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A deepwater case study: How adopting & simplifying standards and specifications helps cut cost and grow production
16 November 2018IHS Markit Energy Expert
Beyond the initial cost and economics, one of the key challenges
to deepwater success is the long time it can take to reach Final
Investment Decision (FID) and first production. Among the key
reasons for delay is a lack of consistency and standardization in
the business processes and workflows for maturing these
opportunities through the lifecycle, including exploration.
Figure 1: Onstream Projects Only, No Subsea
A few years ago, Company A was taking more time from Discovery
to FID and Discovery to production (5.2 years and 8.5 years
respectively) than others, such as Company B, C or D, indicating a
need to focus not only the quality and consistency of technical
evaluations, but also to improve the cycle time, from exploration
to concept selection - this was especially important given a
significant number of deepwater opportunities and projects in the
early phases of their maturation pipeline. As is the case for many
IOCs and NOCs, Company A had exploration and new business
development teams in various regions responsible for the workflows,
analogue databases, tools, and assumptions (including costs) to
mature these opportunities and progress them into the development
phase. Exploration projects along both sides of the Atlantic margin
can benefit from shared learnings, consistent evaluation
methodology, aligned assumptions, and use of common analogues to
reduce the evaluation cycle time.
The framework below illustrates one approach to codifying the
effective management and delivery of major upstream projects,
beginning with the development of an understanding of the operating
environment and its link to company strategic objectives. Managing
capital projects requires involve many parts of a successful
organization operating model, with five key elements to support
workflows, as illustrated below: 1) governance and assurance, 2)
assess and select, 3) project delivery (i.e., design and execute),
4) resources and capability, and 5) tools.
We begin by clearly defining the purpose of the organization,
with process architecture and workflows drawn upon industry-leading
practices, clear decision-gates and accountabilities across the
maturation lifecycle, roles and responsibilities typically built
around RACIs for easy reference during a project, and initial
screening and front-end loading to reduce scope changes.
Figure 2: Operating environment and project delivery
framework
We find it helpful to characterize and categorize projects in
the portfolio to ensure the appropriate allocation of resources,
and correct application of operating model and risk management.
Best practice adapts the organizational design to the project
type, size, complexity, risk, etc.
However, despite our best efforts to simplify and standardize,
the business remains complex and the operating environment is often
challenging. Therefore, organizations and their processes and
workflows require a high degree of resilience and adaptability,
that we will refer to as organizational agility. Regardless of
equipment and process standardization, rig efficiency will vary,
work stoppages and downtime are inevitable, and contingency
planning and root cause analysis are essential.
For example, the IHS Markit EDIN database contains 3,980
offshore Nigeria wells with valid spud dates. The earliest recorded
well, Orimedu 1, was spudded in 1963; since the year 2000, there
have been 387 exploration wells and 856 development wells drilled.
These wells include both shallow and deepwater, range in TD from
1000 to 6000 meters, and required up to 450 rig days to drill! Even
since 2015 (below), rig efficiency (i.e., TD/Rig days) ranges from
a maximum of 89 m/day (Addax) to a minimum of 78 m/day (Exxon
Mobil), with an average for three companies (also Chevron) of 82
m/day. Moreover, the pace and predictability of exploration wells
is even more challenging, due to greater variation in the number of
zones being drilled and tested, the amount of testing required,
special logging activities, and because some exploration wells may
simply be side-tracks from other wells and therefore have very
short drilling times.
Figure 3: Rig days and TD for modern Nigeria deepwater
drilling
On average, modern deepwater Nigeria exploration wells have
required 150% as much time as development wells to drill and with
generally more uncertainty. However, the worst-case scenario (i.e.,
222 days, 4643 meters) was a development well! Despite the presence
of world-class operators, the benefits of modern technology, and
operator efforts to simplify and standardize, deepwater drilling
off the coast of Africa is difficult and uncertain. Organizations,
business processes, and workflows, must be designed and managed to
afford a very high degree of resilience and adaptability.
