The push for operational excellence in managing offshore assets
The fundamental changes set in motion in 2014 have dramatically accelerated since March 2020. The specter of peak demand is now a reality. The worldwide economy is still in the midst of a pandemic-induced retraction. Recovery in the oil and gas sector is likely to be prolonged, exacerbated by the expected downward pressure on oil and gas prices. The timing couldn’t be worse. Investors’ confidence in the industry’s ability to deliverer sustainable returns was already fragile. Now, that confidence has abruptly degraded even further.
This brings into sharp focus the need for operators to preserve and sustain healthy free cash flows. Drastic capital program reductions and aggressive cost takeout programs have become ubiquitous. But such programs can come at the expense of actual production levels. This is especially true in offshore locations, where production assets are more complex and sensitive to deferments than their onshore counterparts. In fact, we’re already seeing that some regions have achieved unit cost reductions of between 10 and 30 percent1 since 2013. Those same regions have experienced a 20 percent increase in unplanned outages since 2017. This trend is concerning. Capital is already scarce. Excessive decline rates will have a more visible impact on operators’ profitability. Health, safety and environment (HSE) implications might also be on the horizon.
The current situation is redefining the objective of offshore operations: produce more, at a lower cost and do so in a safe manner. The traditional levers of capital expenditure discipline, cost containment and production optimization are not new. But one can argue they have limited upside potential when pulled independently. Digital has the potential to bring these actions together. Doing so would change the rules of the game and push offshore performance to new heights.
The need to transform the operating model
Reaching the next level of operational performance is not easy. Functional silos, a lack of access to real-time data, the limit of humans’ cognitive abilities, and the complexity of processes all prevent the real-time, cross-functional coordination that is necessary to anticipate and react to unforeseen events. For example, responding to a well failure or a turbine trip requires the involvement of offshore operators, shore-based remote surveillance centers and other experts to troubleshoot and restore production. It can take days, if not weeks or months, to get back to steady-state operations. Figure 1 illustrates how the resolution of complex operational issues can be accelerated by up to 50 percent by using digital twin and edge devices to provide real-time visibility, insights, resolution options or straight automation.
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With a fully digital operating model, one can envision an end state of quasi-autonomous assets, manned by cross-skilled crews capable of performing multiple functional tasks with guidance and expertise from shore-based resources. This is literally the “moon shot” of the offshore industry. In the future, crews will operate smarter assets, much like astronauts do. Remote operating centers (ROCs) will take on the role of Mission Operations. The future is already here from a technology standpoint. It’s the human factor that still must be addressed. Even the leading Digital Twin providers recognize that changing ways of working is today’s critical imperative.2
Lessons from human spaceflight
Let’s go back to the space exploration analogy for a moment. I have had the great pleasure of working with NASA professionals in the past. The insights they’ve shared with me over the years are, in my opinion, applicable to the oil and gas industry. There are several lessons from NASA worth considering:
Implement a new operating model: The concept of Mission Operations—which centralizes expertise and analytical capabilities—is the only way to manage NASA’s risks and the technical complexity. The model enables highly skilled crews to work collaboratively with a central nervous system that monitors operating parameters and takes actions when unplanned events occur. This model has underpinned NASA’s operations from the beginning and stills stands today.
For oil and gas operators, a similar model can apply (see Figure 2). In such a model, professionals in remote operating centers—or offshore Mission Operations—assume surveillance, as well as intervention responsibilities. That means the number of field resources can be reduced. As NASA has taught us, “unmanned missions” make tremendous sense from a cost and risk standpoint.
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Focus on change management: In our experience, the journey to a new offshore operating model can’t be digitally led. That’s because the industry’s legacy assets and entrenched operating models are quite challenging to transform. The human factor is now the bottleneck. NASA faced similar hurdles. Its operating model works because the organization focused on more than building technical know-how. For NASA, a high level of trust and a clear delineation of roles between the crew and Mission Operations are critical. So are staff selection, training and an ongoing commitment to learn from past missions.
The same is true in offshore oil and gas. Transitioning to a new, more collaborative model will require rethinking skills, resource levels and roles for offshore and shore-based resources. But the effort is likely worth it. In my work in the industry, one operator was able to not only reduce offshore staffing by 40 percent, but also boost its engineering capacity by 20 percent.
Continuously innovate: Most space programs are aspirational in nature and often dependent on the development of new technology. This was certainly the case for the moon program. Today’s computing capabilities for the Space Station program have nothing in common with ones used to land on the moon. New work processes and skillsets are always required.
There’s a valuable lesson here for offshore transformations. Greenfield projects should incorporate digital infrastructures, data management and applied intelligence capabilities from the get-go. The goal should be to create an environment that enables innovation in new, potentially high-impact areas. Programs aimed at transforming legacy assets, on the other hand, need to apply a phased approach to innovation—starting with tackling parts of the production system that complement operations, then building trust and finally establishing new ways of working across the organization before the innovation can be more broadly scaled.
The implications for offshore oil and gas
There are clear advantages to moving to an operating model of the future. Benefits can impact all aspects of an offshore project. Faster operational decisions can help reduce downtime. Fewer offshore crew members would likely require smaller living quarters and lower labor cost. More advanced predictive capabilities, enabled by new technologies, can possibly lead to changes in spare parts and design redundancy strategies, optimized logistics and smaller deck space. Most importantly, all these benefits can be achieved without compromising HSE performance.
The industry is at the beginning of the journey to a future offshore operating model and quantifying the full benefits is challenging. We do see, however, very encouraging results. Digital investments are paying for themselves within a year when operators use them to support real-time operations.
Disclaimer: The views and opinions expressed in this document are meant to stimulate thought and discussion. As each business has unique requirements and objectives, these ideas should not be viewed as professional advice with respect to the business.
1 Accenture analysis; Rystad Energy, Oil Markets Database, January 2020
2 “The What, How and Why of Digital Twin”, Kongsberg Digital, January 2020, https://www.kongsberg.com/digital/resources/stories/2020/1/the-what-how-and-why-of-digital-twin-by-kongsberg-digital