After

Before

432

984-56%

Maintenance Excellence

Even your OEMs cannot deploy the maintenance policies they had previously recommended, so why should you?

Benefits• 56% reduction in maintenance labour costs for 8,000 running hour interventions• Availability improvements of at least 1.5 days per year per gas turbine from planned maintenance

alone• A reduction in Control and Instrumentation Engineer resource requirement of around 60%

However, once again, you will have to take a good look at your organization to assess how easy these benefits are to access

Most organizations are implicitly aware that their planned maintenance regime is over-burdensome, so decisions are being made about what tasks to leave out. This is normally decided at the front-line.

Current situation Real

Potential

Illustrative onlyActual client example

Se-ries1

Series1

88% reduction

1. Evaluate the current workload

2. Carry out RCM process

3. Result in a significant reduction in work orders (88% decrease)

4. Result does not map on to actual manpower figures, i.e. how much of workload is currently under execution?

5. Factoring actuals, a 30% reduction

30% reduction

Current situation RCM Potential task

reductionAdjustment for

actualsReal potential

realized

Workhours issued

Hours required

Hours expended

Hours required

The challenge is to embed these new techniques into your organization by working with your people

People• Tailored org. structure• Clear roles and resp.• Capability development• Performance mgmt.

Business processes• Best practices (e.g. RCM)• Integrated value chain• High capability• Fast & cost effective

Management system• KPIs and score cards• Linked to strategy• Decisions and actions• Accountabilities Performance culture

• Learning organization• Always testing the current• Continuous improvement

Behaviors• Fact based dialogue• Team based vs.

individual• Embedded & ingrained

Results• Delivered and sustained• Owned by organization• Achieved by

organization

If you have any questions, I would be delighted to discuss them.

You can contact me directly at anthony.geraghty@advisian.com

You can call me on +44-7717-346660

The author would like to thank his colleagues Gavin Hall, Mark Chamberlain, James Nightingale and Ian Jones for their contributions to the paper.

DISCLAIMERThis presentation has been prepared by a representative of Advisian.The presentation contains the professional and personal opinions of the presenter, which are given in good faith. As such, opinions presented herein may not always necessarily reflect the position of Advisian as a whole, its officers or executive.Any forward-looking statements included in this presentation will involve subjective judgment and analysis and are subject to uncertainties, risks and contingencies—many of which are outside the control of, and may be unknown to, Advisian. Advisian and all associated entities and representatives make no representation or warranty as to the accuracy, reliability or completeness of information in this document and do not take responsibility for updating any information or correcting any error or omission that may become apparent after this document has been issued.To the extent permitted by law, Advisian and its officers, employees, related bodies and agents disclaim all liability—direct, indirect or consequential (and whether or not arising out of the negligence, default or lack of care of Advisian and/or any of its agents)—for any loss or damage suffered by a recipient or other persons arising out of, or in connection with, any use or reliance on this presentation or information.