The world of a Mature Asset operator is an interesting and challenging one that in many ways is only distantly related to the world of newly installed and operating assets. In fact it could be argued that the operating parameters of these two environments are so different that they could be described as entirely different industries.
In the world of early life assets, operator issues are centred around production stability, well optimisation, early life equipment failures and seemingly endless snagging lists left over following the handover of the keys from projects to operations. Whilst not insignificant challenges they are tackled using (mostly) up to date “as built” P&IDs. Equipment is generally available from the original equipment manufacturers. Most important of all, fixing the issues has the full support and monetary backing of the operator and Joint Venture partners. Everyone is mutually committed to the installation's success. They are keen to reap the considerable rewards of the new production the asset will bring to their portfolio.
Sun setting on an Asset or the dawning of a new era?
Contrast this world with that of an older mature asset. A mature asset is generally considered to be a hydrocarbon resource that has passed the point of peak production and is in decline. Whilst this can happen to an asset in as little as 6 months in some instances, for the purposes of this article it’s considered to be an asset over 10 years old. When entering this phase of the asset’s life cycle, it finds itself in a far less sunny world where the challenges are arguably far greater.
The loving glow of the parent organisation that sanctioned, built, installed, commissioned and proudly watched it take it’s first production steps has began to dim. Where production and availability figures were once flashed up in townhall slide decks by coo’ing CEOs like a toddler’s drawings stuck on the corporate fridge, they are now shushed into appendices or hidden away in a corporate intranet post. The organisations eye has began to drift to their newer, shinier, healthier assets. For the once loved mature asset there begins to be the whispers of “portfolio optimisation” or “ROI challenges”. Gentle euphemisms for divestment. For assets even further down their production lifespans the shadowy spectre of cessation of production and the grim reaper of decommissioning are forever present at the edges of an operator’s vision.
Whilst divestment is by no means a death knell for mature assets, it does mean that the assets in question are likely to be starved of investment as the current operator focuses on investing it’s capital in areas with a higher “bang for it’s buck”. It’s also fairly obvious that operators have little interest in investing in an asset they intend to sell and as a result the focus is on minimising spend. It is at this point in an assets life cycle that the real world that was earlier knocking politely changes tack and kicks the door off it’s hinges.
Up until this point in an assets life cycle it could be facetiously argued that it is harder to make an asset look bad than good, assuming an even moderately healthy oil and gas price. Because the commodity being produced is so lucrative, cost control practices, work execution efficiencies and purchasing approvals that would sink a business in a low margin world go unnoticed. Contingency purchases, high supplier rates, low budget scrutiny and eye watering wastage are hidden by a healthy amount of profit. When profits are high people often don’t ask how much higher they really should have been. When making £100m, people seldom ask why they didn’t make £110m. In reality people are often heartily praised for ordering 2 pumps when only one is required as “1 days production would pay for the spare pump 10 times over!” and often this is entirely true. Whilst regrettable early in an asset’s life cycle, such poor practices are terminal later in its life and unfortunately many operators simply don’t have the skill set to deal with this harsh new world.
Prudence and frugality become essential but have to be balanced with the understanding that things have to be assessed based on their value and not always just their cost. Organisations have to be sized appropriately but they have to be sized appropriately based on the competence of the people within it. An asset with 20 highly skilled people can manage far more work than an asset with 30 lower skilled people. Simple benchmarking does not give this insight. The personnel in smaller organisations also need a greater depth and breadth of competence, as specialists are a headcount luxury that cannot be afforded. Work has to be carefully prioritised to ensure that only essential work is completed. This does not simply mean the urgent but must also include the important. Simply saying “We’re only going to execute priority 1 work” is not an answer. Work must be carefully planned and executed right first time. Extended outages, poor mean times to repair, rework and wastage will bleed an asset to death. Returning excess materials to stores for use another day where once they would simply be discarded must become the new normal. Continuous improvement is vital as making the same mistakes repeatedly cannot be afforded.
All of these things are simple but not easy for an organisation unused to such discipline. When interviewing people for roles in the oil and gas industry who started careers from other industries, I always like to ask them what differences they see between their previous industries and oil and gas. 90% of the responses I get are about unbelievable levels of waste in oil and gas. (The other 10% say that the wages where they came from are vastly reduced, which is also telling). This rather begs a question. Given the world of mature assets is so fundamentally different from that of new assets, why is it organisations often look to the same people to run them and yet provide no training or coaching in how to do so? If you were previously competing at javelin and you’re now playing darts, trying to play the same way you always have is going to get you thrown out of most pubs. Given the number of extremely low margin industries that exist whilst making considerable profits there’s no reason that the oil and gas industry can’t do the same. It’s perhaps just time for the industry to learn to play a different game.