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A"B"E"R"D"E"E"N"""B"U"S"I"N"E"S"S"""S"C"H"O"O"L"

"Master"of"Business"Administration"

!Consultancy"Project"

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Author:"Ajay!Agnihotri!

MBA!Oil!and!Gas!Management!Robert!Gordon!University,!Aberdeen,!UK!!

! 1!

Executive)Summary!

The! purpose! of! the! study! was! to! understand! and! analyse! the! growing! issue! of! production!efficiency!decline!in!the!North!Sea!and!gauge!the!industry!appetite!for!solution.!!!Production!Efficiency!decline!in!North!Sea!has!steepened!in!past!few!years!and!became!a!major!talk!about!subject!within!the!Oil!and!Gas!industry.!Key!literature!was!reviewed!to!gain!inCdepth!knowledge!and!understanding!of!the!subject!matter.!!Several!key!points!were!identified!such!as!Deteriorating!Production!Efficiency!compounds!production!decline,! if!unaddressed,!will! impact!development!and!recovery!of!the!reserves.!Due!to!the!impact!of!production!efficiency!North!Sea!has! shown! a! decline! of! 250,000!boe/d,! and! restoring!Production!Efficiency!will! lead! it! to! gain!500,000!boe/d!and!£10!bln!sales!per!annum!as!per!Oil!and!UK!2013!survey.!!For! this! study,! a! “mixed!method”! approach! to!data! collection!was! employed,!which! focuses!on!collecting,!analyzing,!and!mixing!both!quantitative!and!qualitative!data!in!a!single!study!or!series!of!studies.!The!central!premise!of!mixed!method! is! the!use!of!both!quantitative!and!qualitative!approaches! in!a!combination!provides!a!better!understanding!of! research!problems! than!using!one! approach.! The!mixed!method! also! has! the! benefit! over! other! techniques! by! nullifying! the!weakness!of!a!particular!method!through!the!strength!of!the!other.!Therefore!the!mixed!method!is!particularly!appropriate!for!this!study,!as!a!range!of!opinions!was!expected!to!be!encountered,!due! to! the! diversity! of! backgrounds! of! the! participants;! this! involved! identifying! key! opinion!leaders,!and!asking!them!to!fill!out!questionnaires,!followed!by!an!interview.!!A!structured!questionnaire!was!developed!and!distributed!to!Accenture!industry!player!and!key!opinion!leaders!(i.e,!Analysts,!Consultants,!Middle!Management!and!Upper!Management).!The!list!of!potential!participant!companies!and!individuals!was!developed!in!conjunction!with!Accenture!based!on!their!current!accessible!client!base!and!companies!future!strategy.!Based!on!the!list!of!a!total!of!11!questionnaire!responses!were!received,!and!10!individuals!were!interviewed.!!!The!mixed!methods!approach!allowed!the!quantitative!results!provided!by!the!questionnaire!to!be!supplemented!by!qualitative!data!from!the!interviews,!which!provided!rich!information!on!the!motivations! for! responses! given! in! the! questionnaire.! The! study! also! identified! crossCindustry!appetite! for! production! efficiency! solutions! and! the! actions! taken! by! operator! and! industry!leaders!such!as!DECC,!Oil!and!Gas!UK.!Based!on!the!analysis!of! the!data!gathered! from!various!sources,! via! questionnaire,! interviews,! meetings! and! researching! online,! understanding! of! the!subject!matter!is!enhanced!to!meet!the!aim!of!the!project.!!!The!report! finds!that!Oil!and!Gas!UK!needs!appetite!for! improving!production!efficiency,!which!will! require! their! focus! and! stamina,! additional! expenditure! and! resources,! a! large! number! of!interventions!and!collaboration!including!utilisation!of!scarce!resources.!In!some!cases,!poor!P.E.!can!be!linked!to!a!lack!of!past!investment!hence!identification!of!the!underlying!root!causes!is!the!key!and!analysis!indicates!this!is!not!just!an!“age”!issue.!!!And!lastly!recommendations!were!drawn!for!Accenture,!the!way!forward!and!imminent!danger!and! areas! for! further! research! were! identified! to! assist! the! management! in! identifying! the!important!aspects!that!need!their!attention!and!careful!consideration.!

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! 2!

Acknowledgement!

!I! would! like! to! acknowledge! and! express! my! profound! gratitude! to! all! individuals! who! were!involved!from!the!start!till!the!completion!of!the!MBA!program.!!In!addition,!I!would!like!to!place!my!appreciation!to!the!management!of!Accenture!for!providing!me!the!opportunity!to!undertake!this! interesting!and!exciting!project!especially!Mr.!Silas!O'Dea!(Industry! solution! and! Services! Senior! Manager)! and! Mr.! Christopher! Cox! (PE&CE! Senior!Manager)!for!there!valuable!guidance!throughout!the!project.!!!Special!thanks!to!Mr.!Luca!Corradi!(Global!Energy!Hub!Lead)!and!Mr.!Scott Ogilvie!(Technology!Account! Lead)! for! their! regular! support! and! guidance! throughout! the! project! life! span.!Furthermore,! I! would! also! like! to! extend! my! sincere! thanks! and! appreciation! to! all! the!participants!in!the!study!who!gave!so!generously!of!their!time!and!opinions.!!Finally!I!would!like!to!dedicate!this!report!to!our!lecturers!and!professors!who!taught!and!guided!me! during! the! course! of! the! MBA! program! with! the! special! mention! to! my! mentors! for! the!project:!!Allan!Scott,!David!Gray,!Bryan!McNay!Mohammed!Kisk!and!Linda.!!Special!thanks!to!my!family!back!home!for!their!love!and!support!during!the!period!of!my!MBA!when! I! needed! it! the!most.! I! would! like! to! appreciate! all! the! efforts! of! the! family! that! I! have!created!here!with!friends,!course!mates!and!mentors.!

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Table&of&Contents&!EXECUTIVE(SUMMARY(...................................................................................................................(1(

ACKNOWLEDGEMENT(....................................................................................................................(3(

1.(INTRODUCTION(...........................................................................................................................(5(1.1(PRODUCTION(EFFICIENCY!......................................................................................................................!5!1.2(THE(CHALLENGE!.......................................................................................................................................!6!

2.(AIMS,(OBJECTIVES(AND(SCOPE(...............................................................................................(8(2.1(AIM!...............................................................................................................................................................!8!2.2(OBJECTIVE!..................................................................................................................................................!8!2.3(SCOPE!...........................................................................................................................................................!9!

3.(RESEARCH(METHODOLOGY(.................................................................................................(10(3.1(RESEARCH(APPROACH!.........................................................................................................................!10!3.1.1$Phase$1:$Define,$Plan$and$Analyse$Situation$.......................................................................$10!3.1.2$Phase$2:$Design$and$Circulate$the$Questionnaire$.............................................................$11!3.1.3$Phase$3:$Personal$Interviews$.....................................................................................................$12!

4.(RESULTS(......................................................................................................................................(13(4.1(PARTICIPATION(AND(SAMPLE(SIZE!....................................................................................................!13!4.2(TYPES(OF(PARTICIPATING(COMPANIES!............................................................................................!13!4.3(TYPE(OF(RESPONDENT(INCLUDES!.....................................................................................................!14!4.4(SUMMARY(OF(QUESTIONNAIRE(RESPONSES!....................................................................................!14!4.4.1$Summary$Charts$of$the$current$production$efficiency$situation$across$the$served$operating$companies$................................................................................................................................$14!4.4.2$Summary$Graph$of$the$agreement$or$disagreement$by$the$respondents$with$the$identified$root$causes$behind$the$production$efficiency$decline$issues$across$the$served$operating$companies$................................................................................................................................$16!4.4.3$Services/solutions$that$are$being$implemented$by$your$client$to$address$PE$challenges:$analysis$of$questionnaire$and$interview$responses$for$individual$business$processes$........................................................................................................................................................$17!4.4.4$List$of$Action$Taken$by$the$North$Sea$operating$companies$P$Solutions$/$Services$and$possible$Competition$who$are$providing$production$improvement$services$..........$26!

5.(DISCUSSION,(RECOMMENDATIONS(AND(CONCLUSION(...............................................(28(5.1(APPETITE(FOR(IMPROVING(PRODUCTION(EFFICIENCY!................................................................!28!5.2(ESTABLISH(PRODUCTION(EFFICIENCY(IMPROVEMENT(CHALLENGE!........................................!28!5.3(DEALING(WITH(THE(UNDERLYING(ISSUES!.......................................................................................!28!5.3.1$Leadership$$.........................................................................................................................................$29!5.3.2$The$Engineering$Function$$..........................................................................................................$29!5.3.3$Skill$shortage$$...................................................................................................................................$29!5.3.4$Learning$and$communication$$..................................................................................................$30$

5.4(OPERATOR(COMPANIES(INTERNAL(ORGANISATIONAL(CHALLENGES!........................................!30!5.4.1.Strategic$Foresight:$........................................................................................................................$30!5.4.2$Operational$Stability$.....................................................................................................................$31!5.4.3$Operational$Discipline$..................................................................................................................$31!

5.5(RECOMMENDATIONS(AND(CONCLUSIONS!........................................................................................!31!6.(REFERECES:(...............................................................................................................................(34(

Appendices&!APPENDICES(A:(QUESTIONNAIRE(...........................................................................................(37(

APPENDICES(B:(SWOT(ANALYSIS:(...........................................................................................(45(SWOT(ANALYSIS(OF(THE(OIL(AND(GAS(INDUSTRY!...............................................................................!46!SWOT(ANALYSIS(FOR(ACCENTURE(ABERDEEN!....................................................................................!50!

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List&of&Figures&!FIGURE:(1.1(PRODUCTION(EFFICIENCY(DECLINE(.................................................................(6(

FIGURE:(1.2(IMPACTING(FACTORS(ON(PRODUCTION(EFFICIENCY(.................................(7(

FIGURE.(4.1(PARTICIPATING(COMPANIES(IN(THE(RESEARCH(......................................(14(

FIGURE.(4.2(SUMMARY(OF(QUESTIONNAIRE(RESPONSES(FOR(QUESTION(A1(.........(14(

FIGURE.(4.3(SUMMARY(OF(QUESTIONNAIRE(RESPONSES(FOR(QUESTION(A3(.........(15(

FIGURE.(4.4(SUMMARY(OF(QUESTIONNAIRE(RESPONSES(FOR(QUESTION(B1(.........(16(

FIGURE(4.5:(SPE/WPC/AAPG/SPEE(RESOURCES(CLASSIFICATION(SYSTEM(.............(17(

FIGURE(4.6(RESPONSES(ON(PRODUCTION(FORECASTING(..............................................(18(

FIGURE(4.7:(BATH(TUB(CURVE(................................................................................................(19(

FIGURE.4.8:(UNIT(OPERATING(COSTS(FOR(THE(UKCS,(2001(TO(2013(.......................(20(

FIGURE(4.9(RESPONSES(ON("AGEING(ASSETS"(....................................................................(20(

FIGURE(4.10(RESPONSES(ON("MAINTENANCE/TAR"(........................................................(21(

FIGURE(4.11:(CAUSES(OF(EQUIPMENT(FAILURE(................................................................(22(

FIGURE(4.12:(SERVICE(LIFE(.......................................................................................................(22(

FIGURE(4.13(RESPONSES(ON("MAINTENANCE(EXECUTION"(..........................................(24(

FIGURE(4.14(RESPONSES(ON("MATERIAL(&(SERVICES(SOURCING"(.............................(24(

FIGURE(4.15(RESPONSES(ON("WORKFORCE"(......................................................................(26(

FIGURE(5.1(PRODUCTION(EFFICIENCY(TARGET(................................................................(28(!

List&of&Tables&!TABLE:(3.1(RESEARCH(TECHNIQUES(.....................................................................................(10(

TABLE:(4.1(SERVEY(RESPONSE(RATE(....................................................................................(13(

TABLE:(4.2(TREND(SUMMARY(..................................................................................................(15(

TABLE:(4.3(SERVICE(PROVIDERS(............................................................................................(27(!

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1.1 Production,Efficiency,,!Once!a!field!is!developed,!it!is!in!the!interest!of!all!stakeholders!that!its!oil!and!gas!resources!are!produced!efficiently!by!minimising!downtime!and!maximising!flow!rates.!!Production! Efficiency! (PE)! is! the!metric! used! by! the! Department! to!assess! the! efficiency! of! all!UKCS!production!operations!on!a!common!basis.!Production!efficiency!is!a!measure!of!how!much!an! asset! actually! produces! compared! to! its! structural!maximum! production! potential! (SMPP).!This!metric!is!a!simple!ratio!which!compares!actual!production!against!the!maximum!production!potential!of!a!system,!constrained!only!by!technical!and!market!limits.!Depending!on!factors!such!as! the! complexity! of! a! producing! system,! a! PE! in! the! range! of! 80%! to! 95%! is! considered! to!represent!“good”!performance.!!It! is! of! concern! that! PE! across! the!UKCS!has! declined! from!80%! to! around!60%,! and! that! this!deterioration!has!been!particularly!pronounced!over!the!past!2Q3!years.!It! is!estimated!that!the!reduction! in! PE! visQaQvis! previously! attained! levels! currently! accounts! for! almost! 0.5! million!boe/d!of!lost!production,!approximately!one!third!of!actual!production.!!In!response!to!this!situation,!a!UKCS!PE!target!of!80%!by!2016!was!set!by!the!Department!and!leading! Operators! at! the! PILOT! forum! in! May! 2013.! To! support! delivery! of! this! target,! a!Production!Efficiency!Task!Force!(PETF)!has!been!established!to!share! insights!on!rootQcauses,!consider! good! practice,! and! promote! collaborative! approaches.! Production! Efficiency!improvement!themes!will!be!identified!to!focus!the!work!of!the!PETF.!Individual!Operators!have!committed! to! prepare! assetQspecific! improvement! targets! and! plans,! and! make! budgetary!provisions!for!implementation.!Overall!progress!and,!where!necessary,!further!interventions!will!be!considered!at!the!biQannual!PILOT!forum.!

