Managing Upstream Oil & Gas Producing Assets

Based on a workshop sponsored by PTTC's Central Gulf Region, held on September 17, 2003 in Baton Rouge, Louisiana.

BOTTOM LINE

Upstream oil and gas assets must be managed using an integrated, cradle-to-grave plan to optimize efficiency and maximize profits. The life of a field must be guided by a clearly defined scope of work, a detailed project execution plan capable of handling all contingencies, and a planned ability to manage change. Large old fields that are in decline are often excellent candidates for a field optimization study that will examine the total field production operations with the objective of improving profitability through identifying opportunities for increased production, decreased costs, and improved water management strategies. Using integrated workstation data collection and economics tools throughout the lifecycle of a field can ease management problems by turning decisions into desktop exercises.

PROBLEM ADDRESSED

Upstream oil and gas assets must be managed in order to optimize project efficiency and profitability. Integration must be built into the three necessary aspects of project management, which are: a clearly defined scope, a project execution plan (PEP) and ability to manage change. A scope statement defines the job and will therefore help to keep costs low and minimize schedule duration. The PEP defines how the job should be accomplished and must include contingencies for all project activities. Because change can be good or bad, depending on how it is managed, the ability to manage change must be built into projects from the beginning.

One way to know whether any project can be improved is to create a snapshot of before and after conditions. This is done by a Field Optimization Study (FOS). Previously conducted FOS studies indicate that improvement of production facility operations can lead to increased production, more efficient produced water handling and realization of significant profits. The best candidates for these studies are large or complex mature fields where more than 75% of the recoverable reserves have already been produced, present production is less than 25% of peak production and minimal workovers have occurred. Potential improvement through FOS is typically 4-6% for production and 20-22% for costs.  

KEY WORDS:

Change Management, Desktop Data Handling, Field Optimization Study, Integrated Project Management, Managing Mature O&G Assets, Project Execution Plan

SPEAKERS

Raymond Piper, Integrated Project Management
Business Improvement Solutions

Alasdaor Brown, EPS America Incorporated
Data Management

Bryant Mueller, Schlumberger Information Solutions
Desktop Solutions

Donald E. Johnson, Metrics Consulting
Improving Profits from Mature Fields
 

TECHNOLOGY OVERVIEW

An Integrated Approach to Project Management
In the last ten years there has been unprofitable growth for many companies. Return on capital has not been great and there has been poor performance on asset development. New reservoirs are less profitable than before and volatility often erodes the rationality used for selecting projects. However, much of this downtrend has been self-inflicted by failing to integrate the multiple disciplines that contribute to asset development.

Poor reservoir project management practices include: schedule-driven rather than data-driven projects, reduction of appraisal activities, poor front-end loading for facilities and drilling, minimal owner involvement, inappropriate contracting strategies, company politics, and ignoring known better practices.

However, by following better practices, asset growth costs can be consistently reduced, scheduling is consistently better (less slippage), and "operability" (first year operational costs as % of the Plan) can be improved.

Successful project management requires a clearly defined scope, a project execution plan (PEP) and ability to manage change. The scope defines what the job is. The project execution plan defines how to do the job. And change management will define how to anticipate and handle change.

Integration must be built into each of these three aspects of project management. A scope document improves definition of "front-end loading" in order to keep costs low and minimize schedule duration. The project execution plan must include contingencies for all project activities. The contract strategy is more important than the type of contract. Use the PEP to determine how to use a risk-funding approach and share project risk with contractors. Change management needs to be planned from the beginning of the project. A key to managing change is to understand the trade-offs between cost and schedule. Project problems cannot be solved by just throwing money at them. Change can be good or bad depending on how it is managed.

Integrated project management is not an accident. Data analysis rather than mindless data preparation promotes forecasting. Make sure that the project managers are trained, or even certified, in all areas of the project to facilitate understanding of what it takes to integrate the data.

Improving the Profitability of Production Facilities in Mature Fields
One way to know whether any project can be improved is to create a snapshot of before and after conditions. This is done by a Field Optimization Study (FOS). Field Optimization studies conducted on more than 350 production facilities indicates that more than 2.5 billion dollars per year could be saved/gained. Clearly, mature production facility operations can be improved.

