Every barrel (now) matters

Elaine Maslin

February 1, 2016

A relentless focus is required to maintain and optimize production on often aging North Sea assets. Elaine Maslin reports.

Wintershall’s Brage platform.
Photos from Wintershall. 

Optimizing production and increasing efficiency is rising on the agenda in a low oil price world, not least in the North Sea.

It needs to. On the UK Continental Shelf (UKCS), production efficiency, a metric of how much production facilities produce compared to how much they could produce, fell year on year since 2003, dropping from 80% to 60% in 2012. At the same time, costs increased – by 9% year on year since 2000 – and staffing levels have increased, by 9% in terms of staff per barrel produced, according to figures from consultancy McKinsey & Co.

The good news is that, under pressure from sub-US$50/bbl and even sub-$30/bbl oil prices, there are signs the industry is starting to get a grip. Production efficiency looks set to be closer to 70% in 2015, according to the UK Oil and Gas Authority’s exploration and production director Gunther Newcombe, speaking at trade body Oil & Gas UK’s Aberdeen breakfast briefing early December.

What’s surprising, McKinsey suggests, is that production efficiency is not necessarily directly correlated to spending.

“What’s worrying is that the increase in production losses on the UKCS has mirrored the increase in costs, i.e. although opex spending increased – from £150-400 million (US$217-581 million) – production efficiency didn’t improve,” McKinsey analyst Dan Cole says. McKinsey has looked into the causes behind the fall in production efficiency, using its global offshore benchmark that is based on a database of more than 100 fields on which operators have provided data around production, costs and safety. According to the data, the cost increase breaks down to about 20% due to increased activity, 40-50% due to increased input costs, and then 30-40% due to greater inefficiency.

Plant failures

Brage platform.

Cole, who was speaking at Offshore Network’s Production Optimization conference in Aberdeen late last year, says a large part of the inefficiency on the UKCS has been due to plant failures, but also export losses, through third-party infrastructure shutdowns. In Norway, the issue has been reservoir-based, due to problems such as scale build-up in wells, sand production, and water injection issues, Cole says. When McKinsey tried to look at the data to find relationships between spending levels and reliability, there were no obvious links. “We tracked facilities over time,” Cole says. “One reduced costs and efficiency fell. Another maintained higher efficiency, but costs increased. The interesting assets are those maintaining efficiency, but also reducing costs.”

One trend that was seen was that those assets with the lowest cost increases had some of the highest production efficiency.

McKinsey then compared two assets of similar size, age, and capacity, one from the top quartile of performers, to see what they were doing differently. On one, A, production efficiency and costs had been maintained, on the other, B, it had gone down.

Cole explains that A’s production efficiency was consistent, with loss tracking embedded into the organization. This meant reliability experts from outside the industry were brought in. Additionally, there was a huge focus on cost. “Everyone knew the numbers,” Cole says. “They also put senior operations guys into the supply chain to have a much more positive relationship with the supply chain.

“Those things were largely absent on the other asset,” Cole explains. “What drives good performance is not age, operator size or type, its operator practices being embedded into the operation.

“[On A, the operator had] removed barriers, gave freedom to operators to get ideas out. This helped debottleneck and saw a 12% production increase, taking them from 80,000-95,000 b/d since crisis, with half of that implemented in three months.”

Identifying the “stars” in the organization also helps, Cole says. McKinsey looked at the relationship between production and shifts and found one operator, whenever he was on the platform, caused a 5-8% increase in production, a figure that was higher when compared to the worst performing team.

“He reset the platform, tuned it,” Cole says. “We should use these guys. What are they doing and why is this not shared? How do you capture this?”

In this instance, when asked to share what he did, the operator, who was close to retirement, said he didn’t want to embarrass the other team, which also raises the issue of how you embed knowledge into an organization as people leave.

When it comes to it, “The best performers have a high focus on data and quality management,” Cole says.

Improving uptime

Wintershall’s Brage platform. 

Duncan MacFarlane, a production technologist at Maersk Oil, based in Aberdeen, has been looking into production efficiency on a floating production unit (FPU), which is being decommissioned. His work first looked at industry best practice, and then how this compared to what was happening on the FPU, which had been on station in the UK North Sea for nearly 20 years. The idea was to see, if it was redeployed, how production efficiency could be improved, while minimizing capital spending.