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1.2,The,Challenge,!Following!the!similar!trend!since!2005!in!2010!the!oil!production!dropped!by!6.5!per!cent!from!what!it!was!in!2009.!However,!since!2010,!there!is!a!huge!decrease!in!production!and!it!fell!by!30!per!cent!in!just!two!years!(Oil!and!Gas!UK).!This!was!largely!due!to!shutdowns!in!existing!fields,!both!planned!and!unplanned.!Following!the!Macondo!incident!in!April!2010,!operators!increased!expenditure!on!asset!integrity!programmes,!necessitating!an!increase!in!planned!shutdowns.!Major!unforeseeable!events!also!took!their!toll!on!production.!!!In!2011,!bad!weather!led!to!several!Floating,!Production,!Storage!and!Offloading!(FPSOs)!vessels!being!damaged!and!several!key!pipelines!were!closed!for!extended!periods!following!incidents.!In!2012,!the!Elgin!field!had!to!be!shut,!which!also!resulted!in!the!closure!of!the!SEAL!pipeline!for!the!whole!of!the!second!quarter.!!Crucially,!though,!the!fall!in!production!from!existing!fields!was!not!offset!by!new!field!startQups!with!the!14!new!fields!that!did!come!onQstream!having!little!impact.!Taking!into!account!the!two!to!three!year!average!time!lag!between!investment!decisions!and!first!production,!the!lack!of!new!fields! coming! onQstream! can!be! attributed! to! the! damage!done! to! investors’! confidence! by! the!numerous! adverse! tax! changes! in! the! early! and! midQ2000s.! The! low! exploration! activity!witnessed!in!recent!years!has!not!helped!either.!!

!Figure:(1.1(Production(Efficiency(Decline((Source:(Oil(&(Gas(UK/DECC)((Production(Efficiency( is(a(measure(of(how(much(an(asset(actually(produces(compared(to(its( structural(maximum(production(potential( (SMPP).!The!production!efficiency!benchmark!for! the!UKCS!has! fallen! sharply! in! recent!years! and! is!now!well! below! the!80!per! cent! seen! in!2004.!!Since!2004Q2005!the!production!efficiency!decline!is!been!consistent!&!in!recent!years! its!been!steepened! sharply.! Figure! 1.2,! clearly! shows! separately! the! impact! of! various! factors! on!production!efficiency.!Factors!such!as!Unplanned!plant!losses!and!extended!shutdowns!are!about!twoQthird!of!the!total.!!!For!example!in!early!2013,!the!Cormorant!Alpha!field!was!shut!down!for!a!brief!period!after!oil!was! found! inside! a! platform! leg.! This! closure! caused! the! curtailment! of! production! from! 27!neighbouring! fields! that! export! hydrocarbons! via! this! asset.! Further! unplanned! outages! like!

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those! witnessed! in! recent! years! would! result! in! a! failure! to! meet! the! 1.5! million! boepd! in!2013.The!other!impacting!factors!also!shows!the!gradual!increase.!!

!Figure:(1.2(Impacting(factors(on(Production(Efficiency((Source:)Accenture))!

Increased!spending!on!asset!integrity!in!recent!years!will,!with!time,!result!in!better!uptimes!for!key!infrastructure!hubs.!On!the!downside,!project!slippage!and!asset!unreliability!could!have!an!impact.! The! reliability! of! infrastructure! hubs! is! of! great! importance! to! the! overall! production!picture.! Improving! Production! Efficiency! is! the! quickest! route! to! increasing! UKCS! production,!with!a!leadQtime!of!1Q3!years.!!

The! research! study! aims! to! test! the! hypothesis! that! the! current! development! and! consenting!processes! for!UK! offshore! (North! Sea)! projects! contain! opportunities! for! production! efficiency!performance! improvement! and!Accenture! consultancy!has! scope! to!understand! the! issues! and!generate!solutions.!!

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2"Aims,"Objectives"and"Scope"" ""

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2.1"Aim"

The!aim!of!the!project!is!to!investigate!the!root!causes!behind!North!Sea’s!Oil!&!Gas!production!efficiency!decline!thru!the!lens!of!operating!companies.!The!research!consider!the!likely!impact!of!two!hypotheses!on!production!decline:!1.!!!!!!!Production!efficiency!(PE)!declines!as!assets!age.!2.!!!!!!!Subsea!developments!have!lower!PE!than!other!asset!types.!The! study!will! assess! the!above!hypothesis! to!understand!existence!of! this! linkage! factors! and!services!Accenture!should!develop!to!provide!the!required!solution.!!Any! completed! research!may!be!presented! to!Accenture! clients,! therefore! the! final! deliverable!will!be!clear!and!concise,!while!at!the!same!time!be!able!to!stand!up!to!the!professional!scrutiny!of!both!Accenture!and!it’s!clients.!

2.2"Objective"

The! objective! of! the! first& part! of! the! proposed! project! is! to! carryout! primary! research! to!diagnose! and! understand! the! common! factors! responsible! behind! the! North! Sea! production!efficiency!decline!in!recent!past.!This!will!be!achieved!via!doing!research!study!on!recent!North!Sea!production!profile!pattern!between!2005!till!date!and!then!conducting!series!of! interviews!with! various! Accenture! teams! handling! different! operating! companies! to! find! out! problems!observed!by!their!respective!clients.! !Afterwards! list!out!common!issues!among!the!majority!of!the!operating!companies!are!facing.!!The!objective!of!the!second&part!of!the!project!is!to!seek!best!industrial!solution!of!observed!in!combination! of! primary! and! secondary! research! problems! and! then! based! on! the! Accenture!expertise!both!internally!and!externally.!!!And! third& part! of! the! project! will! focus! on! the! identification! and! recommendations! on! the!services!that!Accenture!Should!develop!such!as!Process,!Technology!or!Outsourcing!solutions!to!provide!solution!to!its!client!base.!

2.3"Scope"

The!following!scope!for!the!project!was!outlined!in!the!terms!of!reference!document!and!agreed!with!Mr.!Silas!O’Dea!and!Mr.!Christopher!Cox!of!Accenture:!

• Diagnose!the!current!situation!of!production!efficiency!across!the!North!Sea!operators.!• Identify,!group!and!categorize!the!root!causes!behind!the!production!efficiency!decline.!!• Interact!with! various!Accenture! client! teams! at! their! respective! bases! and!understand!

their!responses!to!the!current!production!efficiency!decline!issues!faced!in!North!Sea.!• Examine!Solutions!based!on!the!survey,!both!internal!and!external.!

• Identify!the!current!actions!taken!by!the!operators!to!overcome!the!issue.!• Identify! and! recommend! services! that! Accenture! should! develop! such! as! Process,!

Technology!or!Outsourcing!solutions.!

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3"

Research"Methodology"

3.1"Research"Approach"

For! this! study,! a! “mixed!method”! approach! to!data! collection!was! employed,!which! focuses!on!collecting,!analyzing,!and!mixing!both!quantitative!and!qualitative!data!in!a!single!study!or!series!of! studies.! The! central! premise! of! the! mixed! method! is! the! use! of! both! quantitative! and!qualitative!approaches! in!a!combination!provides!a!better!understanding!of! research!problems!than!using!one!approach.!!!The!mixed!method! also! has! the! benefit! over! other! techniques! by! nullifying! the!weakness! of! a!particular!method!through!the!strength!of!the!other.!Therefore!the!mixed!method!is!particularly!appropriate! for! this! study,! as! a! range! of! opinions!was! expected! to! be! encountered,! due! to! the!diversity!of!backgrounds!of! the!participants;! this! involved! identifying!key!opinion! leaders,! and!asking!them!to!fill!out!questionnaires,!followed!by!an!interview.!!Table!3.1:!Research!techniques!!

S."No." Methods"Type"

1" Desk"based"Research"2" Questionnaires"3" Focus"group"Discussion"4" Interviews"5" Data"Analysis"

!For!the!purpose!of!meeting!the!desired!objective!the!project!is!segmented!into!three!parts:!!

• Phase!1!• Phase!2!• Phase!3!

3.1.1"Phase"1:"Define,"Plan"and"Analyse"Situation"

Step%1:!The!initial!phase!of!the!project!will!require!a!detailed!research!to!understand!the!past!and!current!situation!of!production!efficiency!decline!in!North!Sea!operating!fields!by!looking!into!its!history!mainly!of!past!8!years.!!!Data!is!been!collected!by!via!web/internet!that!is!available!to!public!domain!from!sources!such!as!DECC,! Oil! &! Gas! UK,! UKCS! etc.! Another! set! of! data! is! been! collected! from! accenture’s! internal!resources!such!as!“production!efficiency!task!force!presentations”!etc.!The!main!tools!that!were!utilized! for! the! collection! of! primary! data! were! personal! interactions! with! Accenture! team!members,!functional!heads!and!management.!!!Step% 2:! Once! the! data! is! been! collected! from! various! sources! its! been! carefully! analysed! and!examined.! The! objective! of! this! stage! was! to! seek! the! common! pattern! among! the! data! and!improve!the!understanding!on!the!subject.!To!achieve!this,!a!detailed!diagnosis!of!the!collected!

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data! is! been! done! and! emphasis! was! on! understanding! the! current! situation! of! northWsea!production!efficiency.!!The! common! issues! are! been! identifies,! grouped! and! categorized! into! possible! root! causes!behind!the!problem!faced!by!most!operators!that!are!common!or!structural!in!nature.!!

3.1.2"Phase"2:"Design"and"Circulate"the"Questionnaire"

According! to! Saunders! et# al.# (2009),! questionnaires! represent! one! of! the! most! effective! and!widely!adopted!data!collection!techniques!that!provide!a!wider!way!of!collecting!a!large!number!of! responses,! which! can! then! be! qualitatively! or! quantitatively! analysed! (depending! on! the!design!of!the!questionnaires).!!The! introductory! section! of! the! questionnaire! described! the! aims! of! the! study! and! gave!instructions! for! filling!out!and!returning!the!questionnaire.!The!questionnaire!was!divided! into!three!sections:!

1. Section!A!2. Section!B!3. Section!C!

!The! three! questions! in! Section! A! were! worded! specifically! to! assess! current! production!efficiency!levels!situation.!For!questions!A1,!A2!and!A3,!participants!were!asked!to!consider!their!opinions!on!production!efficiency!current!situation!of! for!their!specific!clients.!The!participants!are! encouraged! to! discuss! and! include! opinions! of! their! company! colleagues! to! broaden! the!spectrum!of!the!research.!!!Section!B!was!focused!on!understanding!and!verifying!the! initial!responses!of! the!participants!towards! the! root! causes! that! were! identified! by! the! primary! research.! For! question! B1,!participants! were! asked! to! show! their! agreement! and! disagreement! based! on! their!understanding!of!the!subject.!!Section! C! was! focused! towards! quantifying! the! current! actions! that! are! been! taken! by! the!operating!companies!and!identifying!the!current!player!who!are!proving!the!services!related!to!the!production!efficiency!issue.!!The!questionnaire!was!designed!using!principles!described! in!Webb!(2000),!and! the!questions!were! structured! according! to! the! Likert! scale! of! summated! ratings! where! respondents! were!asked! to! tick! boxes! according! to! their! level! of! agreement!with! a! statement! (strongly! disagree,!disagree,! neutral,! agree! or! strongly! agree).! This! allows! for! the! later! production! of! stacked! bar!charts!or!other!visualizations!to!display!the!results!of!the!questionnaire.!!For! circulating! the! questionnaire! a! list! of! potential! participant! companies! and! individuals!was!developed! in! conjunction! with! Accenture! based! on! their! current! accessible! client! base! and!companies! future! strategy.! For! the! purpose! of! the! research! 15! participants!was! proposed! and!agreed!with!Accenture;!this!allowed!for!a!manageable!number!of!interviews!to!be!arranged!and!conducted!within!the!6W8!week!data!collection!period,!together!with!sufficient!questionnaires!to!generate!quantitative!data.!!The!initial!telephone!calls!are!been!made!to!introduce!the!project!to!potential!participants!to!assess!their!willingness!to!participate!in!the!survey.!!!In! order! to! consolidate! the! data! gathered! through! the! qualitative! method,! structured!questionnaires! were! distributed! to! key! opinion! leaders! (i.e,! Analysts,! Consultants,! Middle!Management!and!Upper!Management).!!

! 12!

!The! objective! behind! releasing! the! questionnaire! was! to! quantify! the! level! of! respondents!understanding! and! acceptance! towards! the! primary! research! conclusion.! Some! openWended!questions!were! intentionally! designed! to! encourage! respondents! think! and! provide! additional!inputs.!!During!the!process!the!development!of!sets!of!questions!is!required!to!analyse!the!operating!oil!companies’!perspective!about!the!issues!they!are!facing!to!sustain/improve!the!production!from!their!respective!fields.!This!required!working!closely!with!the!management!to!carefully!identify!personnel! to! be! interviewed! and! respond! the! survey! questionnaire.! The! answers! from!questionnaires! were! recorded! on! a! standard! form! for! further! consolidation,! analysis! and!consideration.!!

3.1.3"Phase"3:"Personal"Interviews"

The! semiWstructured! interviews! were! conducted! to! explore! the! reasons! for! participants’!

questionnaire! responses.! Majority! of! the! interviews! were! conducted! faceWtoWface;! with! some!

were! conducted! via! telephone! calls.! Most! interviews! lasted! approximately! 35W45! minutes,!

although!some!participants!were!even!more!generous!with!their!time.!!

