How Can Enterprise Operational Intelligence Make You Win in Oil and Gas Services? By Knut Møystad, IFS Global Director for Oil and Gas, 10 May 2016

Securing contracts at achievable day rates and removing unnecessary costs is at the top of the agenda for most players in the oil and gas services market. As the supply and demand of assets are increasingly lowering values, proper financing seems to be the number one survival criterion. In the short term there is little you can do about the value of your assets; in the medium to long term you can make them more efficient, however. Efficiency will be the new value driver once this market starts to move forward again, so now is the time to make operational efficiency your agenda. It will make you look good in the eyes of bankers, lenders, shareholders and oil company clients.

IFS believes that Enterprise Operational Intelligence (EOI) is key to this strategy. Full visibility and control across the value chain are crucial. Only by capturing its value chain can an oil and gas services organisation have a holistic view of the entire operation and fleet of assets. By linking assets to performance, a single version of the truth is created. With this, you have a complete view of your asset base. When this is available in a collaborative, holistic management environment, executives can then make faster decisions based on reliable data from across the company.

The value chain lies at the centre of every company, regardless of industry. It is, in essence, a snapshot of your entire business – a picture of your most important assets. Its importance cannot be underestimated. But how many organisations have end-to-end value chain visibility in a single platform? And how many have the level of control to ensure their assets perform well? The answer is a resounding “Not many”.

Four Key Elements of Operational Excellence

Four essential areas form the basis of an effective, company-wide approach to achieving operational excellence. The key is to gain a good balance in all these to provide the solid foundations to focus on improving performance across the board. Full end-to-end visibility of the oil and gas services value chain in a collaborative environment supports these critical elements.

1. Measuring performance

Measuring organisation-wide performance is fundamental to success. People, processes and equipment are key assets; they are the fuel that drives the business. In oil and gas services, measuring efficiency is crucial to improving – and ultimately maintaining – maximum performance while on the road to operational excellence.

Scorecard systems are used extensively to evaluate performance against strategic goals. And while these systems provide a means to measure performance, the reports produced often lack actionable insight. They are based on historical data from fragmented data systems stretched across the organisation. The metrics from balanced scorecards and other performance management methodologies, such as Six Sigma, must be aligned with key performance indicators and strategic objectives. With an effective performance measurement platform in place, the improvements needed to drive operational performance through the organisation become clear.

2. Attaining continuous improvement

Continuous improvement is a hot topic. It provides an edge in today’s climate, enabling organisations to stay ahead of the game. By constantly evaluating processes, costs and waste can be reduced significantly. If this is to occur, improvement programs must be employed alongside a performance management system that delivers reliable business intelligence (BI) information. Managers at all levels can then make better, faster decisions.

3. Managing changes

Implementing enterprise-wide changes across an oil and gas services organisation can have profound effects throughout many unforeseen avenues. The changes take many forms: mission changes, strategic changes, operational changes, technological changes, as well as changes to company attitudes and behaviours.

Managing these effectively depends on people and processes. Objectives must be defined, roles assigned, performance monitored and, if required, training provided. Communication across the organisation is of key importance. A platform from which managers can collaborate and empower employees supports effective change management programs.

4. Empowering employees

People are central to the success of enterprise-wide operational excellence activities. As oil and gas services organisations make efforts to improve their management practices to comply with stringent regulatory requirements, their employees play a key role in the performance of these continuous improvement programs.

In the future you will be doing more with fewer people. This may lead to a shortage of applied knowledge. To counteract this, information is crucial to operational excellence. It must provide clear goals, key performance indicators (KPIs) and one version of the truth. By incorporating business-wide data into one environment, employees can work together wherever they are. Only then can transparency be attained and improved performance be realised.

The Focus for Oil and Gas Services Companies

While oil and gas services organisations strive for operational excellence, the day-to-day challenges cannot be ignored. From market conditions to regulatory compliance, there are enough existing threats to keep executives busy without the additional pressure of achieving operational excellence.

