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Oil production in the U.S. has seen a steady long-term incline over the last few years. Between 2011 and 2014, the total number of “crude oil and lease condensate” increased by more than 3 million barrels per day, according to the Energy Information Administration. The oil industry itself feeds numerous others, which is why efficiency throughout operations can positively impact the speed and completeness of logistical deployments down the supply chain.
But for as large of an operation as it is, the U.S. oil sector and its companies could benefit from tightening up processes occurring at the very start of an extraction cycle, what is known as the “upstream” segment. In many ways, this under-appreciated section could increase efficiency and overall operational value or disrupt processes in a significant and costly manner. If oil companies seek to improve the efficiency throughout their distribution network, what changes or advancements should be made upstream so they trickle down into other sectors?
“Planning may only make up one-tenth of 1 percent of a well’s total cost.”
Investments in data-intensive oil IT intelligently utilize waning or underfunded resources
Before a drill breaks ground on a new oil well, planning teams collect an extensive amount of data on the geological characteristics of the earth they plan to bore through. As discussed by the Society of Petroleum Engineers (SPE), this process includes layers upon layers of detail including mud weights and formation pressures among other criteria, any of which could negatively affect drilling and extraction should they go unaccounted.
Unfortunately, SPE also concluded, on average, the budget for planning may only make up one-tenth of 1 percent of a well’s total cost, even though the earliest stages of upstream oil operations have the potential to disrupt so much else in later executions. Accessing, communicating and distributing pertinent data points through greater IT deployments can increase the efficacy of planning, allowing this section of operations to enhance others. That said, oil companies should be sure to invest in intelligent and inter-operable production management tools and strategies evenly weighted along all sections of planning, drilling, exploration, extraction, and distribution.
Additionally, enhanced data analytics have also shown to help balance an emerging skills gap among oil industry workers. According to a report by the International Data Corporation on oil industry predictions for 2015 and beyond, many oil companies making IT investments cite labor shortages in employees under 45 years of age as a primary reason for taking the plunge.
How extraction teams navigate a drill through the earth can increase or decrease efficiency depending on many factors.
Rethink drill functions for greater operational efficiency
Once drilling and extraction has been completed, the petroleum industry begins what it calls the “midstream” and “downstream” sectors. After resources are pulled from the earth, they undergo refining and commercial distribution. Though scouting locations and establishing exploratory drills might be the official kick-off to an oil supply chain, conducting thorough drills to hunt down viable wells can set a precedent for how smoothly processes move down the line, as well as causing fluctuations in the price of the product, according to Tortoise Capital Advisors.
“Only 42 percent of drilling operations actually involve drilling.”
While the latter aspect is not unknown to the industry at large, the interests of the companies collecting oil should be the engine behind productivity and volume. These businesses and their successes or failures should not be dictated by malfunctioning equipment or processes fraught with waste.
Managers and supervisors in the upstream petroleum sector should therefore look to increase efficiency and hone drilling operations as much as possible, as this integral area of work has traditionally seen its fair share of inefficiency. According to research by IDC and SAS, the cost of drilling versus the time spent performing drill-related operations doesn’t exactly align. In a 2011 assessment, though drilling constitutes half of all expenses pertaining to the creation and use of oil wells, only 42 percent of drilling operations actually involve drilling, while 58 percent directly relates to “drilling problems, rig movement, defects and waiting periods.”
Horizontal drilling, while beneficial to extraction, can be one factor leading to trouble in upstream operations resulting in lost uptime and lost efficiency. Though this action allows well crews to observe a greater breadth of possible oil acquisition in the exploratory stages, advanced well tortuosity can restrict drills and snag them against the wellbore, slowing processes to a halt until the drill can be jostled free. To protect against these issues, World Oil suggests strategizing on ways to increase the rate of penetration, or ROP. This can be achieved by replacing outdated equipment that cannot handle extreme wellbore bends, addressing the material used to coat the wellbore – if any coating is used at all – or adjusting drilling trajectory during the planning stages to avoid a steep angle. Again, complementing improved drilling strategies with more comprehensive IT deployments during the planning stages can avoid a higher rate of risk during exploratory and extraction segments.
Process industries, perhaps more so than any other, need a strong risk management approach since they experience and interact with risk on a daily basis. Due to the continual nature of a process-focused enterprise, these companies ostensibly subject themselves to the highest level of risk because they’re continually operating without stop.
As such, the most production-minded companies who pride themselves on efficient, timely output require a stellar and comprehensive risk management strategy. But risk is multifaceted, and in many ways, proper risk management deployment can positively impact and maximize lean processes.
“Everyone working at a processing plant assesses and manages risk.”
How does risk management apply to lean processes?
Lean processes boil down to the elimination of waste. While some experts may argue honing operations has more to it than, the mission of an average company seeking to increase value potential is to “trim the fat” and reduce areas of excess. According to Lean Manufacturing Tools, some of these areas include overproduction, overprocessing and extraneous movement.
However, promoting a true lean mindset shouldn’t hinge myopically on the problem, but the factor or process that yields the problem. This is where risk management comes in. In one way or another, everyone working at a processing plant assesses and manages risk. For example, when an employee applies his occupational knowledge by safely operating heavy machinery, he’s leveraging the risk of injury with his expertise. That said, risk management doesn’t exclusively pertain to preventing injuries in the workplace. That same employee prevents value loss by processing material properly.