!Interviews!gave!participant!an!opportunity!to!raise!issues!and!opinions!that!were!not!necessarily!covered!within! the! original! questionnaire! design! –! this! is! one! of! the! advantages! of! the!mixed!method!approach!employed!during!the!research.!

Each!participant!was!assigned!a!code!according!to!the!nature!of!their!status:!

• ANY!codes!for!Analyst,!!

• CON!codes!for!Consultant,!!

• MM!code!for!Middle!Management.!

• UM!code!for!Upper!Management.!

In!addition!to!total!responses,!the!number!of!responses!for!each!participant!type!(ANY,!CON,!MM!or! UM)! was! recorded! in! order! to! explore! any! differences! in! opinions! among! all! the! opinion!leaders! in! upper,!middle!management! or! junior! level! across! Accenture.! Ethical! considerations!were! strictly! observed! during! the! survey! exercise.! Interviews! were! recorded! only! with! the!permission! of! the! participants.! All! participants!were! assured! complete! confidentiality! prior! to!taking!part;!the!list!of!participating!individuals!remains!confidential!and!known!only!to!the!RGU!project!team."

Also,! Along! with! completed! questionnaire,! the! responses! included! additional! comments! as!requested! within! circulated! questionnaires,! which! was! considered! while! coming! up! with!recommendations!in!the!later!stage.!

! 13!

4.1"Participation"and"sample"size"

!• !Questionnaire!responses!were!received!from!a!total!of!15!questionnaires!sent!out!across!

7!companies.!!• This!represents!an!overall!response!rate!of!73.3%!per!questionnaire!sent!out.!These!are!

good! response! rates! for! a! survey! of! this! type,! despite! the! survey! being! conducted!between!July!and!August!when!many!potential!participants!were!on!holiday.!!

• Some!of!the!received!questionnaires!were!partially!completed.!!• 10! individuals! were! interviewed.! Only! one! individual! who! completed! a! questionnaire!

was!not!interviewed.!!• 2!times!more!than!1!individual!filled!out!and!responded!from!the!same!company;!these!

are!counted!as!separate!responses.!

Table!4.1!Survey!response!rates:!!Number!Of!

companies!

contacted!for!

the!survey!

Number!of!

questionnaires!

sent!out!

Number!of!

responses!

received!

Response!rate!

per!

questionnaire!

sent!

Number!of!

individuals!

interviewed!

7! 15! 11! 73.3%! 10!

4.2"Types"of"participating"companies"

!For! the!purpose!of! the!project,!only! the!major!Oil!&!Gas!companies!are!been! targeted!who!are!operating! in! North! Sea! and! are! current! clients! of! Accenture.! The! reason! and! thought! behind!selecting! these! companies! is! to! get! the! response! on! production! efficiency! issues! from! the!Accenture! teams! that! are! involved! in! onWgoing! work! within! these! companies.! The! companies!covered!are:!

! 14!

1. BP!

2. Shell!!

3. BG!!

4. ConocoPhillips!

5. Talisman!Sinopec!Energy!

6. Total!!

7. Accenture!

4.3"Type"of"Respondent"Includes"

!1. Analyst!2. Consultants!3. Middle!Management!

3.1. Industry!solutions!and!services!Managers!3.2. PE!&!CE!Manager!

4. Upper!Management!4.1. Industry! solutions! and! services! Senior!

Manager!4.2. PE!&!CE!Senior!Manager!4.3. Business! and! System! Integration! Senior!

Manager!4.4. Global!Energy!Hub!Lead!4.5. Manager!from!Operator!company!!

4.4"Summary"of"questionnaire"responses"

4.4.1"Summary"Charts"of"the"current"production"efficiency"situation"across"the"

served"operating"companies"

Question!A1.!!What!is!your!client’s!current!level!of!production!efficiency?!

!

!Figure.!4.2!Summary!of!questionnaire!responses!for!Question!A1!

0!

10!

20!

30!

40!

50!

60!

70!

80!

90!

100!

Production!EfSiciency!(%

)!

Operator!Companies!

Production!EfSiciency!Levels!(Current)!

Talisman!Sinopec!Energy!

Shell!

BP!

Total!

ConocoPhillips!

BG!

Figure!4.1!Participating!companies!in!the!research!!

!!

! 15!

Question!A2:!!What!is!the!trend!for!your!client!organization?!!

!Table!4.2:!Trend!summary!!

Company"

"

Trend"

"

Upward" Downward"

Shell" B" X"BG" B" X"BP" B" X"ConocoPhillips" B" X"Talisman"Sinopec"Energy" B" X"Total" B" X"Accenture" B" X"!

Overall!response:!Downwards!

Question!A3.!What!is!the!current!level!of!management!focus!on!Production!Efficiency!/!commitment!to!improve?!

!Note:!The!response!scale!is!from!1!to!10!with!1!being!lowest!focus!with!10!being!the!extremely!focused!and!1!being!least!focused.!!

!!Figure.!4.3!Summary!of!questionnaire!responses!for!Question!A3!

0!

1!

2!

3!

4!

5!

6!

7!

8!

9!

10!

1!

Focus!Level!

Operator!Companies!

Management!Focus!Levels!

Shell!

BP!

ConocoPhillips!

BG!

Talisman!Sinopec!Energy!

Total!

Generic!View!across!Accenture!Management!

! 16!

4.4.2"Summary"Graph"of"the"agreement"or"disagreement"by"the"respondents"with"

the"identified"root"causes"behind"the"production"efficiency"decline"issues"across"

the"served"operating"companies"

!Note:! For! each! of! the! statements! below! in! questions! B1,! indicate! the! extent! of! agreement! or!disagreement!by!colour!coding!in!the!appropriate!boxes.!The!response!scale!for!questions!is!as!follows:!

Strongly!Disagree,!Disagree,!Agree,!Strongly!Agree!

Production!Forecasting! !! 2! !! !! !! !! !! !! !! 8! 1! ! 11!

! ! ! ! ! ! ! ! ! ! ! ! ! !Ageing!Assets! 1! !! !! 3! !! !! !! !! !! !! 7! ! 11!

! ! ! ! ! ! ! ! ! ! ! ! ! !Maintenance/TAR! 1! 1! !! !! !! 4! !! !! !! !! 5! ! 11!

! ! ! ! ! ! ! ! ! ! ! ! ! !Maintenance!Execution! 1! !! !! !! !! !! 6! !! !! !! 4! ! 11!

! ! ! ! ! ! ! ! ! ! ! ! ! !Material!and!Services!Sourcing! !! 2! !! 2! !! !! !! 4! !! !! 3! ! 11!

! ! ! ! ! ! ! ! ! ! ! ! ! !Workforce! !! !! 3! 1! !! !! !! !! !! !! 7! ! 11!

! !! ! ! ! ! ! ! ! ! ! ! ! !

! 0! 1! 2! 3! 4! 5! 6! 7! 8! 9! 10! !! 11!!

!! Strongly!! !! Disagree! !! Agree! !! Strongly!!

!

Disagree!

! ! ! ! !

Agree!Figure.!4.4.!Summary!of!questionnaire!responses!for!Question!B1.!!The!numbers!shown!indicates!the!actual!number!of!responses!for!each!segment.!!Summary!of!the!findings:!

!Within!the!researched!respondents!the!most!prominent!root!courses!was:!

• Ageing!Assets!• 64%!Strongly!agreed;!13%!disagreed!but!only!on!the!basis!of!Pilots!report.!

Within!the!researched!respondents!the!least!prominent!root!courses!was:!• Material!and!Services!Sourcing!!• 37%!Disagreed!or!Strongly!disagreed;!64%!Agreed!or!Strongly!Agreed!

The!processes!that!received!most!“Strongly!Agree”!responses!were:!• Ageing!Assets:!(64%)!• Workforce:!(64%)!• Maintenance/TAR:!(46%)!• Maintenance!Execution:!(37%)!

The!processes!that!received!most!“Strongly!Disagree”!responses!were:!• Material!and!Service!Sourcing:!(18%)!• Maintenance/TAR:!(9%)!

""

Question!B1:!Root!causes!contributing!to!poor!production!efficiency!that!may!present!some!cases!&!reasons!behind!the!production!decline!from!an!asset.!Which!of!these!processes!or!functions!would!you!agree!from!your!experience?""

! 17!

4.4.3"Services/solutions"that"are"being"implemented"by"your"client"to"address"PE"

challenges:"analysis"of"questionnaire"and"interview"responses"for"individual"

business"processes""

!The! following! sections! explain! and! defines! the! six! root! causes! inWdetail! and! explores! the!responses! for!each!segment! i.e.,!Analyst!(ANY),!Consultant!(CS),!Middle!Management!(MM)!and!Upper!Management!(UM).!Each!identified!root!cause!is!shown!with!the!breakdown!of!responses!from!Questions!B1!according!to!Accenture!and!operating!companies!key!opinion!leaders.!!!1.!Production!Forecasting:!

The! estimation! of! petroleum! resource! quantities! involves! the! interpretation! of! volumes! and!values! that! have! an! inherent! degree! of! uncertainty.! These! quantities! are! associated! with!development! projects! at! various! stages! of! design! and! implementation.! Use! of! a! consistent!classification! system! enhances! comparisons! between! projects,! groups! of! projects,! and! total!company!portfolios!according!to!forecast!production!profiles!and!recoveries.!Such!a!system!must!consider!both!technical!and!commercial!factors!that!impact!the!project’s!economic!feasibility,!its!productive!life,!and!its!related!cash!flows.!!Figure! 4.5! is! a! graphical! representation! of! the! SPE/WPC/AAPG/SPEE! resources! classification!system.! The! system! defines! the! major! recoverable! resources! classes:! Production,! Reserves,!Contingent!Resources,!and!Prospective!Resources,!as!well!as!Unrecoverable!petroleum.!!The!“Range!of!Uncertainty”!reflects!a!range!of!estimated!quantities!potentially!recoverable!from!an! accumulation!by! a! project,!while! the! vertical! axis! represents! the! “Chance! of! Commerciality,!that!is,!the!chance!that!the!project!that!will!be!developed!and!reach!commercial!producing!status.!!

Figure!4.5:!SPE/WPC/AAPG/SPEE!resources!classification!system!!The! Project:! Each! project! applied! to! a! specific! reservoir! development! generates! a! unique!production!and!cash!flow!schedule.!The!time!integration!of!these!schedules!taken!to!the!project’s!technical,! economic,! or! contractual! limit! defines! the! estimated! recoverable! resources! and!

! 18!

associated!future!net!cash!flow!projections!for!each!project.!The!ratio!of!EUR!to!Total!InitiallyWinWPlace!quantities!defines!the!ultimate!recovery!efficiency!for!the!development!project(s).!!!A!project!may!be!defined!at!various! levels! and! stages!of!maturity;! it!may! include!one!or!many!wells! and! associated! production! and! processing! facilities.! One! project! may! develop! many!reservoirs,!or!many!projects!may!be!applied!to!one!reservoir.!!!Most!of! the! fields! in!North!Sea!are!considered!mature!due!to!their! long!production!history!and!some!of!them!may!be!in!their!uncertainty!zone.!With!technological!advancement!the!process!of!finding!accurate!measures!is!becoming!more!complex!and!hence!prone!to!errors.!This!results!in!a!poor!quality!dada!analysis,!monitoring!and!inaccurate!projections.!!!Based!on!the!responses!received,!majority!was!an!“Agreed”!(91%)!

"" "" """"Production"Forecasting""

"" "" "" """"

" "" " "" Analyst"

11" "" "" " " " " " " " "" Consultant"10" "" "" " " " " " " " "" Middle"Management"9" "" "" " " " " 4" " " "" Senior"Management"8" "" "" " " " " "" " "

"""

7" "" "" " " " " "" " ""

""6" "" "" " " " " "" " "

"""

5" "" "" " " " " 3" " ""

""4" "" "" " " " " "" " "

"""

3" "" "" " " " " "" " ""

""2" "" "" " " " " 2" " "

"""

1" "" "" " " " " "" " ""

""0" "" "" "" "" 1" "" 1" "" ""

"""

"" """

"" " "" " "" " "" "" """" " " Strongly"

Disagree"" Disagree" " Agree" " Strongly"

Agree"" ""

"" "" "" "" "" "" "" "" "" "" "" ""!

Several!respondents!initially!declared!no!direct!correlation!between!production!forecasting!and!production! efficiency,! but! later! during! the! interview! when! discussed! and! explained! the!relationship!majority! agreed!with!possible! impact!of!high! technology!use! can!give!error!prone!results!which!may!impact!the!designing!of!a!production!systems!of!platform.!!2.!Ageing!Assets!!Over!50%!of! the!offshore!oil! and!gas! installations! in! the!UK!Sector!of! the!North!Sea!have!now!been!operating!for!at! least!20!years.!Most!assets!are!now!approaching!or!operating!beyond!the!original! design! intent.! With! the! continuing! rise! in! oil! and! gas! prices! and! the! advances! in!technology,! there! is! an! increasing! requirement! to! extend! the! operational! life! of! these! assets.!Coupled! with! this! is! the! fact! that! most! installations! have! seen! considerable! changes! in! the!composition! of! the! well! fluids! over! the! life! of! the! field! and! there! is! an! increasing! trend! for!additional!subsea!tieWbacks.!!All! of! these! issues! have! raised! concerns! regarding! the! integrity! and! fitness! for! purpose! of! the!structures! and! equipment! for! this! extended! life.! As! a! result,! the! safety! case! regulations! were!modified! to! include! a! technical! justification! for! extended! operation! and! the! Health! &! Safety!

Figure!4.6!Responses!on!"Production!Forecasting"!!

! 19!

