Oil Major Slashes OpEx by 10% with Strategic Maintenance Planning

Solomon cost efficiency analysis identifies potential 51.5M USD in cost cuts from operator’s continuous improvement cycle.

CONTINUOUS IMPROVEMENT OR CONTINUOUS COST?

Seeking to deepen its implementation of Solomon’s comparative performance analysis as a cost savings strategy, a major international oil company participated in Solomon’s Worldwide Offshore Production Operations Analysis (Offshore Study) in 2015. With worldwide assets onshore and offshore, the company offered multiple assets for review and assessment, hoping to address common challenges across its global portfolio, specifically within its continuous improvement cycle.

PREVENTIVE MAINTENANCE PROVIDED FEW GAINS

The Solomon study team evaluated the company’s operating costs using its proprietary normalization models to assess cost and efficiency. Analyzing cost on both competitiveness and efficiency bases, Solomon benchmarked the company’s OpEx against that of its peers. The team also performed an in-depth analysis of cost drivers to look for correlations between costs and activity levels.

To address the company’s organizational challenges regarding the cost of maintenance, the analysis had two primary areas of focus: production efficiency and surface repair and maintenance.

Key cost drivers for the company were turnarounds and planned maintenance shutdowns. Solomon’s study quickly revealed that the company was not only investing too much capital in and spending too much time on planned maintenance shutdowns, but also that it was not reducing production loss due to trips, outages, and failures.

SPECIFIC PAIN POINTS FOCUSED COMPANY ACTION

Three key findings from Solomon’s analysis illustrated new cost-saving opportunities for the company to focus on:

1. Surface and repair costs were excessive. The high productivity of the company’s global assets masked the costs evident from a unit-cost-per-barrel analysis. Solomon’s study normalized the data for scope and scale, revealing many surface and repair costs to be unjustifiable.
2. Higher maintenance spending did not benefit field production efficiency. Planned maintenance generally did not result in fewer outages or less unplanned downtime. Turnaround duration frequency, complexity, and timing brought the execution of preventive maintenance into question.
3. Planned maintenance deferrals adversely affected production efficiency. Too much work was being deferred to shutdown periods, affecting duration, cost, and reliability.

Equipped with Solomon’s analysis, the company was able to focus specialized task forces on addressing each key issue across its global assets.

After implementing its teams, the company reported cost reductions of 10% to 30% with an overall reduction in OpEx of 10%. In one asset group in which Solomon identified 38M USD of maintenance cost opportunity, the company’s continuous improvement maintenance focus team expanded those findings to 51.5M USD.

SMARTER PLANNING FOR SIGNIFICANT SAVINGS

Reducing the duration and frequency of planned maintenance shutdowns resulted in a significant production revenue benefit. If the company sustains these reductions, a total production efficiency benefit of at least 5% is expected. If turnaround durations are reduced, further cost savings should result, as time is directly proportional to spend.

Solomon has outlined 10 steps for continuous improvement, the first six of which are performed as part of our studies (Figure 1). Steps 7 through 10 ask that operators make assessments and take action based on the findings in the first part of the cycle. Solomon is always available to help guide these final steps, and we recommend operators complete them before the next benchmarking cycle. That way, the benchmarking can be used to verify absolute and competitive improvements.