According to best practice literature, “efficiency should be driven from all levels of the company. Organizational change is key to improving efficiency,” MacFarlane says. Best in class prepared for high impact low frequency events and understood their losses. Other ways to improve production efficiency were benchmarking through industry events and bodies such as the Production Efficiency Task Force, as well as effective communication, monitoring key performance indicators, and using digital oilfield technologies - such as real time data optimization, condition based monitoring, for preventative rather than reactive maintenance.

Armed with a view on how it should be done, MacFarlane looked at losses and costs on the FPU between 2008 and 2014, as well as uptime compared to the wider industry and company strategy.

The unit had failed to meet its target operational efficiency – both its own KPI and the industry target of 80%, MacFarlane says. The top two major planned and export production loss events, amounting to more than three days of lost production, were third-party export infrastructure outages. Other major production loss events were a subsea skid installation and some well intervention work. These together amounted to 16.4 days of planned losses a year.

By far the greatest influence on production losses were major losses that were not planned or export-influenced, amounting to 53 days per year. Integrity was the leading root cause of failures, with 55% of integrity issues associated with minor losses due to hydrocarbon weeps or leaks, followed by “human error.”

Some 22% of all production efficiency losses were minor losses, mostly caused by compressor and turbine failures, with unknown roots causes. Gas compressors accounted for the greatest amount of downtime and controlled shut downs, but also trips. Turbines were responsible for the greatest amount of downtime associated with delayed start-up.

But, something of a concern – and an opportunity – was that 59% of root causes of minor losses were unknown. “There was no record and that’s a key area of work for the future,” MacFarlane says.

Interestingly, MacFarlane found that the number of trips per month looked correlated with harsher weather windows. “As wave and wind increased, trip frequency increased,” he says. Temperature didn’t seem to effect performance, but more work would need to be done in this area.

Concluding, MacFarlane says that it looked like learnings were not passed on. The maintenance strategy was reviewed and while it set out to be best in class, and replicated the literature, there were no procedures, work flow or process flow to follow it. It was just written down, he said. Echoing Cole’s comments, culture and organizational structure would need to adapt if change was to happen in this area, MacFarlane says.

Reviving an aging asset

Wintershall has been putting production efficiency at the top of its agenda on the Brage platform offshore Norway, in this case, as the new owner of an old asset. Brage had been due to cease production in 2015, but after being bought by Wintershall in 2013, it is now due to continue producing until around 2030. The field started production in 1993 under Hydro, and was operated by Statoil from 2009-2013.

After taking over the asset, the focus was on improving health, safety and the environment, production efficiency, cost and volume. Wintershall increased production efficiency in 2015, while opex costs were cut from NOK1.3 billion ($146 million) in 2014 to about NOK 950 million ($106 million) for 2015.

“Is it a revolution? No, it’s just hard work,” says Alv Bjorn Solheim, technical director and deputy managing director, Wintershall, speaking at the Production Optimization event. “When you look at the efficiency plot for 2015, we have improved efficiency from 80% to 94% and we are on 95% now. It has been a huge amount of work, including by the people offshore. We have not done any particular thing. We have done a lot of small things.” The team also looked at what the “A team” was doing to increase production, some times more than 10% compared to the other shift, then shared this.

“For me, it is about focus,” Solheim says. “When you go offshore, we are talking to people about this and that it’s very important. We are telling them every barrel counts. It is a great achievement and giving us volume and income in quite a difficult year.”

But, Solheim wants to do even more with Brage. “The next step is to work on infill drilling,” he says. “We put on stream one well in June which gave us 6-7000b/d and still does. We are now at around 20,000 boe/d [in total on Brage]. We have close management on the cost of wells and a cost focus on modifications. The cost of wells is crucial. If we are going to survive on Brage until 2030, we need new wells every year until 2025. We are sitting on four reservoirs but we need to reduce the cost by 40% if we are going to survive. So that’s a challenge and we are working on it.”

Wintershall also changed its contracting structure, with maintenance and modifications no longer bundled into one contract to a single external contractor. Work has been taken in house and then contracts issued on a call off basis, Solheim says.