Executive!has!recently!launched!the!Key!Programme!4!(KP4)!to!ensure!that!all!duty!holders!have!suitable!management!systems!in!place!to!adequately!address!the!ageing!related!issues.!!According!to!HSE!Research!Report!RR509!W!The!Plant!Ageing!Guide,!“Ageing!is!not!about!how!old!the!equipment!is.!It’s!about!what!is!known!about!its!condition,!and!how!that’s!changing!over!time”.!This!definition!is!clearly!illustrated!in!the!‘bath!tub’!curve!shown!below!in!Figure!4.7:!!

!Figure!4.7:!Bath!Tub!Curve!!During! the! initial! operation! phase,! design! faults,! installation! issues,! commissioning! issues! or!early!life!operating!faults!are!realised.!Once!the!equipment!is!in!the!mature!stage,!it!is!generally!operating!well!within!design!limits,!routine!inspection!and!maintenance!is!being!undertaken!and!in!general!there!is!slow!degradation.!During!the!ageing!stage,!the!design!limits!for!the!equipment!are!approaching,!process!changes!have!usually!taken!place,!frequent!repairs!are!required!and!the!overall! degradation! rate! is! increasing.! In! the! end!of! life! stage,! the! safe! operating! limits! for! the!equipment!are!approaching,!advanced!inspection!techniques!are!required!at!decreasing!intervals!to! determine! fitness! for! purpose,! major! repairs! are! required! and! there! is! accelerating!deterioration.!The!key!to!longerWterm!reliability!and!safety!is!to!establish!effective!management!systems!to!prolong!the!mature!stage,!otherwise!starting!at!the!later!stages!requires!considerably!more!effort!and!cost.!!The!costs!of!operating!the!fields!and!their!assets!across!the!UKCS!totalled!£7.7!billion!in!2012,!an!increase!of! ten!per! cent! from! the!previous!year.!A! further! ten!per! cent! increase! is! expected! in!2013,!such!that!Oil!&!Gas!UK!estimates!that!total!operating!expenditure!will!reach!£8.5!billion!for!the!year.!!Operating!costs!have!risen!by!around!90!per!cent!since!2000.!Adjusting!for!inflation,!the!increase!is!only!around!50!per!cent!over!the!last!13!years,!or!about!3.5!per!cent!a!year,!representing!good!cost!control!from!an!overall!perspective.!This!increase!has!been!consistent!over!the!last!decade,!excluding!a!dip!after!the!financial!crisis!in!2008!and!2009.!Keeping!operating!costs!under!control!is! a! considerable! achievement! for! the! industry,! given! the! need! to! maintain! ageing! assets! to!satisfactory!standards!and!the!worldwide!competition!for!resources,!especially!skilled!people.!!While!growth!in!operating!costs!has!been!fairly!well!contained,!the!unit!cost!per!barrel!produced!has!risen!much!more,!particularly!in!recent!years!as!production!has!declined.!The!unit!operating!cost! (UOC)!has! risen! fourWfold!over! the!past!decade,! a!worrying! trend! that! could!have!a!major!influence!on!the!longevity!of!the!UKCS.!Lower!production!is!providing!constant!upward!pressure!on!UOCs,!alongside!the!recent!increase!in!expenditure!on!asset!integrity.!The!range!of!UOCs!for! individual! fields!on!the!UKCS!is!very!wide,! from!less!than!£5/boe!all! the!way! up! to! around! £70/boe.! There! are! several! fields! on! the! UKCS! that! now! cost! more! than!£40/boe!to!operate.!Oil!&!Gas!UK!has!found!that!much!of!the!cost!escalation!is!concentrated!in!a!

! 20!

small!number!of!fields,!but!the!general!trend!for!UOCs!is!rising!markedly!and!this!will!not!change!unless! the!decline! in!production! is!reversed.! If! there!were!to!be!a! fall! in!commodity!prices,! the!more!expensive!assets!would!have!to!be!shut!down!and!could!face!premature!decommissioning.!

!

Figure.4.8:!Unit!Operating!Costs!for!the!UKCS,!2001!to!2013!Source:!Oil!&!Gas!UK!!Based!on!the!responses!received!this!was!an!“Strongly!Agreed”!(64%);!only!1!respondent!disagreed!on!the!basis!of!recent!data!published!by!Production!Efficiency!Task!Force.!!"" "" ""

"Ageing"Assets"""" "" "" ""

""" "

" " "" Analyst"11" "" "" " " " " " " " "" Consultant"10" "" "" " " " " " " " "" Middle"Management"9" "" "" " " " " " " " "" Senior"Management"8" "" "" " " " " " " "

"""

7" "" "" " " " " " " "

"""

6" "" "" " " " " " " 1"

"""

5" "" "" " " " " " " 3"

"""

4" "" "" " " " " " " ""

"""

3" "" "" " " " " " " ""

"""

2" "" "" " " " " 3" " 2"

"""

1" "" "" " " " " "" " ""

"""

0" "" "" "" "" 1" "" "" "" 1"

"""

"" """

"" " "" " "" " "" "" """" " " Strongly"

Disagree"" Disagree" " Agree" " Strongly"

Agree"" ""

"" "" "" "" "" "" "" "" "" "" "" ""Figure!4.9!Responses!on!"Ageing!Assets"!!Majority!segments!within!accenture!(MM,!CS!and!ANY)!strongly!believed!that!Ageing!Asset!does!have!direct!impact!over!the!performance!of!an!asset!resulting!in!its!efficiency!decline.!

! 21!

3.!Maintenance/Turnarounds!(TAR)!!On!the!subject!of!historical!data,!recording,!retaining!and!accessing!operational,! inspection!and!maintenance! data! is! critical! to! effective! management! of! ageing! and! life! extension.! When!undertaking!life!extension!studies!for!clients,!this!issue!frequently!generates!problems!especially!when! information! has! not! been! archived! correctly,! lost! during! changes! in! ownership! or! lost!during! document! management! system! migrations.! Alternatively,! the! management! of! change!process! has! not! been! fully! implemented! and!documents! /! drawings! have!not! been!updated! to!reflect!the!implemented!changes.!!All! too! often! ageing! and! life! extension! is! focused! on! physical! equipment! however! effective!mitigation! of! the! risks! associated!with! ageing! and! life! extension! is! largely! dependent! on! good!management! systems.! Some! good! management! system! aspects! that! some! operators! have!implemented!to!help!then!effectively!manage!these!risks!are!detailed!below:!

• A!clear!ageing!and!life!extension!policy!signed!by!senior!management,!with!linkage!to!the!HS&E!policy!to!ensure!the!right!level!of!commitment!within!the!organisation.!!

• Having!adequate!numbers!of!competent!people! to!recognise!and!address!ageing! issues!with! clearly! defined! roles! and! responsibilities! linked! to! job! descriptions! and!performance!objectives.!!

• A!clear!ageing!and!life!extension!strategy!for!the!individual!assets!which!is!closely!linked!to! financial,! health! and! safety! and! environmental! strategies.! This! strategy! should! give!due! consideration! to! the! original! design! life,! operational! history,! existing! condition,!predicted! changes,! ongoing! degradation! and!deterioration,! obsolescence,! technological!advances,! regulatory! changes! and! predicted! end! of! field! life.! This! strategy! should! be!underpinned! by! the! supporting! inspection,! maintenance,! verification! and! sparing!processes!and!activities!with!adequate!communication!and!feedback!provisions.!!

• Short,! medium! and! longWterm! budgets! and! turnaround! plans! should! make! adequate!provisions!for!ageing!and!life!extension!requirements.!!

• Meaningful! and! interlinked! Key! Performance! Indicators! (KPIs)! at! all! levels! of! the!organisation!(leading!and!lagging)!to!measure!the!effectiveness!of!the!strategy.!!!

Based! on! the! responses! received! this!was! an! “Agreed”! (46%);! (18%)! respondent! either!disagreed!or!strongly!disagreed.!

"" "" """Maintenance/TAR""

"" "" "" """"

" "" " "" Analyst"

11" "" "" " " " " " " " "" Consultant"10" "" "" " " " " " " " "" Middle"Management"9" "" "" " " " " " " " "" Senior"Management"8" "" "" " " " " " " "

"""

7" "" "" " " " " " " ""

""6" "" "" " " " " " " "

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5" "" "" " " " " " " ""

""4" "" "" " " " " 1" " "

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3" "" "" " " " " 3" " ""

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1" "" "" " " " " "" " """

""0" "" "" 1" "" 1" "" 1" "" 1"

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"" """

"" " "" " "" " "" "" """" " " Strongly"

Disagree"" Disagree" " Agree" " Strongly"

Agree"" ""

"" "" "" "" "" "" "" "" "" "" "" ""Figure!4.10!Responses!on!"Maintenance/TAR"!

! 22!

4.!Maintenance!Execution!!From!undertaking!a!significant!number!of!life!extension!studies!the!following!key!areas!need!to!be!considered.!These!are!also!explained!in!more!detail!in!the!subsequent!subWsections.!

• Degradation.!!• Obsolescence.!!• Changing!production!profiles!and!fluid!compositions.!!• Legislative!changes.!!

!Degradation:!!!!Figure! below! is! taken! from! a! 2008! study! completed! by! ABB! into! onshore! process! equipment!failure,! but! it! is! fairly! indicative! for! an! offshore! environment.! This! highlights! the! fact! that!corrosion! accounts! for! nearly! 50%! of! all! failures! if! you! combine! general! and! stress! corrosion!cracking.!The!last!five!causes!to!the!right!of!the!chart!only!account!for!13%!of!the!overall!failures,!however!they!should!not!be!discounted!as!they!still!have!the!potential!to!cause!injuries!and!shut!down!a!process!train!or!an!entire!process!plant.!!

Figure!4.11:!Causes!of!Equipment!Failure!Note!–!the!number!of!failures!is!displayed!on!the!y!axis.!!

!Obsolescence!!Corrosion!is!one!of!the!more!obvious!signs!of!asset!ageing!because!of!visible!signs!of!corrosion,!however!ageing!and!asset!life!extension!is!more!then!just!corrosion!related.!Obsolescence!is!a!key!issue!facing!a!number!of!systems!on!various!platforms.!This!is!not!a!new!phenomenon,!but!it!is!causing! an! increasing! number! of! issues! offshore! particularly! given! the! pace! with! which!technology! is! moving! forward.! Hence! for! obvious! reasons! it! mainly! relates! to! electrical!equipment,!instrumentation!and!control!systems.!!Equipment!service!life!can!be!broken!down!into!4!distinct!phases!as!shown!in!Figure!4.12!below.!These!phases!are!not!equal!in!duration!and!usually!the!classic!phase!is!considerably!longer!than!any!other!phase.!

Figure!4.12:!Service!Life!

! 23!

The!key!aspect!to!consider!when!purchasing!new!or!replacement!equipment!is!to!determine!the!phase!in!which!the!product!is!currently!situated.!In!the!offshore!industry,!there!is!a!tendency!to!specify!well!proven!technology!for!reliability!reasons,!however,!this!means!the!equipment!tends!to! be! towards! the! end! of! the! classic! phase! when! installed! and! this! increases! the! risk! of! the!equipment!becoming!obsolete!a!lot!sooner.!The!onset!of!obsolescence!is!controlled!by!three!main!factors,! namely! the! rate! of! technological! development,! the! survival! of! suppliers! and! the!availability!of!expertise.!!In! terms! of! a! strategy! options! to! address! obsolescence! there! are! four! main! options,! namely!replace! all! obsolete! items!with! current! products,! partial! replacement,!with! the! removed! items!held!as!spares,!adopting!a!‘runWtoWfailure’!policy!with!current!products!as!spares!and!the!special!manufacture!of!key!spare!parts.!!Changing!Production!Profiles!and!Fluid!Compositions!!Corrosion!and!obsolescence!are! the! two!main! factors! that!are!usually!considered! in!relation! to!ageing!assets,!however!there!are!others,!which!should!not!be!overlooked.!Changing!production!profiles!and! fluid!compositions!can!significantly!affect! the!operability!and!reliability!of!process!plant.!For!example:!

• As!reservoirs!are!depleted,!there!may!be!an!increase!in!the!presence!of!CO2!or!H2S!in!the!well!fluids.!This!can!cause!increased!corrosion!and!additional!safety!hazards.!

• Equipment!originally!designed!for!multiWphase!fluids!may!now!be!subject!to!singleWphase!fluids!and!vice!versa.!!

• Reduced!flows!and!pressures!may!require!the!operation!of!pumps!and!compressors!with!significant!recycling!of!fluids.!!

• Lack!of! turn!down!capability!on!major!equipment! items!such!as! compressors! can!give!rise!to!operability!and!reliability!!issues.!!

• There!may!be!more!solids!entrained!in!the!well!fluids!in!the!form!of!sand,!etc.!This!can!cause! increased! erosion! of! !process! systems.! This! in! turn! can! lead! to! possible! loss! of!containment! and! failure! of! valves! to! seal! inventories!when! !there! is! a! need! to! remove!equipment!for!maintenance.!!

• The!water! cut!may!be! increasing!or! the! reservoir!may! require!additional!water!or!gas!injection!in!order!to!maintain!the!!flow!of!fluids,!this!in!turn!leads!to!the!requirement!of!additional! injection! equipment! on! the! topsides.! This! may! be! constrained! by! physical!space!available,!as!well!as! the!power!available! for! the!drive!units,!especially! if! there! is!less!gas!available!for!fuel!gas!!

• Conversely,!with!the!technological!advances!in!the!areas!of!drilling!and!subsea!that!have!occurred!over! the!past! few!years,!production!graphs!can!exhibit!a! ‘U’!shape!due!to! the!ability! of! the! platform! to! tap! into! other! reservoirs! using! extended! reach! drilling! or!extended!subsea!tieWbacks!!