FOS is a comprehensive systematic investigation of the complete field production operations. The objective is to improve profitability of mature oilfields through increased production, decreased costs, and improved water management strategies. Water cut is a major problem for most mature fields. Average worldwide water cut is 75% and increasing. Increased water cut is related to reduced recovery, surface facility bottlenecks, and increasing disposal legislation. Using external consultants/experts can often bring fresh insights to old problems.

Potential improvement through FOS has been shown to be typically 4-6% for production and 20-22% for costs. The opportunity for improvement lies in the fact that generally 80% of the profit comes from only 20% of the properties in the company portfolio. These studies can identify opportunities for immediate increase of production and lowering of operating costs. Identifying opportunities with an FOS will increase field economic life and lower capital cost (it is cheaper to enhance production than to develop new production).

For an FOS to be successful, the critical steps include:

• Understand the specific production system and operating structure
• Understand current production objectives and historical performance
• Understand operating procedures and constraints
• Observe the current operation
• Collect and document operating performance data
• Interview Operating and Management Personnel to understand why and how work is undertaken

FOS candidates tend to be large or complex mature fields with more than 75% of the recoverable reserves already produced, have present production less than 25% of peak production, and have had minimal well workover or stimulation activity.

FOS study procedures begin by defining the scope and objectives, and documenting the project expectations. Based on the project objectives the FOS team is then formed. The team must prepare for the field visit. Preparation activities include communicating with the field operations personnel the purpose of the visit, reviewing all available technical information, and preparing for language issues on international sites. The field visit is used to gather data and establish a feedback communication loop with the field organization. The field data must be verified and organized into usable form based on the study objectives. Finally, opportunities for improvement must be defined based on risk/reward evaluation.

Critical data must be reviewed with the field organization prior to presenting the report to ensure avoiding misinterpretation. Opportunities are prioritized and potential risk levels must be pointed out and quantified. A cost/schedule of implementation is prepared along with an economic impact forecast. Findings and recommendation should be outlined in a preliminary report for initial review. After the initial review, a formal presentation of the final report is delivered to management along with an action plan.

Turning Oilfield Data into Desktop Decisions
Bryant Mueller discussed how using integrated workstation data collection and economics tools throughout the lifecycle of your field can ease management problems by turning decisions into desktop exercises where all the important data are easily and quickly available. Alasdar Brown followed up on this theme by suggesting the use of proprietary desktop programs offered by EPS America Inc. of Houston.

CONNECTIONS:

Raymond G. Piper
Business Improvement Solutions
810 Bright Ember Court
Houston, TX 77062
Phone: 281-794-1387
Email: BISinfo@houston.rr.com

Alasdaor Brown
EPS America Incorporated
16430 Ten Park Place
Houston, TX 77084
Phone: 832-455-8290
Email: alasdair.brown@e-petroleumservices.com

Bryant Mueller
Schlumberger Information Solutions
5599 San Felipe Suite 1700
Houston, TX, 77056
Phone: 713-513-2504
Email: jmueller2@slb.com

Donald E. Johnson
Metrics Consulting
615 Birdsall St.
Houston, TX 77007
Phone: 713-557-8219
Email: dejohn1937@aol.com
 

For information on PTTC’s Gulf Coast Region and its activities contact:

Mr. Robert H. Baumann, Managing Director
Center for Energy Studies, Louisiana State University
Energy, Coast and Environment Building
Nicholson Drive Extension
Baton Rouge, Louisiana 70803
Phone 225-578-4400 Fax 225-388-4541
E-Mail rbaumann@lsu.edu

Disclaimer: No specific application of products or services is endorsed by PTTC. Reasonable steps are taken to ensure the reliability of sources for information that PTTC disseminates; individuals and institutions are solely responsible for the consequences of its use.

The not-for-profit Petroleum Technology Transfer Council is funded primarily by the US Department of Energy’s Office of Fossil Energy, with additional funding from universities, state geological surveys, several state governments, and industry donations.

Petroleum Technology Transfer Council, 16010 Barkers Point Lane, Ste 220, Houston, TX 77079
toll-free 1-888-THE-PTTC; fax 281-921-1723; Email hq@pttc.org; web www.pttc.org