In the complex and capital-intensive world of offshore drilling, downtime is expensive. The cost to oil producers of non-productive time (NPT) is huge, and although the industry has done very well in combating many of the causes, there remain urgent problems to address to ensure efficient operation.
A major component of NPT is tool failure – a problem that persists despite the industry’s best efforts. “The time spent on activities that were not expected is between 20% and 30% of total time in the global offshore industry. That is a huge cost. The relative amount of NPT caused by tool failures has also gone up. The industry has got very good at addressing some causes of NPT like lost circulation, borehole instability and well control issues, but tool failure problems have gone up,” says Eric van Oort, performance improvement manager for Shell Upstream Americas and a member of the regional Wells Leadership team.
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“One reason is that tools are more sophisticated now, but we are still suffering from the problems that emerged in the boom market, when there was a very fast turnaround on tools and there were cutbacks in quality assurance and quality control among suppliers. Design flaws are a problem, as is change management when modifications are made, but a lack of QAQC is the main problem,” he adds.
Shell has made great strides in addressing tool failure and identifying its causes. In 2006, van Oort started the Root Cause Failure Analysis/ Trouble Action Team (RCFA/TAT), which has made an enormous difference to the company’s operations in the Gulf of Mexico.
When it began its work, Shell was experiencing six or seven tool failures each month in the region, each costing six hours or more in downtime, and at least $1m. “Now, we are down to less than one failure per month and completion failures have fallen by 50%. There is no fancy technology behind this, it is just the result of good processes and the right use of resources,” says van Oort.
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The team has a clearly defined approach to addressing any incident of tool failure. The first step in its work is to quickly identify and follow up on NPT events through a dedicated and knowledgeable team and a very strict, well understood process. Working closely with all stakeholders, from the operational staff to the technology vendors, the team conducts a high-quality investigation into the causes of tool failure. When the cause of the problem has been accurately defined, the team expects a mandatory vendor response, including a mitigation plan and, where necessary, a change to the supplier’s QAQC processes.
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By GlobalData“We also work with people in the supply chain, including those involved in procurement, to hold suppliers accountable for the implementation of the remedial action plan,” stresses van Oort.
Holding vendors accountable
Eliminating, or at least minimising, tool failures is not something the oil companies can do on their own. It is vital that they work closely with their technology suppliers, whose lack of QAQC may in some cases have contributed to the problem. Vendors must, therefore, be part of the solution and the work of the RCFA/TAT team ensures that they can be, because Shell has the leverage with technology providers on the basis of the results of its tool failure investigations.
The RCFA/TAT team effectively demands that vendors raise the bar in terms of their standards and thoroughness, as it has incontrovertible data from its investigations that allow it to test of the claims suppliers make about their products and services.
“The expectation we have of our vendors is that when we identify a cause of failure it is sorted out and does not happen again. We identify the root cause and the remedial action with the intention that we don’t see the same failure happen again anywhere in the Shell world. As a result, we also expect vendors to be more proactive,” remarks van Oort.
“Some suppliers are resistant to that idea, as they feel they are under too much scrutiny, but more see the benefits now. We can hold vendors accountable, so they must put their money where their mouth is. We can qualify the total cost of ownership of their technology with the time and cost of failures. Suppliers who are supportive of what we are doing see it as a way to prove their service quality,” he adds.
The effect of the team’s work on suppliers is tangible. Some have embraced the opportunity to work closely with Shell in mitigating problems that lead to tool failure, and appreciate that through a closer partnership they can raise standards.
After all, it is an opportunity for them to cement relationships with a large customer. Where suppliers are unwilling to become more proactive and engage with the RCFA/TAT team, there are consequences in terms of the proportion of Shell’s business they receive.
“There is power behind the team. We can select vendors on the basis of total cost of ownership (TCO), and we may pay more if the NPT is lower, rather than selecting a cheaper vendor with higher NPT. The focus shifts from short-term cost to long-term value,” van Oort explains. “It is having an effect on our supplier community. The TCO analysis filters into our negotiations because it includes our ‘trouble spend’ perspective, which affects our allocation of market share. Suppliers can reduce the trouble spend an improve service quality.”
Lasting value
The creation of which was by no means easy. It took van Oort a year to build the completion investigation skills required for the team. The Upstream Americas team has seven people, so it also incurs a relatively high cost, but in the four years it has been operating its effect has been remarkable and the return on investment justifies the effort and expense.
With tool failures reduced so much in the Gulf of Mexico, it may nevertheless seem as though the future may hold diminishing returns from the team, but van Oort is confident that its successes will become the basis of more gains in the future.
“Tools get even more complex, so we will still need the team. We can also leverage the team’s experience beyond the Gulf of Mexico to US and Canadian land operations. It must be core to our business activities to hold suppliers accountable, so we can’t let up on it,” he comments.
“We keep all our documentation and best practices in front of the global Shell organisation through our knowledge management technology. We have also started RCFA/TAT teams in the North Sea and in the Far East, and we will eventually extend these resources throughout the global network.”
Like any major oil company, Shell monitors its wells and tools in real-time with advanced technology, but the kind of failures the RCFA/TAT team addresses are by their nature unexpected, and often fall beyond the scope of the monitoring technology. For this reason, the team is likely to be a vital part of ensuring efficient operations around the world, whether offshore or on land, and it is no surprise that other oil producers are already approaching Shell to learn about forming their own teams.
