Cost & Efficiency - oilandgasuk.co.uk€¦ · Improve efficiency through standardised work...

Cost & Efficiency Chaired By

Stephen Marcos JonesBusiness Development Director

Oil & Gas UK

Hackathon Project

Myrtle DawesDirector of Projects & Decommissioning

Centrica Energy E&P

© Centrica plc, 2013

This document, and its contents, are strictly confidential and may not be used for any purpose by any person other than the intended recipient, and may not be reproduced or distributed to any other person or published, in whole or part, anywhere. Neither Centrica plc nor

any of its affiliates, representatives or employees, makes any representation or warranty, express or implied, as to the fairness, accuracy or completeness of any of the contents of this document, nor will they have any liability relating to or resulting from their use.

“The Hackathon”Cost Efficiency – The Need for Change

OGUK Annual Conference

Myrtle Dawes, Projects Director, Centrica Energy


Centrica – a leading integrated energy

company

• FTSE top 40 company

• 28 million customers in UK and North America

• Operate across the energy spectrum

• Diverse investor in our Supply Chain


UK and Netherlands – Assets and Operations

3 Manned platforms

1 Floating, Production Storage &

Offtake Vessel

9 Normally unmanned

installations

3 Terminals

84% Operated production

85% Gas

Geographically diverse

Among the top UK gas

producers in 2014


In 2014 the energy world changed

40

60

80

100

120

Jan-15Jan-14

NBP (Winter 2015)

Brent (Month Ahead)

AECO (Winter 2015)

Index (1st Jan 2014 = 100)


The opportunity for change

Source: Oil & Gas UK

The cost of operating on the UKCS


Several complementary workstreams

Short term

Short to medium term

Short, medium and long term

To unlock our portfolio we need to be profitable in a low price environment; we

want to shift our culture to :• deliver more cost efficiently and more productively,

• be open to new ways of working, learning and collaboration, and

• embrace technology


10

The Trigger

• Opportunity rich, but costs too

high to deploy

• Consider full lifecycle reduction

(reach back)

• Interactions with supply at cross

purposes

• Needed targeted solutions

around our challenges

What and how – The Hackathon


What and how – The Hackathon

• Meeting of more than 130

new and existing

contractors to discuss

projects stuck in pipeline

• Opportunity to share

knowledge, experience and

capabilities

• Hundreds of ideas

generated and renewed

sense of collaboration with

supply chain


Decommissioning 33

Subsea developments 28

Ways of working 27

Brownfield 26

Very shallow reservoirs 19

Subsea Well Abandonments 17

Southern North Sea long reach

drilling 13

Technology & Innovation 11

Collaboration 10

Other 3

Grand Total 187

The Results

• Reviewed nearly 190 ideas

from more than 70

companies

• Proceeding with nearly 140

– one already implemented

• Sharing relevant ideas with

PILOT/industry


Key emerging themesSmall Pool Developments

• Standardise materials (Pipelines, flexibles and

umbilical)

• Re-condition & re-use high value equipment

• Use of novel technologies such as Zaplok and

raw water injection

• Collaborate with near fields operators for joint

field development Subsea Decommissioning

• New ways of decommissioning e.g. diverless

decom

• Flexibility to execute the scope

opportunistically when the barges are

available

• Collaboration with other operators,

contractors and DECC to streamline the

decommissioning requirements


The Hackathon – next steps

• Ideas from the Hackathon being

implemented in two SNS

decommissioning projects this year;

now evaluating new development well

at York and progressing Pegasus

prospect

• Re-engaging with contractors to

investigate ideas further for potential

future projects

• Sharing learnings, ideas and outcomes

with industry so knowledge is not lost

• Recognition that internal campaign on

cost efficiency was also required


What and how - 100 in 100

We need to take

costs out of the

business

Dec 2014

Let’s take out

£50MM

Jan 2015

No, make that

£100MM in 100

days!

