Operational Excellence (OE) is a systematic and comprehensive approach to enabling safe, reliable, and efficient operations. The specific frameworks vary, but the vision and mission for has not changed across the value chain. OE has always been and still is the North Star of Oil and Gas company cultures.
Focus on safety, volumes, and reliability have long been the priority goals. But the new, lower-priced reality demands financial resilience that goes beyond the typical Big Oil cost-cutting playbook. The immediate triage requires right-sizing capital structures, restructuring balance sheets, and optimizing cash flows. These financial moves are necessary – but not sufficient.
With an unwavering commitment to safety across the industry, that leaves reliability and operational efficiency as the key capabilities to maximize. Optimizing OE is THE differentiator on which firms will achieve sustained financial resilience.
Did you lose your bearing?
While OE has been adopted across the industry, many organizations are in the infancy of their maturity process. Over 65% of Oil and Gas organizations still do not have an effective OE program in place that truly links planning and operations to strategy.
Critical strategic financial decisions are being made without a complete picture of the impact on Operational Excellence. Management teams across the industry are feeling the pain from a lack of investing in some key capabilities necessary to deftly navigate this environment…
- No agile planning/sensitivity/scenario analysis… it’s still in Excel and manual and disconnected
- Lack of insight into key decision analytics… it’s still in 12 systems with 4 different answers
- Disparate and manual processes that can’t be optimized further without an overhaul
- Extra overhead required to work around technology constraints
While those that strategically invested in areas such as operational efficiency are now demonstrating their operational resilience, marginal and below-average Operators must significantly improve in order to compete.
With up to 10% of production capacity that is hampered by complexity and inefficiency, now is the time to optimize processes to yield more productivity and fully harvest the benefits of scale and standardization.
It’s time to refresh the strategy and double-down on OE
The strategy for achieving OE needs a refresh. The environment has changed significantly. The business strategy has evolved from growth to survival. Priority and weighting of the business drivers has changed. Resetting costs by a significant margin is imperative. Short-term cost cuts may deliver immediate relief, but the wrong cut can threaten the healthy balance of safety, reliability, and cost leadership that OE programs target.
Comparing a $3M efficiency or reliability improvement opportunity against a $3M capital project is short-sighted. OE is the bedrock for achieving sustained financial results. The importance of driving fundamental and lasting OE improvements today is paramount to shape a competitive future.
The Journey to World-class Operational Excellence
World-class OE requires ensuring safety while maximizing reliability and operational efficiency. A tall order when the financial constraints are considered.
Three factors influence a company’s ability to move up the OE maturity curve: a comprehensive approach to continuous improvement, a capability-building roadmap, and a permanent shift in leadership engagement.
Industry leaders consider the OE journey as a series of strategic capability investments. This elevates the capability investment to be evaluated against the entire asset portfolio. Just as the asset portfolio and base evolves over-time, the OE roadmap is routinely optimized to prioritize investments. With the right approach, world-class operational execution can add up to 30% of value to the production asset base.
OE Guiding Principles to keep your bearing…
- Refresh the OE strategy. Define a roadmap.
- Lead from top. Drive a new cost-conscious culture.
- Maintain world-class HSE performance.
- Focus on process & outcomes. Distribute efforts across system, deployment, compliance, and results.
- Ensure transparency and accountability. Eliminate obscure financial lines.
- Remove complexity and overhead. Rethink how and where decisions are made. De-layer management. Increase span of control in the field.
- Adapt and modify. Understand the capabilities necessary to scale. Best-in-class standards and systems, standardized and adopted consistently across the business? Or good enough?
- Don’t stop improving capabilities. Routinely rationalize and optimize the roadmap.
- Execute well. Top-quartile performance and return on capital across all assets.
Consider a fresh approach to squeeze the most value out of your Operational Excellence investment.