Micro-KPI analyses, drilling automation among key strategies for efficiency amid industry’s deepening cost challenges
By Linda Hsieh, Managing Editor
From your perspective at Shell, what do you see as the most critical challenges that the industry faces in 2015?
Safety remains our top priority and boundary condition in our drive for performance. Beyond that, right now the biggest challenge is cost. The industry is in the midst of a downturn cycle – we have to become more efficient to deliver our wells and production safely at competitive cost. That is our critical business focus at the moment.
How will Shell go about achieving cost reduction?
There are several tactical approaches we can take to impact cost. In the short term, we can work with our contractors to get commercially better deals. For some projects, we’ve taken a longer-term view by making commitments to multiple rigs for 10 years. This means we invest across the business cycle rather than at the whim of the market.
We can also take a more disruptive approach, such as our well manufacturing joint venture partnership with CNPC. This is where we provide innovative rigs and services through our joint venture rather than relying on the market. The goal is to be cost competitive at a time when the oil price puts pressure on viability of projects, not just for Shell but for all the major operators.
And we continue to work hard on improving our operational performance – both by reducing downtime with a focus on front-end engineering, planning and quality control, as well as looking for innovation and technology solutions to improve drilling and completion construction time and costs.
Does Shell see automation as a key technology for keeping its projects economically viable?
It’s definitely one of them. We believe we’re making real progress on automation and are quite excited about it. We’ve reached the point where the machine can out-perform the human in terms of drilling a hole section consistently – not by a little bit but by a significant amount.
This will definitely have an impact, but it’s not a silver bullet. So it is one of our strategies, but it’s not the only thing.
Since wells performance is one of the focal points in your role at Shell, what are the most important factors you consider when evaluating the performance of a well?
First of all, we must identify what we want to get from the well. Is it information? Is it production? Is it appraisal? Getting clarity on this sounds trivial – but it’s often lack of this clarity and the knock-on impact on well functional specification that drives our costs up. Then we use that information to drive the well design process. The better we get at executing that process, the better we’re going to be at reliable, competitive results. Shell has fantastic processes in place – we just need to apply them effectively to deliver quality wells.
Of course, at different points along the way, we need our contractors and service company partners to give their input – tell us what could go wrong, what opportunities there are to design it better or how we can set it up to be more effective.
You touched on automation and how it can drive performance. Where else is Shell looking for performance improvement?
I see a lot of opportunity going forward in terms of data. I’ve seen quite a few examples demonstrating that having transparency of what’s happening operationally and in the planning phase allows us to improve performance. Shell has adopted an approach that we call Micro-KPIs. It measures and tracks small-scale activities on our rig operations.
As an example, we’ve used this approach to improve the time it takes to make connections. For a given hole section, with the same set of downhole conditions, there can be a massive range of connection times across similar rigs in the same area. On one field, we found that connection times varied from four minutes to 16 minutes. In many cases, it comes down to the human approach to making connections that creates the variation.
I want to emphasize that we’re not saying the rig needs to rush and make every connection four minutes. However, we need to understand the reason for that variation and then have a discussion about how to narrow it. Almost every time we take this small-focus approach to an individual operation, we see opportunity for improvement.
What results have you seen?
In one field, we used Micro-KPIs to look at connection times on two jackup rigs. One rig was consistently much faster than the other rig, and we couldn’t work out why. Eventually, we sent the driller from the slower rig to the other rig. He realized that it came down to a specific operational procedure. On the faster rig, when they got to the end of a stand of pipe, they would backream a single, or 30 ft of the stand. That was their operating procedure.
On the other rig, they would backream the whole 90 ft. Both of them were following procedure, and both of them thought they were doing the right thing. Yet, one rig was doing a third of the backreaming with no downside.
The driller from the slower rig went back, changed the procedure, and immediately there was a difference. This sort of small-scale focus allows us to really understand the operational steps of how to do something and then be able to compare to somewhere else with better performance. We can then identify where there is waste in those steps and concentrate on removing them.
What challenges are associated with taking this approach?
I want to go back to my caveat on HSE. There is a risk that drill crews might misunderstand it – to quote a specific comment I heard: “You want me to run and get the hammer.” My response is, no, I want you to have the hammer here when you need it. You don’t even have to walk to get it – it’s here. That requires thinking through what you’re going to do and having really detailed, good-quality planning. It also requires everybody being aligned on the plan. We get a heck of a lot of performance – time, cost and safety – from making the right plan, particularly at the engineering stage. This means we must be good well architects.
Equally, there are significant opportunities in how we work with the contractor, how we create shared understanding about the operational steps we want to take and how we use tools like the Micro-KPI to improve performance.
Then, going back to what we started with, is the commercial piece. We could have fantastic design and brilliant execution, but if we’re paying too much for renting the rig, the services or the materials that we put in the well, then we won’t be performing either. It’s about finding a balance between engineering design, operational performance and the costs of the goods and services that we pay for.
Shell has made significant efforts around process safety in recent years. What improvements have you seen in process safety, and what would you like to see your business partners do?