1 Feb 2015

What about next

year? We need

sustainable savings

April 2015

Evolution of the business challenge

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRw&url=http://www.wired.co.uk/magazine/archive/2014/03/ideas-bank/mark-pagel&ei=T8BVVY_uC4y1Ud2ogKgE&bvm=bv.93564037,d.d24&psig=AFQjCNGhlHobT-SORgep4G9AsTMQmlo4Lw&ust=1431769529321531


http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&source=images&cd=&cad=rja&uact=8&ved=0CAcQjRw&url=http://www.timeanddate.com/calendar/&ei=795VVaWJHMjnUsCfgIgN&bvm=bv.93564037,d.d24&psig=AFQjCNE4uBituA0GhM_ac5_rTwF95gXEMg&ust=1431777371546382















What and how - 100 in 100Urgent need to change

• Falling commodity prices

• Job losses across the industry

Create a compelling vision of our future

• £100mm of cash savings will help

create a safe, sustainable business and

help protect position

• Simple communication of how we get

there

Make it real and visible

• Created space where everyone could

contribute

• Communicated quick wins

• Everyone knew about the progress of

the challenge

The Result: 1,418 ideas with

potential savings of

£266mm


100 in 100 – the approach

Typical Cost

Reduction Approach

UKNL Approach

• Top-down targets only

• Everyone told what to do & where to cut

• Hard to get buy-in from organisation

• Not sustainable

• Shared mission (find £100mm of cash in 100 days)

• Organisation empowered

• Engaging campaign

• Shared successes and progress

• Better buy-in as the solution came from the organisation


Day 1

02/02/15

Post 100

Days

Day 100

12/05/15

Requirements Desired Outcomes The Challenge

• Leadership buy in

• First list of opportunities to go

for – quick wins

• Task force established and

resourced

• Awareness and engagement

begins

• 100% of target delivered

• Entire organisation engaged

• Hopper overflowing (£115mm)

• Healthy competition across

departments (no. ideas, value etc.)

• Celebrate success for the milestone,

but don’t declare victory too early

• Avoid fatigue and complacency

• Find new ways to energise the efforts (e.g.,

cash vs sustainable opex savings)

• Keep the momentum going

• Knock the target out of the park!

18

Supported by a solid plan


19

Problem statement

• Today around 210 small discoveries (<15mmboe) remain undeveloped on the UKCS; equating to >1.1bn boe.

• We believe developing and deploying technology focused on standardised (non-bespoke) subsea tie backs, pipelines and brownfield modifications will unlock the potential while working closely with the ongoing development of new well designs.

What and how – Small Pools


Small Pools – The Prize

20Source: Wood Mackenzie

Producing fieldsOngoing developments

Currently locked fields

Fiel

d r

eser

ves

(mill

ion

bo

e)

All UKCS discovered fields ranked by reserves

small pools (3-15mmboe)

• Small pools collectively account for more than 1billion boe

• This equates to 3-5% of the total discovered reserves on the UKCS –

or 13-20% of future production


Small Pools - Roadmap

21


This document, and its contents, are strictly confidential and may not be used for any purpose by any person other than the intended recipient, and may not be reproduced or distributed to any other person or published, in whole or part, anywhere. Neither Centrica plc nor

any of its affiliates, representatives or employees, makes any representation or warranty, express or implied, as to the fairness, accuracy or completeness of any of the contents of this document, nor will they have any liability relating to or resulting from their use.

Cost Efficiency – The Need for Change

OGUK Annual Conference

Myrtle Dawes, Projects Director, Centrica Energy

Lessons from Norway Constructive Collaboration

Sam SpiersSenior Director Oil & Gas

CGI

© CGI Group Inc.

Constructive Collaboration for the UKCSLessons from Norway

18th June 2015

Sam Speirs

CGI is a global end-to-end IT and business process

services leader

World’s 5th largest independent IT and BPS firm

95% of all UK offshore

personnel are tracked using our

Vantage PoB solution

$10B annual revenue

9.4/10clients would recommend us for

future projects

68,000 professionals,

75% shareholders

95%on-time, on-budget delivery

2,000 Oil & Gas professionals

working with our clients in 24

countries around the world

System integration,

IT and business process

outsourcing

9/10 client satisfaction score for the

past 10 years

25

UK Continental Shelf The current environment

26

Collaboration in the Norwegian CSWhat were the drivers?