!Legislative!Changes!!!!From!a! safety!perspective! the!Health! and! Safety!Executive! are!becoming! increasing! concerned!about!ageing!facilities,!which!has!manifested!itself!in!the!KP3!and!KP4!programmes!as!well!as!the!recent! corrosion! project.! Changes! in! the! safety! legislation! now! mean! that! operators! have! to!provide!a!clear!and!detailed! justification!for!extended!operation!of!the!asset!within!Safety!Case!Thorough!Reviews.!As!a!result! it!will!be! increasing!difficult! to! justify!operation!with!significant!maintenance!backlogs.!Legislative!changes!can!also!impact!in!other!areas!for!example:!!

• The! ATEX! directive! &! PFEER! (Prevention! of! Fire! and! Explosion! and! Emergency!Response)!mean!that!like!for!like!replacement!of!equipment!may!not!be!possible!due!to!the!hazardous!area!rating!requirements.!!

! 24!

• The!replacement!of!R22!refrigerants!typically!used!in!HVAC!systems!by!December!2014!due!to!the!Montreal!Protocol!and!EU!Regulation!2037!on!ozoneWdepleting!substances.!!

• The! increasingly! stringent! limitation! imposed! on! emissions! from! power! generation!turbines! has! lead! to! changes! in! combustor! design! and! the! installations! of! post!combustion!clean!up!technology!such!selective!catalytic!reduction.!!

!Based!on!the!responses!received!this!was!an!“Agreed”!or!“Strongly!Agreed”!(91%).!!"" "" ""

"Maintenance"Execution""""" "" "" ""

""" "

" " "" Analyst"11" "" "" " " " " " " " "" Consultant"

10" "" """ " " " " " "

""Middle"Management"

9" "" "" " " " " " " " "" Senior"Management"8" "" "" " " " " " " "

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Disagree"" Disagree" " Agree" " Strongly"

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"" "" "" "" "" "" "" "" "" "" "" """

Figure!4.13!Responses!on!"Maintenance!Execution"!!5.!Materials!and!Service!Sourcing!!Based! on! the! responses! received! this!was! an! “Agreed”! (64%);! (18%)! respondent! either!

disagreed!or!strongly!disagreed.!

"" "" """"Material"&"Services"Sourcing""

"" "" "" """"

" "" " "" Analyst"

11" "" "" " " " " " " " "" Consultant"10" "" "" " " " " " " " "" Middle"Management"9" "" "" " " " " " " " "" Senior"Management"8" "" "" " " " " " " "

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"" " "" " "" " "" "" """" " " Strongly"Disagree" " Disagree" " Agree" " Strongly"

Agree"" ""

"" "" "" "" "" "" "" "" "" "" "" ""Figure!4.14!Responses!on!"Materials!&!Services!Sourcing"!

! 25!

The!responses!revealed!that!there!were!different!opinions!regarding!this!topic!among!the!diverse!group!within! accenture.!However,!most! respondents! agreed!with!Material!&!Services! Sourcing!cause! unwanted! delays! resulting! in! long! unplanned! shutdowns! hence! sometimes! severely!impacting!the!PE!w.r.t.!Time.!!

The!most!noticeable!factor!in!the!responses!was!the!difference!in!opinion!among!the!key!opinion!leaders!especially!at!senior!management!level,!which!is!varying!from!strong!agreement!to!strong!disagreement!on!the!subject.!!!!6.!Workforce!!Age!Profile!and!Competency!level!!!The!question! to! ask! in! relation! to! this! topic! is!whether! you!have! any! succession!planning! and!knowledge! retention! systems! in! place! for! your! key! operations! and!maintenance! personnel.! So!much! information! is! usually! held! in! the! heads! of! individuals! and!when! these! people! retire! or!move! to! another! company! this! information! is! all! too! easily! overlooked!until! they! leave!or! it! is!required,! e.g.! in! the! event! of! an! unplanned! shut! down.! The! other! element! to! consider! is! the!training!of!your!work! force! in!new!technology.!This!should!be!considered!at!all! levels!with! the!organisation!and!special!consideration!should!be!given!to!the!impact!of!new!technology!to!allow!more!efficient!or!remote!control!of!equipment!or!platforms.!This!can!lead!to!deWmanning,!which!means! the! remaining!personnel!need! to!be! skilled!/! crossWtrained! in!other! technical! areas! and!working!methods.!!!

Subcontracting!to!3rd!Parties!!Even! though! all! operators! are! trying! to! drive! down! operating! costs,! due! to! the! reduction! in!production!from!the!various!installations,!the!overall!industry!trend!is!for!unit!operating!costs!to!increase! over! time.! One! of! the! ways! to! keep! operating! costs! lower! is! to! subWcontract! some!services! that! are! only! required! periodically! to! minimise! overheads.! Hence! there! has! been! an!increased! dependence! on! 3rd! parties! especially! for! the! ‘newer’! operators! who! tend! to! have!limited! internal! resources.! There! is! nothing! wrong! with! subWcontracting! work,! however!competency! assessment,! inductions! and! debriefing! of! personnel! are! critical! factors.! Also! you!have!to!ensure!that!you!are!receiving!or!you!will!have!access!to!all!relevant!information!in!years!to!come!and!this!should!be! in!the!detailed! in!the! legal!contract!with!the!company.!Otherwise! if!the! company! closes! down! or! is! taken! over,! or! you! change! to! another! company,! you!may! lose!access!to!this!critical!information!and!this!may!prevent!your!new!company!from!understanding!long!running!issues!or!undertaking!trend!analysis.!!

Based!on!the!responses!received!this!was!a!“Strongly!Agreed”!(64%);!(27%)!respondent!either!disagreed.!

Overall! almost! 64%! of! the! respondents! Strongly! Agreed! with! Workforce! being! a! severe! root!cause! that! is! impacting! production! efficiency! in! North! Sea.! ! The!most! noticeable! factor! in! the!responses! was! the! opinion! among! the! key! opinion! leaders! especially! at! upper! and! senior!management!levels!with!almost!75%!strongly!agreeing.!!"

"

"

"

! 26!

"" "" """Workforce""

"" "" "" """"

" "" " "" Analyst"

11" "" "" " " " " " " " "" Consultant"

10" "" """ " " " " " "

""Middle"Management"

9" "" """ " " " " " "

""Senior"Management"

8" "" "" " " " " " " ""

""7" "" "" " " " " " " "

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6" "" "" " " " " " " 4""

""5" "" "" " " " " " " ""

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4" "" "" " " " " " " """

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2" "" "" " " 1" " " " 2""

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0" "" "" "" "" 1" "" 1" "" 1""

"""" ""

""" " "" " "" " "" "" ""

"" " " Strongly"Disagree"

" Disagree" " Agree" " Strongly"Agree"

" ""

"" "" "" "" "" "" "" "" "" "" "" ""!Figure!4.15!Responses!on!"Workforce"!

"

4.4.4"List"of"Action"Taken"by"the"North"Sea"operating"companies"V"Solutions"/"

Services"and"possible"Competition"who"are"providing"production"improvement"

services"

!" "

"

Question!C1:!What!are!the!current!types!of!services/solutions!that!are!being!implemented!by!your!client!to!address!PE!challenges?!

"" " ""Following" is" the" summary" of" solution" and" services" that" are" being" implemented" by" the" North" Sea"operators" to" mitigate" production" efficiency" decline." Improving" Production" Efficiency" is" the" top"priority! among! most! North! Sea! operators.! The! viability! of! their! UK! business! depends! upon!resolving!this!problem!and!some!of!the!actions!that!were!taken!by!them!are:!!• Creation!of!a!dedicated!group!called!Production!Delivery!to!identify!and!execute!production!

optimisation!opportunities;!!• Reorganisation!of!the!operations!area,!developing!an!Integrated!Operations!Centre;!!• New!focus!on!Integrated!Activity!Planning;!!• Change!in!leadership,!bringing!operations!specialists!• Establishing!a!Risk!Management!process!(Facility!Risk!Review)!to!create!a!full!understanding!

of!facility!risks!and!develop!targeted!risk!liquidation!plans!• Equipment!maintenance!improvement!also!falls!under!the!FRR!process!!• Dedicated! turnaround! teams! e.g.! in! shell! current! Curlew! startWup! and! Pierce! dryWdock.!

However,!these!turnarounds!are!still!well!beyond!the!original!schedule!• Client!teams!working!on!life!extension!viability!and!WRFM!opportunities.!• Working! on! improvising! on! risk! liquidation! rate! by! analysing! investment! decisions! to!

mitigate!risks!by!launching!big!turnarounds.! !

! 27!

• Human! behaviour! transformation:! Behaviour! change! management! workshop! for! all!employees.!

• Improving!work!management!on!daily!maintenance!activities.!• Focused! maintenance! and! upgrade! programmes! (Planned! program! Specific! to! assets! and!

upgrading!to!new!ones).!• Intensive! major! new! projects! to! bring! on! stream! new! facilities! with! high! production!

efficiency.!(Replacing!the!old!assets!by!new!development)! !• Extensive! and! increasing! use! of! new! technology! in! particular,! remote!monitoring! and! real!

time! support.! (They! have! consoles! for! downhole! to! collect! data! &! transfer! it! to! Onshore!where!more!people!can!monitor!&!review!it!along!with!offshore!crew)!!

• Sustainable! performance! improvement! project! utilizing! internal! consultants! to! identify!opportunities! and! progress! actions! to! deliver! increased! production! efficiency! (SPI! –!Sustainable!performance!improvement)!

• Projects! to! specifically! focus! on! safety,! costs,! capital! efficiency,! and! reliability! to! aid!production!efficiency! !

• Funding!and!projects!approved!to!increase!tool!time!• New!TMAX/WMS!system!(Maximo!7.5)!due!to!go!live!in!Q1!2015!to!aid!production!efficiency!• TURNAROUNDS!and!PLE!have!been!vastly!improved!due!to!projects!over!the!last!2W3!years.!• Optimised!maintenance!programme!taking!shape!and!an!offshore!coaching!programme! for!

production!efficiency!improvement!due!in!2014.!!!

!Table!4.3:!Service!providers!!

S."No." Companies" Type"of"Service"

1" SAMI" Consulting"

2" Schlumberger" Consulting""3" Petrofac" Technical"

4" ARMS" Technical"

5" ART" Technical"

6" AMEC" Technical"

7" Wood"Group" Technical/Consulting"

8" Mckinsey" Consulting""

9" Schlumberger" Technical/Consulting"

10" CapGemini" Consulting""

11" Accenture" Consulting""

12" Independent"contractors" Technical/Consulting"

!

!

" "

"

Question! C2:! Who! is! currently! providing! services! related! to! production! efficiency!improvement?!

"" " "

! 28!

5.1"Appetite"for"improving"Production"Efficiency""

!UK!offshore! is! showing!steep!decline! in! there!production!especially! in! recent!years! (Decline!of!250,000! boe/d! p.a.).! Improving! Production! Efficiency! is! the! quickest! route! to! increasing!UKCS!production,!with!a!leadWtime!of!1W3!years.!This!will!require:!

• Focus!and!stamina;!!• Additional!expenditure!and!resources;!!• A!large!number!of!interventions!expected;!!• Collaboration!including!utilisation!of!scarce!resources!!

!In!some!cases,!poor!P.E.!can!be!linked!to!a!lack!of!past!investment.!Identification!of!the!underlying!root!causes!is!the!key:!

• Analysis!indicates!this!is!not!just!an!“age”!issue.!!• Operators!have!granularity!on!root!causes.!!

5.2" Establish" Production" Efficiency" Improvement"

Challenge"

• Individual!improvement!targets!to!be!set!per!Field,!based!on!matrix!!

• Individual!improvement!targets!to!be!set!per!Operator!!• Operators!to!investigate!what!is!required!and!plan!

accordingly!!• 2014!and!subsequent!budgets!to!include!spend!to!increase!

PE!!• Provide!transparency!for!DECC!stewardship!discussions!!

5.3"Dealing"with"the"Underlying"Issues""

!During! this!research! I!have! identified!a!number!of!underlying! issues!and!common!failures! that!were! contributing! to! poor! asset! integrity! management! causing! more! and! more! unplanned!shutdowns!and!resulting!steep!decline!in!production!efficiency!in!recent!past.!!

Figure!5.1!Production!Efficiency!Target!Source:!Oil!&!Gas!UK!!

! 29!

5.3.1"Leadership""

The! focus! to!manage! the! PE! decline! issue! effectively! understanding! or! appreciation! by! senior!management! for!major! hazard! risk! control! and! in! particular! the!major! hazard! risks! posed! by!their!own!operations!has!been!needs!enhanced!through!for!example!by!conducting!focused!Asset!Integrity!Workshops.!!!Incidents! such! as! Macondo! provided! another! driver! with! individual! company! programmes!flowing!from!their!review!of!the!lessons!from!the!various!reports.!The!significant!business!risks!that!arise!from!operating!an!installation!with!degrade!systems!requires!better!understanding!by!senior!management! teams! than! they!have!ever!been!previously.!Business! leaders!needs!better!information! on! a! routine! basis! through! receipt! of! understandable! data! from! sophisticated!performance! monitoring! arrangements.! The! enhanced! visibility! of! asset! integrity! status! is!enabling! business! leaders! to! make! informed! decisions! about! resource! prioritisation! for! their!assets.!!Good!practice!in!safety!and!sustained!investment!in!developing!the!skills!of!the!workforce!always!make! the! best! business! sense.! This! is! even!more! crucial!when!business! decisions! are! difficult.!There!will!therefore!be!no!change!in!our!resolve!to!help!the!UK!offshore!oil!and!gas!industry!to!become!the!global!leader!in!safety!performance.!!Oil!and!Gas!industry!required!continuing!investment!directly!in!safety,!asset!integrity,!skills!and!training!throughout!the!economic!cycle!and!will!support!Step!Change!in!Safety!and!OPITO!The!Oil!&!Gas!Academy!to!ensure!safety!continues!to!be!our!top!priority.!