But this needn’t be an issue. With end-to-end value chain visibility in a single platform, attaining operational excellence while managing the challenges is not a distant dream. By taking a strategic, step-by-step approach, the two can be realised together, resulting in a stronger organisation with better-performing operations.

1. Reacting to the downturn

The fluctuating nature of today’s market is forcing decision making to be agile to an extreme extent. To succeed, executives must react quickly to market changes. End-to-end visibility of the value chain – linked strategically, tactically and operationally – facilitates this. With an enterprise-wide overview of all oil and gas services processes in one integrated environment, managers can respond quickly to any situation.

2. Executing strategy

Agility provides a strong foothold for oil and gas services executives to execute strategies across the organisation. As companies readjust, strategies must be implemented across many dispersed locations. This is made easier by having full value chain visibility, ideally with connected management cockpits creating a single version of the truth for all employees, wherever they are.

By aligning all remote oil and gas service operations to a common goal, strategies can be executed effectively from the top down. Strategy execution on an enterprise-wide scale is realised through delivering strategies to those responsible for their implementation in a tailored and business-context manner.

3. Embedding balanced scorecards, Six Sigma, Lean, etc.

Although the industry was relatively late to catch on, the use of performance management tools such as balanced scorecards and Six Sigma has increased steadily. In many organisations, however, these remain a tool which is disconnected from day-to-day operations. By embedding them into the organisational framework, aligning key performance indicators with strategic objectives will deliver true value to the company.

Implementing such systems consistently throughout a complex oil and gas services organisation can be a gruelling task. Fragmented IT systems, remote locations and no single version of the truth call for a powerful and flexible platform to view, analyse and act on up-to-the-minute data you can trust.

4. Acquiring accurate, useful business data

An oil and gas services organisation relies on accurate information to understand performance and ensure its operations run smoothly. As market conditions and demands continue to fluctuate, managers need high-quality data from their fragmented and often aging IT systems. With this, a clear and up-to-date view of performance across the end-to-end value chain is achieved. This enables quick, informed decisions to be made.

Root cause analysis and what-if analysis depend on this data; it is needed to pinpoint performance leakages and assess the impact of various scenarios. By empowering employees with actionable data, oil and gas services companies can drive enterprise-wide performance improvements.

5. Forecasting maintenance and repairs

Production is heavily affected when equipment is standing idle. The ability to accurately predict when upkeep of machinery will take place – and how long it will be out of action – can save valuable time and money. When relying on subcontractors, this is of the highest importance.

Powerful capacity planning is therefore essential to ensuring maximum availability of machinery and manpower. An end-to-end view of capacity, performance and processes ensures that production volumes and resources meet targets.

6. Managing mergers and acquisitions

Whether through mergers or acquisitions, oil and gas services companies will continue to expand. Managing merged organisations can be difficult. This is made even more challenging when you take into account the remote, harsh locations in which they operate.

Connected management cockpits can consolidate the different data sources into a top-down, single version of the truth. Everyone then makes decisions based on the same high-quality data, wherever they are located. By providing an end-to-end view of the business, all KPIs, performance data and strategies can be made available in one enterprise-wide framework.

7. Complying with regulations

Health, safety and environmental factors are at the core of any oil and gas services company. More often than not, oil and gas services organisations have operations across multiple, isolated locations. This makes implementing and managing compliance regulations difficult. Management needs a powerful enterprise-wide framework to introduce compliance activities into the workflow. This then facilitates effective communication to employees across the organisation.

Conclusion

As market demands put increasing pressures on oil and gas services organisations to improve asset performance, the important differentiator in the industry is gaining end-to-end visibility of the value chain. Only with a complete view of business processes, performance and assets can oil and gas services companies improve and perform at the highest levels. Mapping your value chain in a collaborative environment is the first step to managing this.

About the author

Knut Møystad is the Global Director for Oil and Gas at global enterprise applications company IFS. He has extensive experience in the management consulting industry in strategy and corporate development and helped to realise a number of successful ventures in the energy and finance sectors.