27

Multiple applications for different information needs

Incomplete coverage of all content management needs in a secure environment

Unable to support key information sharing between key stakeholders

Specific challenges relating to cost and time to prepare regulatory reporting

Extensive customisation required to maintain system

Costly to maintain and enhance

28

Challenges: Nordic Continental Shelf

What Information Complexity looked like…

29

Community

Security

Dissemination

Cost

Technology

Norwegian ApproachThe story behind the creation of the solution

31

License & Authority Web

EPIM License2 Share

2000 2007 2009

The SolutionCreated by the industry for the industry

32

• Developed by Oil & Gas Industry for the

Industry in partnership with:

Regulators

Operators & other stakeholders

EPIM

CGI

• L2S is operational since 2009 and used by 40

Oil & Gas companies, for more than 750 joint

venture licences in 8 countries and 4 continents

• In 2014, CGI signed an agreement to operate

and further develop the License2Share system

over four years

Image source: www.license2share.com

...What it now looks like

33

Enabling governance and trust

34

Transparency through holistic collaboration and data sharing

Functionalities

License Management

Data Management

Document Management

Integrated Calendar/Email

Voting Mechanism

Any type of

information can be

shared between two or

more partiesContract Data

Production Data

Drilling Data

Incident Data

HSE Data

Other relevant

governance data to

manage compliance

process

Participants decide level

and type of information to

be shared

Benefits What benefits realised in Norway & envisaged in the UK?

35

1. Ensure compliance with laws and regulations

Used an industry standard by all operators

Industry players avoid non-compliance penalties.

Regulator has proof that collaboration took place

2. Improve efficiency through standardised work processes

30% less administration

Less bureaucracy, saving administration costs

Standardised processes supports collaboration

3. Reduce costs of solution development

50% cost saving in IT

Collaboration for production fields without developing a system

IT cost savings - scalable?

4. Reduce business risks

Proven

Immediately available

Conclusion

36

Thank You

Working Together to Deliver a SustainableUKCS Oil and Gas Future

Brian ChalmersBusiness Unit Director

Wood Group PSN

Working Together

to Deliver a Sustainable

UKCS Oil and Gas Future

Brian Chalmers, WGPSN

June 2015

The Big Mac index

2.5%

18%

Supersize me!

Anyone for a £13 Big Mac?

Three main drivers of cost inflation

30-40%

40-50%

20%

Inefficiency

Unit Costs

Activity

Facing up to the challenge…

• What can we do about this?

• How might we help each other?

• How do we make it sustainable?

We are on both sides of the counter

Customer

Service Provider

Customer

Service Provider

Taking a long term perspective

70%

Labour: Unsustainable personnel mix

30%

13%

Labour: Unsustainable rate inflation

46%

Labour: Strengthening the staff base

20% 80%

Efficiency: Lean ‘repair order’ service

• Streamlined tiering of scopes

• Dedicated, multi-skilled team

• Standards reduce complexity

• Integrated across contracts 15%

£600m

£10m

p.a.

Efficiency: Smart Engineering

• “How will we engineer it?”

but…

• “How will we operate it?”

then…

• “How will we build it?”

20%

Productivity: Supervisors who lead the way

• 28,000 experts

• 3,000 influencers

• New standards & expectations

• Right players on the pitch

• Set them up to win

Some savings are easier to see

• Unit cost

• Efficiency

• Productivity

Relationships

Relationships

But what lies beneath?

Relationships

We can do it

If we do it together

Area Cooperation

Jan Paul Van DrielPartner

StrategicFit

Area cooperation

Aberdeen, June 2015

Copyright © 2014 by StrategicFit. All rights reserved. 60

• A shared set of issues

• A credible prize for meeting the challenges (MER)

• Carrot and stick to make the necessary cooperation work

• That was at $100 oil

• In the current business environment, should we exclusively focus on cost and

efficiency (doing things differently)?

• Or should we also do different things?