5.3.2"The"Engineering"Function""

The!Engineering!and!Technical!Authorities!in!an!oil!company!act!as!a!backstop!against!continuing!operations! with! degraded! safetyWcritical! equipment! –! this! is! an! important! strategic! role,! the!importance!of!which!needs!to!be!recognised!again!and!reWembedded!within!operating!companies,!and!so!that!their!resources!significantly!increase.!!!In!March! 2011! an! “Offshore! Industry! Engineering! Function!Workshop”!was! held;! there!was! a!high!degree!of!engagement!by!Engineering!and!Technical!Authorities!from!operating!companies!and!contractors!(including!fabric!maintenance!contractors).!The!objectives!of!the!workshop!were!to! raise! awareness! of! HSE! concerns! on! asset! integrity!with! a! particular! focus! on! the! role! and!effectiveness!of!the!engineering!function!and!to!develop!a!broad!industry!consensus!on!the!way!forward.!Following!the!workshop!industry!senior!leaders!were!provided!directly!with!important!feedback! from! the! event! by! personal! letter! from! the!Asset! Integrity! Steering!Group!Chairman.!Key!messages!from!this!event!were!built!into!the!Asset!Integrity!Workshops!for!senior!industry!leaders.!!

5.3.3"Skill"shortage""

The! Industry! recognizes! the!need! to! recruit,!develop!and!retain!a!highly! skilled!workforce!and!the!important!linkage!between!skills,!competence!and!safety!performance.!!Since!the!publication!of! the!KP3!report!a!new!Skills!Academy!has!been!established! for! the! industry.!OPITO!W!The!Oil!and!Gas!Academy!was!created!in!December!2007.!Completely!funded!and!directed!by!all!sections!of!the!industry,!including!the!Trade!Unions,!the!Academy!is!intended!to!provide!a!more!focused!approach!to!ensuring!the!availability!of!a!safe,!skilled!and!effective!workforce!now!and!into!the!future.!HSE!are!granted!observer!status!on!the!Board!of!the!Academy.!!!In! the! first! few!years!of!operation! the!academy!has! taken!a!number!of!new! initiatives!and!has!continued!to!operate!the!Technician!Training!Scheme!in!conjunction!with!ECITB.!This!is!the!most!

! 30!

successful!modern!apprenticeship! scheme!anywhere! in! the!UK.!At! the!end!of!2010! there!were!1323!OPITO!managed! young!people! in! the! scheme,!which! provides! a! feed! of! around!800!high!quality!new!technicians!and!process!operators!into!the!industry!each!year.!!The! Academy! continues! to! develop! and! update! industry! safety! standards,! including! those!supporting! the! new! MISTS! training! referred! to! elsewhere,! as! well! as! working! with! schools,!colleges! and! Universities! on! a! number! of! projects! which! promote! the! study! of! science! and!engineering!and!the!oil!and!gas!industry!as!an!attractive!career!choice.!!Oil!&!Gas!UK's!published!analysis!of!the!industry's!demographics!shows!that!the!true!picture!of!the!age!profile!within!the!industry!is!actually!much!better!than!previously!believed!and!there!are!increasingly!positive!trends!which!point! to! the!attraction!of!a!young,!highly!skilled!and!diverse!workforce.!

5.3.4"Learning"and"communication""

!Efforts! to! ensure! that! the! whole! workforce! (from! CEO! down)! understand! the! major! hazard!control!loop,!the!barriers!in!place!to!prevent!a!major!accident!and!the!role!that!everyone!can!play!in!ensuring!their! integrity!have!been!widespread.!Within!companies!an!important!outcome!has!been! greater! consistency! between! assets! and! more! consistent! KPI! reporting! to! senior!management!teams!leading!to!analytical!evaluation!of!inspection!and!maintenance!findings.!!PILOT!(formerly!the!Oil!and!Gas!Taskforce)!facilitates!the!partnership!between!the!UK!oil!and!gas!industry,!and!government.! !The!role!of! the!group!is! to!deliver!quicker,!smarter!and!sustainable!energy!solutions! to!secure! the! longWterm!future!of! the!UK!Continental!Shelf! (UKCS)!and!ensure!full!economic!recovery!of!its!hydrocarbon!resources.!The!aim!of!PILOT!has!been!to:!

• Focus!on!delivery!of!actions!that!will!improve!the!competitiveness!of!the!UK!oil!and!gas!industry!

• Deliver! the! PILOT! 2010! vision,! which! will! contribute! to! the! longer! term! security! of!energy!supply!

• Promote!continued!dialogue!between!government!and!industry!!

Recently!the!Department!and!leading!Operators!at!the!PILOT!forum!set!UKCS!PE!target!of!80%!by! 2016! in! May! 2013.! To! support! delivery! of! this! target,! a! Production! Efficiency! Task! Force!(PETF)! has! been! established! to! share! insights! on! rootWcauses,! consider! good! practice,! and!promote!collaborative!approaches.!Production!Efficiency!improvement!themes!will!be!identified!to! focus! the!work! of! the! PETF.! Individual! Operators! have! committed! to! prepare! assetWspecific!improvement!targets!and!plans,!and!make!budgetary!provisions!for!implementation.!

5.4"Operator"companies"Internal"organisational"challenges"

!During!the!research!I!have!segmented!some!internal!challenges!that!operators!companies!need!to!address!to!improve!on!their!performance.!!

5.4.1.Strategic"Foresight:""

• Accurately!identifying!opportunities!and!constraints!well!in!advance!of!decisions!

• Confidence!in!decisionWmaking!capabilities!a)!Integrity!of!data!!b)!Capacity!and!competence!to!consistently!make!sound!decisions!!

• Organisational!will!to!act!on!decisions!well!in!advance!of!when!they!must!be!made!

! 31!

5.4.2"Operational"Stability"

• Necessary!level!of!mechanical!integrity!and!workforce!competence!to!ensure!a!stable!and!productive!operation!

• Sufficiently!leveraged!capacity!for!process!to:!a)!Maximize!productivity!of!our!physical!assets!!b)!Ensure!a!competent!and!behaviourally!aligned!!workforce!!

5.4.3"Operational"Discipline"

• Consistent!management!processes!to!ensure!high!reliability!and!productivity!!• Sound!financial!modelling!and!budget!allocation!processes!!• Empowered!to!act!in!a!timely!and!decisive!manner!to!capitalise!on!opportunities!!• Efficient!and!aligned!processes!!• Establish!a!pace!of!work!that!encourages!high!levels!of!productivity!and!engagement!!

5.5"Recommendations"and"Conclusions"

!Based!on!the!research!currently!Accenture!Business!Services!(ABS)!is!providing!below!services!in!oil!and!gas!industry:!!

1. Finance!and!accounting,!!2. Master!data!management!!3. Procurement!!4. Project!management!5. Supply!chain!!6. !HR!and!learning!

!Most! of! these! services! cover! the! business! end! of! solutions! for! their! client! base.! In! order! to!become! the! leader! in! providing! services! that! results! in! improving! production! efficiency! the!recommendations!are!as!below:!!!• Enhance! serviceWoffering! portfolio! by! including! operations/technical! services! such! as! site!

solutions!for!maintenance,!accessing!assets!conditions!etc.!!• Recruiting!top!talents!from!experienced!upstream!operations!across!the!globe!to!develop!inW

house!operations/technical!talent.!!• Providing!technical!trainings!to!current!ABS!employees!to!engage!them!in!understanding!and!

providing!broad!range!of!services.!!• Strategic! Acquisition! or! Joint! venture! (JV)! with! upstream! operation/technical! consulting!

company.!For!example!Hitachi!Consulting!acquired!Celerant!consulting.!This!type!of!strategic!acquisition! or! JV! can! further! strengthen!Accenture!Consulting’s! ability! to! deliver! complete!range!of!strategy,!implementation!and!technology!services!for!businesses!across!the!globe.!

!• Results! of! the! questionnaire! responses! and! interview! showed! the! nonWuniform!

understanding!on!the!subject!of!Production!Efficiency!within!the!accenture!teams!and!across!company’s!organizational!hierarchy.!Company!has!a!good!internal!knowledge!sharing!system!in! place! and! Key! opinion! leaders! need! to! share! their! understanding! of! the! subject! with!everyone.!

!!

! 32!

• To!become!a!leader!in!providing!services!in!the!segment!of!production!efficiency!Accenture!needs!to!improve!their!understanding!of!the!subject!by!identifying!solutions!to!the!set!of!“39!factors”! has! been! collated! and! identified! during! this! research.! By! doing! so! company! can!identify! the! direct! and! indirect! correlation! among! different! functions! that! relates! to!Production!efficiency.!

!The!factors!are!grouped!by!three!broad!themes:!

1. “Operator!approach”;!factors!the!company!wholly!determines!and!controls.!2. “Assets,!reservoirs!and!infrastructure”;!factors!a!company!might!manage!or!influence.!!3. “External!factors”:!factors!outside!of!the!company’s!control;!to!be!responded!to.!!

!Operator!approaches!!

1. Capital! investment:! “Do! assets! with! higher! relative! levels! of! capital! investment! have!better!PE!performance?”!!

2. Gold!plated!design:! “Do! assets!with!higher!upWfront! capital! spend!perform!better! than!assets!that!require!constant!midWlife!capital!intervention?”!!

3. Running! costs:! “Do! assets! with! lower! opex! per! unit! production! potential! have! higher!PE?”!!

4. UKCS!competition!for!capital:!“Do!companies!with!higher!reinvestment!rates!(cashWin!to!UK! assets! versus! cashWout! from! UK! assets)! perform! better! than! companies! using! the!UKCS!as!a!“cashWcow”!(low!cashWin!to!UK!cashWout)?”!

5. UKCS! operations! focus:! “Do! companies! with! a! sole! UK! focus! have! better! PE! than!companies!with!more!global!operations?”!

6. Portfolio!size:!“Do!companies!with!larger!portfolios!perform!relatively!poorer?”!!7. Production!hub!focus:!“Do!companies!with!tight!geographical!production!hubs!perform!

better!than!companies!with!widely!dispersed!assets?”!8. Asset!trades:!“What! impact!does!a!change!of!operator!have!on!pre!and!postWtrade!PE?”

! !9. Macondo! impact! (via! a! lower! risk! tolerance):! “Has! increased! focus! on! asset! integrity!

work!caused!PE!to!fall?”!10. Shutdown!(TAR)!performance:! “Have! turnaround!performances!significantly!worsened!

in!recent!years?”!! !11. Company! decision!making*:! “Do! processWdriven! companies! perform!poorer! relative! to!

companies!that!“empower!individuals”!to!make!key!decisions!offshore?!!12. Organisational! complexity*:! “Do! companies! with! a! flatter! organisational! structure!

perform!better!than!more!hierarchical!peers?”!13. ManWhours!available:!“Is!there!a!relationship!between!manWhours!available!offshore!and!

PE?”!!14. TimeWonWtools*:!“Which!assets!have!the!best!timeWonWtools!ratio!(i.e.!hours!doing!‘useful’!

work!relative!to!offshore!manWhours!available)?”!15. Bedding!constraints:!“Do!assets!with!underutilised!POB!levels!(i.e.!assets!not!constrained!

by!bedding!availability)!show!higher!PE?”!!16. Focus!of! available! labour:! “Do!assets!with! a!higher! relative!proportion!of!well! service,!

asset!integrity!and!production!personnel!see!higher!PE!or!less!unplanned!outages?”!17. Controlling!equity!stake:!“Do!assets!with!high!operator!equity!perform!better!than!assets!

where!the!operator!has!lower!field!equity?”!!18. Duty!holder!strategy:!“Do!assets!with!a!contractor!as!duty!holder!perform!than!operatorW

controlled!assets?”!!19. Contractor! relationship:! “In! cases! where! the! duty! holder! is! a! contractor,! which!

contracting!strategy!(fixed!cost,!reimbursable,!or!“risk!sharing”)!performs!best?”!!

! 33!

20. Contractor!performance:!“Is!the!choice!of!maintenance!contractor! is!a!key!determinant!of!PE!performance?”!

21. PE! reporting! and! monitoring:! “Is! overWestimation! of! production! potential! (in! rapidly!declining!fields)!a!partial!root!cause!to!noted!PE!decline?”!

!!Assets,!reservoirs!and!infrastructure!!

22. Redundancy! in! platform! design:! “Do! platforms!with! high! levels! of! redundancy! have! a!more!robust!PE!performance?”!!

23. 3rd! party! crossings:! “Is! PE! improved!when! an! asset‘s! volumes! are! handled! by! a! selfWowned! hub! versus! a! 3rd! party! hub?”/! “Is! PE! performance!materially! poorer! for! fields!that!depend!on!3rd!party!infrastructure?”!!

24. Complexity!of!the!infrastructure!network:!“Does!PE!change!depending!on!the!“degrees!of!separation”!to!onshore!infrastructure?”!!

25. Presence! of! an! active! derrick! on! an! asset:! “Does! ready! ability! to! conduct! well! work!confer!a!PE!advantage?”!

26. Rise!of!subsea!developments:! !“Are!subsea!fields!subject!to!longer!times!for!recovery!if!things!go!wrong?”/!“Is!UKCS!PE!negatively! impacted!by!the! increase! in!scale!of!subsea!production?”!!

27. Rise!of!FPSO!usage:!“Are!production!losses!relatively!higher!for!FPSOs?”!!28. Asset! safety! KPIs:! “What! is! the! link! between! an! asset’s! HSE! performance! (in! terms! of!

personal!safety,!dangerous!occurrence!reporting,! improvement!and!prohibition!notices!and!hydrocarbon!leakages)!and!its!reliability?\!

29. Asset! deferment! schedules:! “Do! fields! with! relatively! higher! levels! of! scheduled!deferment! have!more! predictable! (lower! variability)! levels! of! unscheduled! deferment!over!time?”!!

