5 Imperatives for Operational Excellence in Oil and Gas

Oil and gas operators are under increasing pressure to simultaneously increase production while continually driving down costs, reducing carbon emissions and preparing for a net zero world. Operators must balance these sometimes-contradictory aims through a blend of pragmatism, efficiency, and technological innovation.

Successful operators focus on operational excellence to align people, assets, and processes to deliver operational improvements and drive business value.

Operational excellence techniques such as Lean and Six Sigma offer a proven approach to achieving operational efficiencies and improving processes for oil and gas operators. Six Sigma provides a set of statistical tools that gives operators better insight into the causes of defects and process variation. Lean, on the other hand, provides a more culture-based approach that strives for continuous improvement.

But as the oil and gas industry faces historic challenges – the energy transition, decarbonization, volatile oil prices, and changing government regulation – operators are under pressure to deliver change and enhance operating performance like never before.

How can operational excellence help align top line economic growth with operational performance?

The five key imperatives of operational excellence for oil and gas companies: safety and compliance, driving production efficiency, optimizing costs, supporting decarbonization and maintaining asset reliability.

#1: Safety & Compliance

Oil and gas are high stakes industries when it comes to risks to human life, the environment, and the resulting damage to a company’s reputation that can result from mishaps. BP’s 2010 Deepwater Horizon disaster, where an offshore rig blowout killed eleven workers and caused the largest marine oil spill in history, is an extreme example of what can happen when processes or machines break down or people fail to conduct a procedure in the right way.

No oil and gas operator wants to make the news for the wrong reason, and they want to ensure the safety and security of their employees. By continually identifying ways to improve processes and procedures, operational excellence can help oil and gas operators avoid potentially disastrous process break downs and failures.

Further, the industry is highly governed by environmental, financial and safety regulations. Well run operations with standard procedures that all workers can follow and understand helps to ensure that operators don’t breach important compliance requirements.

#2: Production Efficiency

The oil and gas industry has been struggling with an unprecedented labor shortage as experience baby boomers retire, younger generations turn away from oil and gas, and the pandemic-era reset has confronted all industries with a challenging labor market.

Many workers are growing tired of the cyclical boom and bust nature of oil and gas that sees regular hiring and firing and undermines the industry’s reputation as a dependable employer.

The problem is set to worsen. A recruitment survey last year by Brunel and Oilandgasjobsearch.com, found that almost half (43%) of workers want out of the energy sector in the next five years.

Operational Excellence can help operators identify ways to increase production efficiency to deal with the scarcity of human labor. By reducing complexity, eliminating the need for rework, and streamlining processes, operators can be more efficient per hour worked.

Additionally, automation will be crucial to helping maintain production levels. Streamlining and improving operating processes is the first step to digitizing and automating them to be able to do more with less.

#3: Cost Optimization

While the recent oil price upswing has seen operators enjoy record profits, the party is not expected to last long. Oil and gas companies must position their business and operation for the next downturn as the industry’s long-established boom-and-bust cycle becomes more compressed.

Operational excellence can help oil and gas operators offset some of the commodity price fluctuations through a continuous focus on driving down costs, rationalizing digital platforms and eliminating non-value-added work. As cyclical downturns become more frequent, the capability to continually eliminate unnecessary costs has become a critical enabler.

#4: Decarbonization

Oil and gas companies are under increasing pressure from politicians, regulators, investors, and consumers to reduce or eliminate emissions.

While clearly decarbonization will have a huge technological component as companies produce innovative new fuels, solutions for carbon capture, and other breakthrough technologies, operational excellence has a significant role to play.

Efficiently run machines and operations are, by definition, less carbon intensive. Operational excellence can help oil and gas operators reduce energy use, limit the use of natural resources, and run processes more efficiently to drive out carbon from the value chain.

Operational excellence can help operators tackle decarbonization in the near term by lowering carbon intensity and has the additional benefit of driving out costs and improving efficiency.

#5: Asset Reliability

Operators want to maintain their assets to ensure peak performance and improve plant reliability. Operational excellence can help support the safe and efficient operation of machines and equipment by standardizing operating procedures, improving maintenance processes, and identifying common failure modes.

Conclusion 

Operational excellence can help oil and gas companies leverage their strengths by continually improving processes, driving out costs, and paving the way for the low carbon future. Those operators who can successfully harness the power of continuous improvement will emerge competitive in tomorrow’s shifting landscape and secure the future of global energy.

Interested in Learning More About This Topic?

Our Operational Excellence in Oil & Gas Summit brings together over 300 senior level oil and gas executives at the Norris Conference Center in Houston on November 1-3. Over three days, get practical insight into how leading oil and gas companies are unlocking the power of their people to drive operational excellence and tackle the larger economic challenges facing industry. Download the agenda for more information.