• Two case studies explore strategic cooperation with lessons learned

The Wood Review came up with exciting findings


A cost / efficiency drive is necessary but not sufficient to

get full MER in a $60 world.

Challenge Examples Type of decision

How can we get costs out of

the system? What can we do

differently?

• Opex challenge

• Share services

• Share information

• Simplify agreements

Operational:

• Learn by doing

• Action and outcome relate

transparently

• Recommend / approve

Where can we do different

things altogether?

• Joint developments

• Natural ownership

• Investment timing

• Re-developments

Strategic:

• Learn by dialogue and

thinking

• A plunge is inevitable

• Joint decision process


• Edvard Grieg (formerly Luno) & Ivar Aasen (formerly Draupne)

were discovered in 2007 & 2008

• The discoveries are 10 km apart but independent developments

were pursued, with FIDs for 2011

• In 2011 the NPD requested a joint development solution from the

operators

Case study 1: a strong NPD intervention forced Edvard

Grieg & Ivar Aasen to work together

• The NPD believed that both society & licensees could expect big savings with a unitized development

solution and made it clear operators couldn’t expect approval without these benefits being realized

• In 2012 a PDO was submitted for a joint development after the operators were able to come to

agreement

Why did it need such a strong government statement to get two, comparably sized, nearby,

concurrently developing projects to work together?

Edvard Grieg

≈180mmboe

Lundin Op.

Ivar Aasen

≈190mmboe

Det Norske Op.


Case study 2: in contrast, the NPD urged Q35 development

operators to get together for early thinking

Area Context:

• Approx. 500 MBOE will be matured for possible

development

• Processing capacities are coming available in the

area as production declines

• Near-term appraisal and exploration could

substantially change the picture

• Fragmented ownership structure and multiple

operators

• There are many decisions which are going to be

made in 2014-2015

How to kick start effective cooperation?


The Q35 story: Phase 1 – create trust and a shared view

Charter & shared view Strategy cycle Services viability

• Reserve ranges

of discoveries

• Characterise

future

exploration

• Timing &

profiles

• Representative

scenarios

• What are export

limits?

• What solutions

are worth

testing?

• Can / should we

debottleneck?

• What options

work, when?


The Q35 story: Phase 2 – where is the value?


65

Solution 1 Solution 2 Solution 3

XX

?

?

?P10

P90

Volume

Scenario

Families of Area Solutions

• Identified

potential area

solutions

• Created cost

methodology

• Phasing of

profiles to fit

constraints


The Q35 story: Phase 3 – what are the limits / is it viable?


Example critical

requirementsService Solution

WI SRU GI Platform Subsea BargeR

es

erv

oir

Mn

gt

Re

qu

ire

me

nts

x

x

x x

x x

• Services

scenarios

• Convert

demand to

weight, space

and power

• Peer reviewed

assessments /

solutions


What makes this so hard? Is it worth it?

Shared view Strategy cycleServices viability

‘Without A

commercial

framework nothing

will happen’

‘The best time to do a

strategy cycle is once

we have the appraisal

outcomes’

‘A business case is

the test for a viable

engineering

solution’

What made each Phase difficult to start?

What did the Forum members believe upon completion of each phase?

‘Avoid commercial

issues, this helps build

trust and leads to

open dialogue’

‘There is always more

info to come, starting

early gives insights to

what matters’

‘We know what can be

achieved and what will

matter as we define

our business cases’


• A ‘push’ from the authorities may be extremely helpful

o Timing is critical – earlier = better!

• It takes a long time to built trust across operators

o A premature commercial frame kills opportunities

• Doing simple, useful things together is a practical guide

o Asking for a huge upfront investment (eg data) may be counterproductive

• The prize for strategic collaboration can be huge

o Working on alternatives at an early stage helps test viability before it is too late

Key take aways

www.strategicfit.com

For further information, please contact:

Jan Paul van Driel

+44 7740 765944

[email protected]

Cost & Efficiency Panel Session

Chaired By

Stephen Marcos JonesBusiness Development Director

Oil & Gas UK

Cost & Efficiency - oilandgasuk.co.uk€¦ · Improve efficiency through standardised work...

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