Driving operational performance in oil and gas

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T o p b u s i n e s s i s s u e s I n d i i o n o f n d e n f i n e p l o i o n , g l o b i i o n o f i n d i l e i n g o o n n , i n g i o n f n g m o o e o f p e o n n e l d e p e e n . n n i n g o l i n e o o p e e , l e e i n g n i e n o n i n e m e n , n e e b e e n m o m p l i e d o d i f f i l . W l e i d l g i n g e o l o g d o e l d o p m i e o f f o i n g i n d , i n i n g e f f i e n d i m p i n g l , f l l i n e g i n g e n e e o l o g i e i n o d - o - d o p e i o n d i i n g p m i e m n e l i e . ad t t t he u am t al s hi t x rat t he al z at t he u s t ry s ad t re s u rce co s t rai t s w t h ce rt ai re s aci a aj r t u rn v r rs an x ri ce Mai t ai a s ci al ce s t rat w hi achi v co s s t t re t u rn s v s t t s has v r re co cat r cu t hi rap y chan t chn y s ho u t t he ro s t ran s rm t he u s t ry cre as ci cy an ro v re s u t s s u cce s s u y t rat t he s t chn s t ay t ay rat s an re al z t hat ro s re ai s u s v O v e r 5 0 % o f g l o b al p ro d u ct i o n co m e s f ro m as s e t s b e y o n d t he i r m i d p o i n t o f t he as s e t l i f e cy cl e . A g i n g a s s e t s T he e x i s t i n g i n f ras t ru ct u re an d as s e t s w i t hi n t he o i l an d g as i n d u s t ry are co n t i n u i n g t o ag e , re s u l t i n g i n i n cre as e d risk of equipment f ai l u re s . D r o p p i n g o i l p r i c e T he re ce n t an d s u s t ai n e d d ro p i n o i l p ri ce has hi g hl i g ht e d t he s u b s t an t i al i m p act o f t he s e t re n d s . Mo s t E & P co m p an i e s hav e b e e n f o rce d t o re d u ce t he i r cap i t al spend outlook in favor of reducing costs and increasing operating e f f i ci e n ci e s . $120 $100 B O E p e r d ay produced per US$m i n cap i t al has d e cre as e d b y 1 1 % Y O Y o v e r 2008- 12. $80 D e c l i n i n g e f f i c i e n c i e s P ro j e ct p l an n i n g $60 an d e x e cu t i o n are b e co m i n g m o re $40 chal l e n g i n g d u e t o t he t e chn i cal n at u re o f $20 t he p ro j e ct s as w e l l as March 2013 March 2014 March 2015 f i n an ci al i m p l i cat i o n s . Declining E & P operating efficiency B O E p e r d ay p ro d u ce d p e r $m cap i t al e m p lo y e d acro s s I O C s 1 45 41 11% y o y d e cl i n e 37 30 27 2008 2009 2010 2011 1 E Y an al y s i s b as e d o n d ata f ro m an n u al re p o rt s f ro m E x o xn , B P , R o y al D u tch S he l l , C he v ro n , T o tal an d E N I . 2012 4
Low oil prices highlight the effects of inefficiencies The sustained reduction in oil and gas prices, coupled with a forecast of modest recovery, requires the industry to apply increased f o cu s an d ri g o r t o o p e rat i o n s p e rf o rm an ce . W hi l e n e w e x p l o rat i o n an d g ro w t h w i l l al w ay s b e a co rn e rs t o n e o f u p s t re am o p e r achi e v i n g a b al an ce b e t w e e n n e w as s e t d e v e l o p m e n t an d e x i s t i n g as s e t o p t i m i z at i o n i s b e co m i n g i n cre as i n g l y i m p o rt an t . improve operational performance and economics could have lasting effects on a company’s long-term growth and viability. I n t he cu rre n t l o w - p ri ce e n v i ro n m e n t , p e rf o rm an ce g ap s hav e b e co m e e v e n m o re p ro m i n e n t d u e t o a he i g ht e n e d aw are n e s s among investors, stakeholders and employees. The present low oil price is disruptive by nature and calls for more than just rapid re d u ct i o n o f co s t t hro u g h d o w n s i z i n g o r b u d g e t cu t s acro s s t he o rg an i z at i o n . T he d i re ct i m p act s o f t he cu rre n t l o w - p ri ce are p re s e n t e d i n t he t ab l e b e l o w , i n d i cat i n g t he re as o n s f o r e x p e d i t i n g o p e rat i o n al e x ce l l e n ce . I m p a c t o f l o w o i l p r i c e a n d h o w E Y o p e r a t i o n a l e x c e l l e n c e c a n h e l p S i t u a t i o n • C as h co n s t rai n t — e x i s t i n g O & M b u d g e t s w e re cre at e d d u ri n g p re v