Ultradeepwater suitability matrix helps estimate value of lean processes
LEAN ENERGY MANAGEMENT—6
The realization of major cost and cycle-time savings in ultradeepwater projects requires the intersection of three major lean energy processes discussed in Parts 1-5 of this series:
Subsurface uncertainty must be merged with lean engineering design and real options economic models to drive decisionmaking.
The value proposition for conversion to lean energy management must be laid out, agreed to, and examples developed (from generic to specific) before such a major engineering transformation can occur in the offshore industry.
The automotive, shipbuilding, aerospace and military industries are already experts in lean engineering and management. A common understanding of languages, tools, and processes is required to propagate their techniques to the ultradeep offshore industry.
The challenges of reservoir uncertainties in ultradeepwater areas cloud the industry's belief that similar cost and cycle-time savings will come with the lean tools and techniques.
Suitability of importing lean tools and processes into the appraisal, planning, construction, installation, and operational phases of ultradeepwater development must be demonstrated before widespread acceptance will follow. Such systemwide, enterprisewide improvements have not yet been demonstrated.
We have developed an analysis technique that can be used within individual companies to estimate those cycle-time and cost savings from conversion to lean processes and tools. A generic "case history" is presented below to illustrate how our "lean suitability matrices" can be used to establish the return on investment that would justify the risk associated with conversion of the ultradeep industry to a lean energy management paradigm.
Lean principles
A key requisite is to fully describe how lean energy management is able to perform more accurate design studies and eliminate waste in the fabrication, assembly, and operations of offshore facilities for ultradeepwater projects.
Lean processes shorten the time and cost of building any great structure by paradoxically maximizing the digital design time and preserving options for as late in the build process as possible. This dichotomy of shortening cycle time while providing more design time is a hallmark of the lean management process.
The savings are brought about through software that allows conflicting issues to be worked in parallel and through the use of 3D solid models that contain the complete and accurate descriptions of all components of the entire project at all times throughout the history of the project.
For example, lean techniques point to an obvious need to provide flexibility to subsystems through modularity of design while enhancing the concept definition and its cost, schedule, and risk assessment accuracy. At the same time, uncertainty must be dealt with in each of these critical processes of the lean enterprise.
How to go about the implementation of lean energy management is the final step, and Toyota has paved the way. Toyota begins with a road mapping of existing processes so that a plan for migration from "unhealthy to healthy" processes can be planned (Fig. 1, top). Boeing, GE, Lockheed-Martin, and countless other great corporations throughout the world have adopted and modified Toyota's model. In fact, if GM, Ford, and Chrysler can successfully convert to lean then surely the ultradeepwater oil and gas industry can, too.
Toyota has described how to manage the learning of lean processes with its Jidoka strategy that defines five levels of growth (Fig. 1, bottom).
Level 1 requires the benchmarking of the existing manufacturing processes, whatever they are, to create a baseline to measure future progress. In addition, employees and subcontractors are all introduced to lean process theory. They are challenged to stop measuring specific actions and instead think of each and every process in terms of the whole system they are producing. It is only the cumulative results of all those actions that results in a quality product.
In Level 2, powerful software tools are put into place to build and enforce standards and identify and eliminate waste in materiel, machines, effort, and methods.
Level 3 tools escalate to the introduction of a common, 3D solid model for all to use to standardize and streamline work.
Level 4 introduces a continuous improvement plan.
Level 5 finally achieves lean management.
The level of software rigor increases steadily up this improvement ladder.
As with automotive and aerospace workers before, the ultradeepwater offshore industry will encounter a predictable set of reactions to these lean energy concepts, processes and tools:
1. You don't understand our business; ours is harder; the offshore is different.
2. We don't need lean, we just need to be quicker and cheaper in what we do now.
3. We are already using lean; we're doing that, and that, and that U as each new level is introduced.
4. But only design/build will benefit from lean processes, not HR, not finance, and certainly not operations.
Lean energy management will take any company several years to fully implement, and the above reactions must be worked through. Examples of success become critical teaching tools to overcome the considerations of the risks involved in conversion.
Honest awareness of previous "train wrecks" and a realization that technologies alone will not produce the step change improvements promised by lean management are two human barriers to overcome. Fundamentally, lean is a people-process, and "soft side" change is hard to achieve.
Ultradeep a difficult factory
In our discussions with decisionmakers from many companies, the most common reason offered for why lean processes and techniques have not yet spread into the ultradeepwater offshore industry is that we face a much harder manufacturing environment than that found in "traditional lean industries."
The manufacturing process in deepwater "factories" involves fuzzy resolution of the assets that are being produced (the reservoir). Oil and gas are found miles underground with a mile or more of ocean on top of that.
Perhaps the biggest differentiator offered is that, over time, the oil and gas reservoirs change drainage patterns in often unpredictable ways. Therefore, we must learn to design-in uncertainty over the life cycle of the production process in order to fully exploit our reservoirs. This flexibility turns out to be one of the biggest strengths of lean energy management, but our "show-me" industry must be convinced.
So how do we begin? Current offshore practices are slanted towards overbuilding of facilities for maximum production volumes and rates, and therefore, excess hardware is permanently installed on offshore platforms for the life of the field as a matter of routine practice. However, conversion to a "lean approach" requires "proof-of-success" in order to change this mindset.