30. Accuracy!of!planned!downtime!forecasts:!“Do!assets!with!high!planned!downtimes!have!more!predictable!(less!variability)!performances!in!unplanned!downtime?”!!

31. Asset!consistency:!“Are!the!best!performing!fields!(over!the!past!8!years)!also!the!most!consistent!performers?”!!

32. Water!cut:!“Is!increased!water!production!a!root!cause!of!declining!PE?”!!33. Complex!fields!and!frontier!developments:!“Do!more!technically!challenging!and!remote!

fields!impact!on!UKCS!PE?”!!External!factors!!

34. Commodity! prices:! “Are! production! losses! correlated! to! oil! price?”/! “Is! there! a! link!between!product!margin!and!PE!trends?”!

35. Train!wrecks:!“Is!UKCS!PE!performance!being!driven!down!by!a!relatively!small!number!of! significant! events/outages! on! significant! producers?! Or,! is! it! that! every! asset! is!contributing!to!the!downward!PE!trend?”!!

36. Regulatory! changes:! a)! “Have! changes! to! the! fiscal! regime! impacted! upon! investment!and!therefore!PE?”!b)!“Have!changes!to!laws!regarding!shift!work!rotations!impacted!on!the!ability!to!get!people!offshore!and!therefore!PE?”!!

37. Offshore! travel! constraints:! “Is! there! a! link! between! helicopter! flight! hours! and! UKCS!PE?”!!

38. Drilling!unit!availability:!“Is!there!a!link!between!semi!sub!and!jackWup!utilisation!rates!and!PE?”! !

39. Weather:!“Bad!weather!impacted!FPSO!availability!in!2011W2012.!How!has!this!affected!overall!PE?”!

!

! 34!

" The!oil!&!gas!activities!of!the!energy!development!unit.#2013.![online]!UK:!Department!of!

Energy!and!Climate!Change.!Available!from:!https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/237516/edu_booklet_Aug_2013.pdf![Accessed!Aug!15!2013]!!

MITCHELL,!J.,!2013.!#What#next#for#the##oil#and#gas#industry?##[online]!UK:!Chatam!House.!Available!from:!http://www.chathamhouse.org/sites/default/files/public/Research/Energy,%20Environment%20and%20Development/1012pr_oilgas.pdf![Accessed!July!15!2013]!!

ENERGY!AND!CLIMATE!CHANGE!COMMITTEE,!2013.!#UK#energy#supply:#Security#or#independence?##[online]!UK:!House!of!Commons.!Available!from:!http://www.publications.parliament.uk/pa/cm201012/cmselect/cmenergy/1065/1065.pdf![Accessed!July!20!2013]!

! HOOK,!M.,!2013.!#Giant#oil#field#decline#rates#and#their#influence#on#world#oil#

production##[online]!USA:!Available!from:!http://www.postpeakliving.com/files/shared/HookWGOF_decline_Article.pdf![Accessed!July/19!2013]!

! OIL!AND!GAS!UK,!2013.!Activity#servey#2013.#[online]!UK:!Available!from:!

http://www.oilandgasuk.co.uk/cmsfiles/modules/publications/pdfs/EC037.pdf![Accessed!July/21!2013]!

! UK!OIL!AND!GAS,!2013.!#Industrial#strategy:#Government#and#industry#in#partnership##[online]!

UK:!Available!from:!https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/175480/bisW13W748WukWoilWandWgasWindustrialWstrategy.pdf![Accessed!July/21!2013]!

! WEBB,!J.,!2000.!Questionnaires!and!their!design.!The!Marketing!Review,!1,!197W218.!!

! 35!

WARD,!S.C.,!1999.!Assessing!and!managing!important!risks.!International!Journal!of!Project!Management,!17,!331W336.!

! SBC,!2012.!Energy#Perspective#G#Summer#2012.#online:!Schlumberger!Business!Consulting.!

CHISNALL!P.,!2005.!Marketing!Research.7th!ed.!England:!McGraw!Hill.!!

SEKARAN,!U.,!(2003).!Research!methods!for!business:!a!skillWbuilding!approach.!4th!Edition.!New!York:!John!Wiley!&!Sons.!!

ROBSON,!C.,!2002.!Real!world!research!Second!Edition,!Oxford!Blackwell!Publishers!Limited!!

DEPARTMENT!OF!ENERGY!&!CLIMATE!CHANGE,!2012.!United!Kingdom!energy!statistics!(DUKES).!26#July#2012,#1,!pp.!65W94!

! DAWSON!C.,!2002.!Practical!Research!Methods.!United!Kingdom:!How!to!books.!!! NEWSWIRES,!DOW!JONES!AND!WILLIAMS,!SELINA,!2013.!UK#government#launches#review#of#

UK#north#sea#oil#&#gas#industry.#[online]!Rigzone.!Available!from:!http://www.rigzone.com/news/oil_gas/a/126998/UK_Government_Launches_Review_of_UK_North_Sea_Oil_Gas_Industry![Accessed!July/16!2013]!

! SPENCE,!PAUL!AND!PARSONS,!PETER!,!2013.!The#impact#of#shale#gas#on#energy#markets.#

[online]!HOUSE!OF!COMMONS.!Available!from:!http://www.publications.parliament.uk/pa/cm201213/cmselect/cmenergy/785/785.pdf![Accessed!July/18!2013]!

! FERGUSON,!RONAN,!2013.!Production#efficiency#G#this#year's#hot#topic#in#oil#and#gas.#[online]!

energyblogs.com.!Available!from:!http://www.energybiz.com/blog/13/06/productionWefficiencyWyearsWhotWtopicWoilWandWgas![Accessed!July/15!2013]!

! COBB,!K.,!2013.!The#decline#of#the#world's#major#oil#fields.#[online]!Available!from:!

http://www.csmonitor.com/Environment/EnergyWVoices/2013/0412/TheWdeclineWofWtheWworldWsWmajorWoilWfields![Accessed!July/18!2013]!

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Appendices!

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Appendices!A!!!

Questionnaire!!!!!!!!!!!!!

!

“North'Sea'Assets'Production'Efficiency'Research'and'

Recommendation'for'Accenture”'Questionnaire+

+

+

+

+

Client+Company+Name+ + :!__________________+

Participants+Name+ + + :!__________________+

Participants+Designation+ + :!__________________++

!

$!Ajay!Agnihotri!+++Aberdeen+Business+School,+++++Robert+Gordon+University+

!!

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Production efficiency Decline factors & issues

Questionnaire Page 2 of 7

!

Introduction:+

Following!the!similar!trend!since!2005!in!2010!the!oil!production!dropped!by!6.5!per!cent!from!what!it!was!in!2009.!However,!since!2010,!there!is!a!huge!decrease!in!production!and!it!fell!by!30!per!cent!in!just!two!years!(Oil!and!Gas!UK).!

Production+ efficiency! is! a! measure! of! how! much! an! asset! actually! produces! compared! to! its!structural! maximum! production! potential! (SMPP).! The! production! efficiency! benchmark! for! the!UKCS! has! fallen! sharply! in! recent! years! and! is! now! well! below! the! 80! per! cent! seen! in! 2004.!Increased!spending!on!asset!integrity!in!recent!years!will,!with!time,!result!in!better!uptimes!for!key!infrastructure!hubs.!

+Fig:+Production+efficiency+(Source:)DECC))

On! the! downside,! project! slippage! and! asset! unreliability! could! have! an! impact.! The! reliability! of!infrastructure!hubs!is!of!great!importance!to!the!overall!production!picture.!

The! overall! objective! of! this! project! is! to! understand! the! role! and! contribution! of! production!efficiency!w.r.t!consistent!Production!decline!seen!in!North!Sea!such!as!why!more!losses,!operational!issues!etc.!are!increased!significantly!in!recent!times.!!

Based!on! the! impact!we!will! like! to!understand! root! causes! thru! the! lens!of!Production!Efficiency!decline! and! finally! look! for! possible! solutions! that! can! help! the! Operators! to! improve! their!performance!by!improving!production!efficiency!of!their!assets.!!

The!Aim!of!this!questionnaire!exercise!is!to!learn!&!understand!Accenture!teams!understanding!and!opinion!about! the!subject,! to!know!what! issues!are! impacting!production!volumes!as!North!Sea! is!seeing!consistent!decline!in!their!production.!!

The! responses! sent! by! all! will! be! collected! &! in! 2nd! round! of! face$to$face! interviews! will! try! in!understanding!the!reasons!behind!the!response!given!by!the!teams.+

Production efficiency Decline factors & issues

Questionnaire Page 3 of 7

!Instructions for completion:

This questionnaire is comprised of three parts, Part A, Part B and Part C. Part A contains three questions designed to assess the potential and magnitude of the issues, and what kind of actions the North Sea operators are taking at present. Part B contains one question related to root causes behind the current declining trend. Part C contains two questions to understand the actions taken by the operators at the moment and who are the service providers.

This questionnaire should take no longer than 15-20 minutes to complete.

For the two questions in Part B, each question consists of a statement followed by various factors, for which participants can indicate their level of agreement on a five-point scale for each factor.

For example, in Question B1: I have identified and mentioned a series of business processes and functions, which may help to understand the reasons behind Production Efficiency decline, faced by all major operators in North Sea. Which of these would you agree are applicable according to you for production efficiency decline issues:

S. No.

Business process or function Description Strongly

Disagree Disagree Agree Strongly Agree

1 Production Forecasting

• Tools complex & error-prone

x • Limited by poor quality data, reporting, monitoring & analytics

2 Workforce Competence

Immature workforce without knowledge and skills to make right set of decisions

x

3 HSE Stringent targets do not optimize balance between production and productivity

x

Suggestion: Please consult your respective clients while answering the questionnaire. Kindly mention separately if additional input is been suggested or recommended by anyone. Following completion of the questionnaire I would like to arrange a short (1 hour) face to face meeting to discuss your responses and additional open-end questions to get more clarity on the subject.

Please return the completed questionnaire in Word or pdf format within 1-2 days of receipt via email to: a.s.agnihotri@rgu.ac.uk or 1212042@rgu.ac.uk Please do not hesitate to contact me if you have any queries about completing the questionnaire or any aspect of this study. THANK YOU FOR YOUR PARTICIPATION!

Production efficiency Decline factors & issues

Questionnaire Page 4 of 7

!Part A - SITUATION

Question A1 –What is your client’s current level of production efficiency?

Question A2: What is the trend for your client organization?

Note: Trend is towards Upwards or Downwards from past few years.

Question A3: What is the current level of management focus on Production Efficiency / commitment to improve?

The response scale is from 1 to 10 with 1 being lowest focus & 10 being the extremely focused. Please indicate the extent of your understanding by placing a cross in the appropriate boxes.

Lowest Highest 1 2 3 4 5 6 7 8 9 10

Note: Please mention the actions taken by your specific organization to improve production efficiency of their assets in the past and present along with their future plans if any.

Production efficiency Decline factors & issues

Questionnaire Page 5 of 7

!PART B – ROOT CAUSES

For each of the statements below in questions B1, please indicate the extent of your agreement or disagreement by placing a cross in the appropriate boxes.

The response scale for questions is as follows:

Strongly Disagree, Disagree, Agree, Strongly Agree

Question B1:

I have identified a series of Root causes contributing to poor production efficiency that may present some cases & reasons behind the production decline from an asset. Which of these processes or functions would you agree from your experience?

Please place a cross in one box for each business process or function

S. No.

Business process or function Description Strongly

Disagree Disagree Agree Strongly Agree

1 Production Forecasting

• Tools complex & error-prone

• Limited by poor quality data, reporting, monitoring & analytics

2 Ageing Assets • Ageing assets suffer from increasing integrity and maintenance requirements

3 Maintenance/TAR • Poorly planned and delivered turnarounds overrun

4 Maintenance Execution

• Inefficient work execution fails to deliver on the maintenance plan – Leading to increased unplanned downtime

5 Materials & services sourcing

• No quick response to incidents (PR to PO time)

6 Workforce

• Staff turnover erodes the high working knowledge of process and procedures

Production efficiency Decline factors & issues

Questionnaire Page 6 of 7

!Please list below any other business processes or functions that you would consider to be suitable and is missing in the list:

Production efficiency Decline factors & issues

Questionnaire Page 7 of 7

!PART C – ACTIONS TAKEN - Solutions / Services / Competition!

Question C1:

What are the current types of services/solutions that are being implemented by your client to address PE challenges?

Question C2:

Who is currently providing these services to your client?

Name!of!the!company! Type!of!Service! Additional!comment/Info!

!! !! !!!! !! !!!! !! !!!! !! !!!! !! !!!! !! !!!! !! !!

***************************************End of the Questionnaire ************************************

Thank you for your participation!

! 45!

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Appendices)B)!!

SWOT!Analysis!

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! 46!

SWOT!Analysis:!

SWOT!Analysis!of!the!oil!and!gas!industry!)The! industry! is!UK8wide!with!key!clusters! in!Aberdeen,!London!and! the!north!east!and!east!of!England.!Whilst!most!of!the!gross!value!added!(GVA)!is!concentrated!in!the!operators’!extraction!of!oil!and!gas,!the!supply!chain!services!are!an!integral!part!of!the!industry’s!success:!operators!in!the!UKCS!are!dependent!upon!the!vibrancy!of! the!domestic!supply!chain!and!vice!versa.!As!shown!in!the!diagram,!the!UK!supply!chain!is!deep,!varied!and!activity!is!linked!to!all!parts!of!a!field’s!life!cycle.!

