www.assetdev.com

Production Efficiency

A former operator’s view

5 November 2014

Agenda

History

Evolution

Current conclusions / observations

An approach

Critical success factors

Results

2

Production efficiency - history

Developed 2002 / 2004 in collaboration between industry

and DTI

Intent was to create a measure of how well operators

were maximising production from their operated assets

Objective: to increase production

3

Production Efficiency (PE) = Perfect day production

Hydro-carbons delivered to market

Not perfect

Numerator was sales – i.e. Bbls, Boe – the stuff we

should be increasing

Denominator was ‘perfect-day potential’

• Nothing broken, everything in development plan operating,

ready when planned

• Open to interpretation

Designed so a PE of 100% was highly unlikely

• No trips, no shutdown or blowdown tests for a whole year?

Does not adequately capture IOR

• Water injection 4

Production efficiency - history

Evolution – genetic mutation

‘Operating efficiency’

• No standard definition

LIP (Locked in Potential).

• Good useful metric but little to do with PE

A wide range of interpretations of SMPP

• One recent test provided a 27% difference in calculated PE

between one operator’s method and another for the same

data

5

Average UKCS PE trends over time

6

50%

60%

70%

80%

90%

100%

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Current conclusions / observations

It is hard to conceive any other industry that would tolerate a 63% efficiency from its revenue producing facilities

The focus on looking good is distracting from being good (i.e. high PE vs producing more barrels)

The economics of the older areas of the UCKS are very sensitive to PE

• The barrels not the absolute number

• There needs to be urgency

PE does not capture IOR performance e.g. Water Injection

To improve, transparency and honesty are required• PE was not designed as a motivational tool 7

An approach

SMPP set/agreed by multi-disciplinary team

Losses tracked to a five choke model and cause

determined, not just location

Transparency and data

Bow-tie applied to the root cause

Address root causes - often does not require CapEx

8

Production efficiency

9

Reservoir

WellProcess Plant

3rd Party Processing

3rd PartyTransportation

Export

Utilities Plant

5 Choke Model

Identify Plant capacities

Identify Losses

Determine Root Cause

Identify and implement Solution

Assess suitability of solution

Review Asset Performance

Data

Gather raw data (not adjusted data) and then process

SMPP

• Do not be judgemental or exclude data that you don’t like (e.g.

LIP, fuel gas, planned maintenance, etc)

• SMPP ≠ production forecast in the budget

• SMPP ≠ highest production over last 4 months

• SMPP is a theoretical production figure for a perfect day,

agreed with a multi-disciplinary team

Do not stop at ‘what / where’, carry on the investigation

into ‘why’

10

Bow-tie

Production

efficiency

Opex

Revenue

Time

Culture

Motivation

Reputation

Facility/equipment

availability

Facility/equipment

capacity

Operating

practices

Reservoir fluids

3rd party services

Integrity

Operating

documentation

Capability

Competence

Operating discipline

Goes out 4 levels – reduces in number of “legs”

Critical success factors

Remember that the objective is to increase the numerator (Boe)

• Reducing the denominator (potential) gives a better number but produces no more barrels

Do not set a target of 100%• 100% is not sustainable and demonstrates you don’t

understand the metric

• Shutdown/TARs are investments and should be treated like every other investment (kept to an economic minimum)

Address root causes - which may not be equipment

If possible use barrels as a target, not PE, avoid the temptation to play with the numbers

12

More conclusions / challenges

It’s not about age, but how the facility has and is being

operated

The focus on looking good is distracting from being good

(i.e. high PE vs producing more barrels)

Adopt a robust system of PE improvement and address

causes not symptoms

13

Some results – gas hub

14

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

PE programmecommences

• Gas asset

• Declining production had resulted in the

compression requiring less power

• Originally 3 x 50% Power Gen sets

• Now 1 set could keep the platform running at

steady state

• 2 required for start-up at the same time as

crane use

• Decided to mothball 1 GT (leaving 2x 100%

sets)

• Frequent Power Outages (MTBT <5 days)

• 2 x GTs running on 30 – 45% load

Results – story continued

15

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

PE programme commences

MDT increases SMPP

Results – Story continued

16

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

PE programme commences

MDT increases SMPP

Addressing operating practices

Identified physical mods

required

Results- Final result

17

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

PE programme commences

MDT increases SMPP

Addressing operating practices

Identified physical mods

required

Shutdown to replace obsolete control system

Conclusion – It’s all about the barrels

Thank you for listening

18