i o u s o i l p ri ce f o re cas t s , an d i n re s p o n s e , co m s l as hi n g t he m . • Declining asset uptime — blanket budget cuts are creating risks of equipment failure and production output. • Insufficient performance measurement and governance — when company performance begins to lag industry leaders, o rg an i z at i o n s t e n d t o o p e rat e i n s i l o s w i t h l i t t l e g o v e rn an ce . • Expectation to “achieve more with less” — organizations are required to maintain margin by reducing costs and meet stakeholder expectations, • Cost efficiency — the rise in the cost of fuel has increased the focus on fuel loss. The loss of fuel occurs throughout the s u p p l y chai n . • Operational excellence viewed from employees’ perspective — when organizations focus on cost efficiency, employees may n o t s hare t he s am e p ri o ri t y . p an i e s I m p a c t • O rg an i z at i o n s are f o rce d i n t o ran d o m cu t s an d s l o w e d g ro w t h t hat i m p act s l o n g - t e rm co rp o rat e o b j e ct i v e s . • ►Instability in achieving production targets becomes an issue, risking production revenue. • Without continuous improvement, organizations can’t capitalize on ideas and leverage leading practices. • Organizations are required to identify savings from existing contracts • F u e l l o s s i s p ro m i n e n t acro s s t he i n d u s t ry , has d e v as t at i n g e f f e ct s o n b u s i n e s s e s an d n e e d s a t ho ro u g h i n v e s t i g at i t hw art f u rt he r l o s s e s . • When organizations focus on cost efficiency, employees may view this as a decrease in capital investment and may become l e s s e n g ag e d . • Mi s ap p ro p ri at i o n o f co m p an y i n t e l l e ct u al p ro p e rt y m ay o ccu r f o r p e rs o n al g ai n , an d acci d e n t al l o s s can o ccu r t hro u g h negligence. Data breach incidents can be high profile and expensive and may result in reduced value of the organization’s IP. H o w w e c a n h e l p • Free up operating cash through intelligent supplier and contractor management and by building cost efficiencies. • I m p ro v e re l i ab i l i t y an d p e rf o rm an ce t hro u g h as s e t re l i ab i l i t y an d i n t e g ri t y m an ag e m e n t . • Gain consistency across operating groups and a governance framework all by having a defined operating model and ap p l y i n g t he i n t e g rat e d b u s i n e s s p l an n i n g ap p ro ach. • I m p ro v e p ro j e ct p e rf o rm an ce b y i m p l e m e n t i n g b e s t p ract i ce s an d cre at i n g s t an d ard i z at i o n acro s s p ro j e ct s • Generate savings through identification of duplicate payments, overpayments and erroneous payments • Capturing data and leveraging continuous improvement to compress repetitive processes and maximize efficiency • I d e n t i f y are as f o r i m p ro v e m e n t an d p ro v i d e p ract i cal i n p u t t o f u t u re co n t ract n e g o t i at i o n s b y g ai n i n g a d e t ai l e d u n d e rs t an d i n g o f co n t ract g o v e rn an ce p ro ce s s e s • Determine whether the key driver of fuel loss is due to inadequately skilled staff, damaged equipment or collusion. • Quantify potential loss and provide recommendations for improvements through forensic analysis of technical, operation and financial data pertaining to the production and allocation of fuel. • I d e n t i f y i n d i cat o rs o f p o t e n t i al l y s u s p i ci o u s act i v i t y , i n cl u d i n g u n au t ho ri z e d s y s t e m an d d at a acce s s o r d at a harv e s • Embed and assist with the implementation of information governance program that aligns with the organization’s risk m an ag e m e n t s t rat e g y . 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Page 3 and 4: 1 E x e cu t i v e s u m m ary T he
Page 5: I n d u s t ry o b j e ct i v e s O
Page 9 and 10: T he an at o m y o f o p e rat i o
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Page 15 and 16: 1 2 3 We identified three main reas
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