In lean energy management, several solutions are simultaneously developed at the beginning of the design cycle (see Fig. 2 for a design roadmap example). Each scenario is parametrically modeled so that each can be compared and changed as the design space evolves. The lean systems engineering approach is to identify and assess the response of modular solutions to uncertainties all along the process.
Lean suitability matrix
As a general beginning point, we should concede that the offshore industry does not do a good a job of understanding the linkages between surface performance and uncertainty within the subsurface reservoirs.
Electronic schematics, 3D routing and installation layouts, systems engineering analyses, digital parts libraries, and virtual prototyping are all lean techniques that are foreign to our industry. Transparent design shared with all relevant suppliers all the time by software is, too.
Consequently, we routinely have version mismatches, modifications that are incompatible with each other, and design conflicts are solved during construction by the welding torch.
Such are easily identified in the 3D solid model long before any construction occurs on a lean project. And virtual prototyping extends to fabrication so that modular change-out is built into the structures from day one. Reworking required from structural obstructions is eliminated.
The assembly sequence itself, along with work instructions for the fabrication yard, are tested, optimized, and distributed virtually. Besides deriving requirements as early in the process as possible, lean maintains a logic trail of the consequences of any given modification on all other parts of the entire system. Below we show how to value the cycle times and cost savings from these lean benefits.
We have developed a "lean suitability" matrix to estimate the likelihood of success of lean management implementation for specific projects. By describing the metrics, efficiency gains in project development and operations can be valued.
In addition, the metrics that track owner/contractor relationships and cross-organizational performance are particularly important to evaluate because most of the cost and cycle-time savings come from there. However, metrics to estimate risks of implementation must consider the impact of specific lean methods and tools on a subsystem in order to estimate cost and cycle-time savings (Fig. 3).
Cycle-time impact
We conducted a cost and cycle-time evaluation of the impact of lean energy management on a generic, $500 million ultradeepwater offshore project using our lean suitability matrix to relate possible lean savings to the specific design/build segment of the project.
The first step is to estimate the added impact of lean tools and methodologies on the existing processes of the industry. The cycle-time improvements will vary across the lean suitability matrix.
In the early appraise and select stages, lean processes estimated to shorten the cycle time the most are reduced design ambiguity, faster review and decisions on design options, and migration of the posting of detailed build instructions to all subcontractors to far earlier into the schedule. During these early stages of the project, digital design tools and methods have a much greater impact on configuration design than on supportability as shown by the lean suitability matrix (Fig. 4, left versus right).
In the define stage, most lean benefit comes from improved tools and methods that deliver better visibility, clarity, and accuracy of interfaces to processes where collaboration with subcontractors dominates. In the execute stage, it provides better supplier and fabricator collaboration, improved visibility of the total product, and in particular, improved change order management that results in reduced site queries.
Virtual manufacturing tools used for all stages reduce cycle time primarily in the execute stage through the improvement in interfaces between subcontractors for hookup and commissioning and in the operate stage through the shortening of the need for retrofit. Supply chain improvement is found throughout.
Cost savings impact
Cost impact was begun by estimating potential value and defining savings based on past project experience. These estimates are then refined through benchmarking metrics kept on all succeeding projects.
When necessary, this expertise base must be augmented by experiences in other lean industries but with added uncertainty because of the possible industry differences (sometimes as high as 50%). Initial cost improvements are estimated to be found throughout all lean stages, not surprisingly. For example, virtual support tools and methods provide significant operational cost reductions in both the define and operate stages (Fig. 5).
We then calculated the cumulative cycle time and cost savings over the life of the generic project by summing cells of the lean suitability matrix (Fig. 6). These must then be compared against the baseline project to evaluate projected savings.
In our generic analysis, the baseline project cost $500 million and took 80 months to complete, whereas our estimate for the same project done with lean tools and methods would have only cost $400 million and would have been completed in 56 months. In addition to these savings, first oil would be realized two full years early!
Summary
Present industry practices of system development, construction, deployment, and particularly, customization, must be critically challenged at all levels.
The above analysis suggests that lean energy management alone will not get you all the way to an efficient, modern industry driven by state-of-the-art business and manufacturing practices. However, it will get you 30-50% improvement in process flow, and will break the "incremental improvement" mindset so prevalent in the offshore industry today.
First steps toward a lean industry require that design must occupy enormously more time and consideration than at present. Lean productivity gains only work if you take the whole system as an integrated enterprise. For example, there are core competencies in deepwater business units in real options business evaluation of properties, completion strategies, and development scenarios, but these quantitative economic evaluation tools are not applied to the design/build phases of development.
Managing all business processes must become more quantitative as well, and uncertainty in reservoir performance must no longer be isolated from the design, build, and sometimes even the operate phases of ultradeepwater offshore projects.
Bibliography
Anderson, R., Boulanger, A., Longbottom, J., and Oligney, R., "Future natural gas supplies & the ultradeepwater," Energy Pulse, Mar. 12, 2003.
The authors
Roger N. Anderson ([email protected]) is Doherty Senior Scholar at Lamont-Doherty Earth Observatory, Columbia University, Palisades, NY. He is also director of the Energy and the Environmental Research Center (EERC). His interests include marine geology, 4D seismic, borehole geophysics, portfolio management, real options, and lean management.
Albert Boulanger is senior computational scientist at the EERC at Lamont-Doherty. He has extensive experience in complex systems integration and expertise in providing intelligent reasoning components that interact with humans in large-scale systems. He integrates numerical, intelligent reasoning, human interface, and visualization components into seamless human-oriented systems.