Managers and supervisors seeking to flesh out their risk management simultaneously enhance their lean capabilities. BASF explained risk matrices as a very simple math problem: Risk equals probability times severity. This means equal weight is given to small issues that occur frequently and huge ones that only happen once in awhile. Lean process oversight follows similar guidelines: Waste production can be glaring or ingrained in the system, but either way, it’s unwanted at a business seeking efficiency.
Proper risk management avoids processes that could take down the whole operation.
Why risk management and lean operations complement each other without redundancy
In fact, many common areas typically attributed to managing risk are practically blood-related to lean opeations. For instance, since the advent of the digital age, data curation has wedged itself into every industry. Regardless as to what companies do, these days, they all do it with data. In process industries, apart from customer data, information gleaned from machinery and integral technologies can provide managers with valuable insight toward both eliminating inefficiencies and removing risk from the equation.
For example, if a piece of smart equipment reports to a company’s operational risk management system that it’s running too hot, this procedure blends liability control with lean best practices. Not only do these alerts reduce the chances of worker injury, but they also give supervisors an advanced opportunity to address the issue on their own terms, rather than having to deal with a crippled production line completely out of the blue. A Mälardalen University study found downtime can consume almost a quarter of a manufacturer’s total cost ratio. Thankfully, intelligent data deployment and management can resolve those risks and many more.
The biggest mistake a person looking to optimize their production can make is cutting corners. Lean processes aren’t made by throwing the baby out with the bathwater, but by utilizing the resources available with the most innovative and effective methods. operational risk management keeps workers safe, but it’s just as important as a deterrent for expensive downtime, compromise products and surprise repairs.
Achieving operational efficiency is essential in the pulp and paper industry. Variances in production can raise overhead costs and, in turn, make it more difficult to stay competitive in a global market. Fortunately, there are practical solutions that are often the result of smart planning and execution.
Cost and quality management in process industries
A recent whitepaper on operational efficiency in process industries, mentioned several challenges that manufacturers face when trying to improve operations. The pulp and paper industry, in particular, is under pressure to manage costs, quality and customer demands because of the nature of the market. As global demand for pulp and paper decreases over time, mills are required to grow more efficient and limit production variances as much as possible. Cost reduction and quality improvement are essential for industry players to remain competitive.
“Mills are required to grow more efficient and limit production variances as much as possible.”
Pulp and paper mills require smart planning and execution
One of the biggest obstacles in the efficiency of pulp and paper mills is the inability to achieve a high level of visibility and control of operations. If managers cannot measure, monitor and amend existing processes, efficiency in production is negatively affected. Cognizant points out that for an operation to be successful, it is essential to understand how equipment, technology and automation can improve existing operations. When considering two areas in need of constant attention – lowering operating costs and reducing process operations variability – planning and execution are paramount.
Cognizant noted that operational excellence and efficiency in production planning and manufacturing execution requires a solid link between the two. In production planning, schedules are required to be in sync with the demands of the entire supply chain. Accordingly, assets need to operate and be utilized at optimal levels. A big component in effective production planning is managing deviations between forecasts and planned deliveries. Successful manufacturing execution is dependent on the ability to adapt to schedule changes and manage unexpected issues as they arise. Any deviations in quality need to be addressed by analyzing and fundamentally understanding root underlying causes.
Identifying variability sources and applying solutions
In a blog post, Magnetrol International Incorporated indicated that level measurement is a critical part of improving efficiency in pulp and paper manufacturing operations. Pulp and paper mills have specific processes, such as chipping, pulping, washing and bleaching, which require specific knowledge, instrumentation and practical approaches. By looking at each process, determining sources of variability or deficiency, and applying solutions, facility-wide efficiency can be ascertained.
Magnetrol explained that pulp and paper mills are some of the largest industrial users of process water. As such, they are often located next to natural water sources and water levels of intake channels require constant monitoring. Outdoor conditions can sometimes cause complications for level controls, especially if accumulation of debris occurs. A solution for this problem is to install bar screens to remove debris that will damage mill equipment. Bar screens are routinely cleaned and raked, often through automatic level controls mounted in an upstream channel.
Equipment and Technology can Improve Efficiency in Mill Operations
Another possible issue that pulp and paper mills may need to address is the damage done to sensor equipment in the pulp digestion process. Heat and chemicals are used in combination to digest and transform wood chips into pulp by dissolving the base material. Due to high temperatures and harsh chemicals, sensors sometimes cannot withstand the conditions. Accordingly, it is helpful to instate continuous monitoring of overflow in order to avoid potential problems in pulp digesters.
Staying competitive in a global market
As the pulp and paper industry continues to strive for increased operational efficiency, planning and execution will continue play a fundamental role in cost and quality management. By limiting the amount of operational problems that occur throughout production, facilities have a chance to increase efficiency. In the case of source water and pulp digesters, understanding the cause of problems often leads to a quick and practical solution. While other areas of production may require more in-depth analysis, the planning and execution aspect will remain the same.