)))

Strengths))The! UK’s! oil! and! gas! supply! chain! has! been! over! 40! years! in! the! making.! Throughout!its!evolution,! the! UK! supply! chain! has! demonstrated! an! aptitude! for! technical,! operational,!commercial!and!contractual!innovation!and!as!a!result,!is!well!positioned!across!the!value!chain.!The!supply!chain!achieved!revenues!of!£27!billion!in!20113!and!is!internationally!recognised!as!a!center! of! excellence! in! project! management,! major! contracting,! design! engineering,! asset! and!operational! management,! design! and! manufacturing! of! advanced! equipment,! research! and!development,!training!and!education!and!professional!and!financial!services.!!Specifically,!the!UK!is!acknowledged!as!having!significant!strengths!in!the!following!areas:!1. Safety;!2. Subsea!engineering;!3. High!pressure,!high!temperature!(HPHT)!field!developments;!

Figure)5.2:)The)oil)and)gas)supply)chain)across)the)UK)!

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4. Oil!and!gas!process!machinery,!equipment!and!technology;!5. Deep!water!oil!and!gas!developments;!�!!6. Integrated!services!for!the!operation!and!Maintenance!of!fields;!�!!7. Late!life!operation!of!mature!fields;!8. !Training!and!education;!�!!9. Legal,!financial!and!insurance!services.!!Weaknesses))1. High!cost!base:!!Revenues! in! the! oil! field! services!have! increased! year8on8year! since!2008!but! profits! have!not!always!mirrored!this!trend.!One!potential!explanation!is!the!rise!in!costs!in!the!industry;!the!oil!and!gas!industry!has!the!highest!average!cost!per!employee!across!the!industrial!sectors.!!2. Industry!collaboration:!!High!activity!levels!can!lead!to!an!‘overheating’!of!the!UK!supply!chain!and!increased!demand!for!cost8competitive!options!overseas.!Collaboration!would!work!to!smooth!out!demand!and!supply.!!3. Technology!implementation:!!It! is!suggested!that! there! is!a!“race!to!be!second”! in!terms!of! technology! implementation! in!the!UKCS,!with!end!users!wanting!to!implement!technology!with!a!proven!benefit,!but!not!wanting!to!be! the! first! to! trial! a! new! technology! in! situ.! Anecdotal! evidence! from! discussions! with! the!industry!has!suggested!that!some!SMEs!go!out!of!business!before!their!product!is!trialed.!!4. Aberdeen!!While!the!strengths!of!the!sector!are!UK!wide,!Aberdeen!has!established!itself!as!a!global!hub!for!oil! and! gas! expertise.! This!has! happened! in! spite! of,! not! because! of,! its! infrastructure.! From! a!small!airport!through!to!traffic!congestion!and!limited!housing!stock,!Aberdeen!has!struggled!to!keep!up!with!the!demands!of!the!thriving!oil!and!gas!sector.!!Aberdeen! City! Council! is! fully! aware! of! these! issues! and! keen! to! tackle! them! with! industry.!Previous! investments! in! industry! parks! and! support! for! new! build! facilities! have! helped! give!Aberdeen!an!enviable!employment!record.!The!City!Council! is!now!taking!forward!work!on!the!western! peripheral! route!which!will! ease! congestion.! The! new! harbour! in!Nigg! Bay!will! be! of!particular! value! to! the! sector.!The! airport! is! up! for! sale,! following! the!Competition!Authority’s!BAA! ruling.! New! owners! will! be! encouraged! to! invest! in! its! facilities! to! make! it! a! true!international!airport.!!Aberdeen! City! Council! is! in! discussions! with! Infrastructure! UK! regarding! the! use! of! an! UK!guarantee!to!help!raise!finance!for!infrastructure!investment.!)Opportunities)))1. Domestic!!There!is!a!large!enough!resource!base!to!feed!supply!chain!field!development!and!operations!to!well!beyond!2050:!over!41!billion!barrels!of!oil!equivalent!have!been!recovered!from!the!UK,!but!a!further!recovery!of!15824!billion!barrels!could!be!achieved!with!further!new!investment.!!2. High!interest!in!licensing!rounds!!Following!high!levels!of!interest!in!successive!UK!offshore!licensing!rounds,!the!number!of!firm!commitments! for!shooting,!processing!and!interpreting!seismic!on!the!UKCS!over!the!next! four!

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years!is!high,!especially!for!3D!seismic.!Improvements!in!mapping!and!technology!could!increase!recovery.!This! increase! in!demand! is!due! in!part! to! the!extension!of! the!Small!Field!Allowance!(SFA),!which!improved!the!expected!monetary!value!of!exploration!drilling!in!mature!regions!of!the!UKCS,!making!drilling!more!attractive!now!compared!to!after!Budget!2011.!!3. New!investment!!New!technology!and!changes!to!the!fiscal!code!have!helped!lead!to!recent,!sizeable!investments!in! large!projects!such!as!BP’s!£4.5!billion!Clair!Ridge!project!and!Statoil’s!£4bn+! investment! in!the!heavy!oil!Mariner!field.!These!are!the!largest!investments!in!the!UKCS!for!more!than!a!decade.!Field! allowances! in! the!west! of! Shetland! region! have! lead! to! the! development! of! fields! in!this!area;!opening!up!the!frontier!for!smaller!developments!in!the!region!in!future.!The!SFA!continues!to!help!the!development!of!many!other!smaller!developments.!!4. Existing!fields!!Approximately!50%!of! fixed!offshore!platforms!are!now!operating!beyond!their!original!design!life16,! with! older! facilities! needing! increased! amounts! of! maintenance! related! activity.! The!Macondo! incident! has! also! lead! to! an! increase! in! asset! integrity! activity.! The! introduction!of! a!brown8!field! allowance! and! work! on! securing! decommissioning! liabilities! will! both! lead! to!extensions!in!field!life,!through!increased!brown8field!work!and!asset!trades,!and!will!also!result!in!increased!asset!maintenance!work.!!5. Technology!Significant! implementation! of! increased! oil! recovery! (IOR)! and! enhanced! oil! recovery! (EOR)!techniques! and! technologies! could! improve! production!within! the!UKCS! by!up! to! 4%!over! the!next!35!years17.!Future!opportunities!to!deliver!advances!in!technology!will!come!in!part!from!fostering! stronger! links! between! the! needs! of! the! industry! with! academia! and! commercial!innovators.!!6. Future!sectors!!Decommissioning!will!become!a!significant!part!of! the!oil! field!service!value!chain,! if!operators!and! the! supply! chain! collaborate! to! minimise! bottlenecks! of! activity.! In! future,! other! sectors!could!come!into!focus;!carbon!capture!and!storage!opportunities!could!use!oil!and!gas!industry!transport!expertise!and!storage!infrastructure.!Shale!gas!in!the!UK!could!draw!on!the!well!service!contractor!community!in!Aberdeen.!Offshore!wind!and!marine!energy!offer!significant!potential!opportunities! for!the! UK! oil! and! gas! offshore! and! supply! chain! experience! and! expertise.! In!particular! the! subsea! sector! which! is! already! straddling! both! sectors! and! also! in! relation! to!health!and!safety!and!training.!!Threats!!!1. Declining!production!!The!UKCS!reached!its!peak!in!terms!of!oil!and!gas!production!in!1999.!Production!in!recent!years!is!currently!less!than!50%!of!its!historic!peak18.!Any!increases!in!UK!production!ought!to!be!seen!against!a!baseline!of!long!term!decline.!Indeed,!production!issues!in!the!North!Sea!were!touted!as!the!principal!factor!behind!the!UK’s!negative!GDP!growth!in!Q4!2012.!Production!is!the!lifeblood!of! the!oil! field!service!sector!and!current!decline!rates!need! to!be!arrested.!The!challenge! is! to!boost!current!levels!of!production!by!working!on!increased!recovery!techniques,!asset!integrity!and! successful! well! interventions;! developing! this! short8term! threat! into! a! longer! term!opportunity!for!the!supply!chain.!!!

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2. Declining!exploration!drilling!and!success!rates!Although!the!number!of!exploration!wells!started!in!2012!represented!a!40%!increase!on!2011,!the! year! with! the! fewest! wells! drilled! since! 196519,! only! two! small! discoveries! were! made;!leaving!exploration!success!rates!at!an!all8time!low.!Supply!chain!companies!with!a!main!focus!in!exploration!and!drilling!services!may!have! their!skills!and!services!drawn!outside!of! the!UK!to!other,! more! prospective! areas.! One! operator,! Tullow! Oil,! recently! exited! the! UK! citing! better!exploration!prospects!elsewhere.!!3. Accessing!finance!!Currently! smaller! supply! chain! companies! competing! for! large! contracts! are! asked! to! post! a!security!bond!to!protect!the!operator!or!primary!contractor!from!project!overruns!or!low!quality!product.!This!is!reported!as!a!barrier!to!growth!for!some!UK!supply!chain!companies.!!4. Ageing!workforce!demographics!and!its!implications!for!skills!!Despite!a!tight!UK!oil!and!gas! labour!market!where!the!majority!of!the! industry’s!workface!are!older! than! the!UK!average,! and! a!UK! labour!market!where! spare! capacity! is! estimated! at! over!3%20,! companies! have! tended! to! bid! up! the! price! of! labour! currently! available! instead! of!investing! the! time! in! fully! training! a! new! entry! level! employee.!This! short! term! approach! to!tackling!the!issue!increases!the!costs!of!operating!in!the!UKCS.!Anecdotal!evidence!suggests!that!widespread!use!of!subcontracting!and!limited!company!status!is!exacerbating!these!impacts.!

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SWOT!Analysis!for!Accenture!Aberdeen!!SWOT! (Strengths,! Weaknesses,! Opportunities! and! Threats)! constructed! for! an! organisational!culture! illustrates! the! power! of! shared! assumptions! and! beliefs.! It! assists! in! assessing!environmental!factors!and!current!realities!of!an!organisation.!The!limitation!that!constraint!the!use!of!SWOT!is!that!it!only!analyses!what!is!evident!and!what!is!evident!is!based!on!the!prevailing!organisational! frame! of! reference,! the! constellations! of! assumption! and! beliefs! about! the!business!and!its!relationship!to!the!environment!(Trefry!2006).!!The!below!analysis!is!done!for!Accenture!Aberdeen:!!!

)Strengths)

)

• Experienced!Management!• Value!led!organization!• Corporate!image!• Located!in!Aberdeen!• Clients!–!Major!Operators!• Excellent!Knowledge! sharing! system! in!

place!!

)Weaknesses)

)

• New!in!Oil!and!Gas!business!• Limited!Services!offering!• Lack! of! industry! trained/experienced!

staff!at!lower!level!• Industry! specific! training! and!

development!!

)Opportunities)

)

• Poor!production!performance!of!UK!oil!and!gas!sector.!

• Operator!companies’!willingness!to!look!for!solutions.!

• Global!penetrations!and!offering!special!fees!for!smaller!projects!

• Growing!organization!attracts!talent!

!

)Threats)

)

• Experienced!competition!

• Skill!Shortage!

• Premium!offering!may!not! resonate!with!midmarket!customers!

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!!!Author:(Ajay(Agnihotri(Email:!a.s.agnihotri@rgu.ac.uk!

((

Ajay! is!an!experienced!Oil!&!Gas!professional!with!over! 5! years! of! hands! on! industry! experience! &!with! academic! background! in! MBA! Oil! &! Gas!management! from! Robert! Gordon! University!(RGU),! Aberdeen,! UK! and! B.Tech.! in! Petroleum!Engineering,! University! of! Petroleum! and! Energy!Studies,! Dehradun,! India.!He! joined! Baker! Hughes!in!2007!and!contributed!to!the!growth!and!success!of!the!organisation!working!as!a!Senior!Project!lead!along! with! being! integral! part! of! business!development!team.!!

He! is! currently! nearing! completion! of! his! MBA!studies! from! Robert! Gordon! University! (RGU),!Aberdeen,!UK.!

!

(

(

(

Accenture( plc( is! a! multinational! management!consulting,! technology! services! and! outsourcing!company! worldwide.! Accenture! is! domiciled! in!Dublin,! Republic! of! Ireland! but! headquartered! in!New! York! and! operates! from! more! than! 200!locations! in! about! 55! countries.! It! is! the! world's!largest!consulting!firm!measured!by!revenues!and!is!a! constituent! of! the! Fortune! Global! 500! list.! As! of!September! 2011,! the! company! had! more! than!244,000! employees! across! 120! countries.!Accenture's!current!clients!include!96!of!the!Fortune!Global! 100! and! more! than! three]quarters! of! the!Fortune!Global! 500.! Accenture! is! listed! on! the!New!York!Stock!Exchange!and!is!a!constituent!of!the!S&P!500.! For! Accenture,! the! accent! is! on! helping!businesses! improve! their! performance! for! the!delivery! of! high! performance.! Accenture! plc! offers!various! management! consulting! services,! which!include! customer! relationship!management,! finance!and! enterprise! performance! management,! risk!management,! supply! chain! management,! talent! and!organization! management,! strategy,! and! operations!related!services.!

!

Robert(Gordon(University(is!located!in!Aberdeen!and!was!recently!listed!as!the!best!modern!university!in!Scotland,!according!to!the!Guardian!(University!Guide!2012).!Robert!Gordon!University!was!also!voted!Scottish!University!of!the!Year!in!2011.!

The!Aberdeen!Business!School!is!one!of!the!leading!providers!of!management!and!professional!education!in!Scotland.!Over!3,500!students!are!studying!a!comprehensive!range!of!courses.!

The!Aberdeen!Business!School!is!rated!excellent!by!the!UK!quality!assurance!agency!for!higher!education!and!has!a!very!strong!portfolio!of!courses!and!has!had!AMBA!accreditation!since!1999.!Currently!it!is!structured!in!8!departments!offering!29!postgraduate!courses!with!accreditation!from!CIPD,!CIPS,!AMBA,!CIARB,!CIMA,!CIM,!CMI,!APM,!PMI,!IQA,!Institute!of!Exporters,!and!CILIP!to!name!a!few.!

!