We’re focused on three key components to process safety, the first being the people component and ensuring their capability and competency. If you get on a plane and the pilot tells you, “My pilot license is out of date, but don’t worry, I’ll be OK,” you would probably get off the plane. If you take the same approach to our industry, it’s not acceptable for a driller in charge of the well control equipment on a billion-dollar operation to say, “Don’t worry, you can trust me. My qualifications are out of date, but it’s OK.” Driving competency and assurance of that competency is really an important part of process safety. There is another aspect to the people part, which is about a process safety mindset. We have addressed this with our “Think Process Safety” initiative that creates awareness and understanding of 10 critical aspects to keep a well safe.
The second component is technology and equipment. New technology development, such as better BOPs, is ongoing. There are a number of joint industry projects to address both the barrier side to prevent incidents and the mitigation/response side.
Then, the third component to process safety is the process part, which refers to the management systems and standards we have in place. Since Macondo, the whole industry has been looking at how we can give ourselves better assurance and give our people better clarity as to what our expectations are. I think the challenge is to create these processes in a way that people at the wellsite understand what they’re expected to do. There’s always a danger that we create thousands of pages of rules and expectations that are not user friendly, so we have to be clear on what we expect. That gives us the confidence that we’re doing the best we can from a process safety point of view. To some extent, the earlier mentioned “Think Process Safety” elements are helping in that regard to keep focus on the critical things.
As the industry works to improve process safety, it’s incumbent upon us to maintain efforts around personal safety, as well. What are the key challenges you see there?
I strongly believe that the industry needs to fix the dropped objects problem. The majority of high-potential incidents are in dropped objects. There has been an ongoing campaign for the last few years, and we’ve seen some progress, but these incidents have not been eliminated. Obviously, safety in its broader context is critical, but personally I see dropped objects as a key issue that needs to be addressed immediately.
We’ve talked about optimizing the drilling process, via automation technologies and processes such as Micro-KPIs. What about the completions side? What can the industry do to improve its efficiency there?
Actually, a lot of what I’ve talked about isn’t just relevant to the drilling process. The Micro-KPIs approach and our well delivery process are equally applicable for completions. It’s a good point, though, that automation has so far been focused on the drilling phase. When you look at a land well in Texas, less than half of it is drilling time – so if we want to make a big impact on the performance of these wells, we need to focus on the completion phase, too.
So would you like to see more automation of completion activities?
Yes, but when it comes to performance, completions are more challenging because it’s not such a consistent, mechanistic approach. There are opportunities for optimization around the frac job in terms of automation technologies and using a machine to manage the combination of pumping, blending and the frac itself. For us, though, that’s a way back compared with the maturity we’ve achieved in automation in the drilling process.
Shell has built quite a bit of experience in drilling unconventionals, especially in North America. Have you been able to transfer key learnings from those operations to emerging shale areas like Argentina or Algeria?
In early 2012, Shell slightly reorganized itself along business lines instead of geographical lines for exactly that reason. We now have a line of business that includes all the unconventional business in North America, as well as Argentina, China and other countries in the world. This team, with all of the experience that they’ve gained from North America, is the same team planning, executing and coordinating wells across the countries within which we have unconventional operations.
This structure and the ability to put experienced people into new operations have really paid off. On one field in China, we’ve got to a point where the wells are as competitive time and cost wise as some of the wells on our older fields in North America. For a relatively new country entry, that is a fantastic result. We couldn’t have done it if we didn’t have that connection with the team that works in North America.
How close are you to achieving a true mass-scale manufacturing mode with these resource wells, either in more mature or emerging regions?
I don’t think it’s so much the technology that holds us back. It’s the play. A misconception in the early days of the business was that you would visualize these fields as 20 rigs lined up on 20 pads, and they’re all drilling exactly the same design and geometry of well. It’s more heterogeneous than that, and there is a degree of engineering needed. You need careful placement of the wells to get to the sweet spots, and that means it’s quite difficult to get completely into a factory-style approach. However, we get fairly close in our projects that deploy tailored approaches by our Sirius Well Manufacturing Services joint venture in countries like Australia and Canada.
Let’s look further at the people part of the business, which is so critical to the industry’s success. What impact do you think the industry’s focus on cost reduction will have on personnel and training in the next year?
If there is a reduction in activity, the focus naturally shifts away from high volumes of recruitment, but we do need to continue to recruit through the cycle because we continue to lose experienced people in the Big Crew Change. We also recognize that we have invested heavily in the development of the existing talent within our workforce. They have committed to us and the industry, and we need to retain this capability for the next upturn.
Another critical challenge I see in terms of people is that the industry must continue to consciously manage diversity in the workplace. Having a diverse workforce in terms of gender, age, nationality, disability and sexual orientation adds real value, and it adds to our bottom line. If we can leverage diversity in the right way, we achieve better creativity, better balance and more effectiveness.
Across our operations, for example, we’ve been concentrating on recruiting a more balanced proportion of men to women. The current ratio between men and women in this industry is still disproportionate to almost any other industry. We must work harder to ensure the attractiveness of our industry to all segments of the workforce during the full course of their careers.