Jay Holstine: Well Process Management for Oil and Gas by Jay Holstine

Well Process Management for Oil and Gas

From concept through tie-in, the well pre-production lifecycle is complicated, volatile and uncontrolled. Getting the lifecycle processes under control will propel your success and yield enormous results to your bottom line.

Executive Overview The Acme Energy paper presents the challenges and benefits, from four different experiences of process improvement in Oil and Gas exploration and production, and integrates them into a single Business Guide. These real-world examples can easily be adapted to the content of each organization interested in the value of the template-based WPM solution. This is the only Well Process Management system that can be configured entirely through templates created by business users, and is also the only WPM solution that delivers an end-to-end E&P scheduling capability natively built into the product.

Goals and Challenges Acme Energy identified three strategic challenges within their Field Development Planning and Exploration process that are holding them back from achieving their goals.

Challenge Addressed $ Benefit Concept to PermitApproval

Operational Benefit

$4,000,000

Increased from 100 to 200 permit applications per year without adding resources.

Maximize Rig Drilling Time

$30,000,000

Enabled 3 additional wells to be drilled per rig, per year. (3 free wells per year.)

Drilling to Tie-in

Reduced working capital by reducing work-in-progress $57,000,000 inventory by 30 wells. In addition, accelerated revenues by 35 days.

Goal: Double Exploration, without hiring additional resources Challenge 1 - ‘Concept to Permit-Approval, Process Efficiency’. Hand-off delays, habitual rework loops, sequential processing, and inefficient scheduling were more than doubling the effort required to take a well from Concept through Permit-Approval. Result: Leveraging template-based process management and obtaining scheduling transparency enabled Acme to increase the number of ready to drill wells from 100 to 200.

Goal: Improve Drilling Efficiency to enable 3 additional wells, per rig, per year Challenge 2 – ‘Maximize Rig Drilling Time.’ A time study revealed that on average rigs are only drilling 42% of the time. The low percentage is due to longer than expected rig moves, unscheduled maintenance, shortage of permitted wells, sub-surface conflict with completions, and inefficient transparency into ‘no-drilling’ stipulations and permit expiration.

ii.

Result: Ability to simulate and implement a ‘night move’ process, benchmark drilling planned vs. actual performance, and tracking down-time reasons allowed Acme to drill more wells per rig per year, and with fewer drilling rigs.

Goal: Reduce the Drilling to Tie-In process time, and decrease Work-In-Progress well inventory Challenge 3 – ‘Drilling to Tie-In, Scheduling and Inventory Efficiency.’ An audit revealed that on average, the Drilling to Tie-in process spans 110 days with an inventory of 120 wells that have been drilled, but are not yet producing. By improving transparency and scheduling, the team estimated process time span reduction to 75 days and the work-in-progress inventory to 90 wells. Result: Ability for an asset manager to efficiently prioritize company resources using forecasted milestone dates for green field development reduced working capital by reducing work-in-progress inventory by 30 wells. In addition, accelerated revenues by 35 days

Project Summary: The SigmaFlow Well Process Management solution manages the drilling permit process, enables efficient area-level prioritization by integrating all third party schedules (surveys, site construction, drilling, completions, and gathering), enables accurate forecasting of product ramp-up dates and volumes by linking wells with their pipelines and facilities, and provides analytics via operational and continuous improvement reports and dashboards. The project had four phases:

SigmaFlow provided jump-start templates for the concept to tie-in process, entities, milestones, schedules, reports and dashboards. Acme Energy modified this baseline by running scenarios and making tweaks to the templates to align with their business processes and requirements. Implementation was performed SBU by SBU and involved loading wells into the system and catching them up to their appropriate procedure tasks, and training SBU team members on how to best use the system and providing needed change management support. Data integration with other systems occurred once the templates and data collection had been vetted by the users. ii.

Discovery To best address Acme’s challenges and meet their goals, interviews were conducted with their management team, current business processes were reviewed, and the benefits of a Well Process Management (WPM) solution were assessed.

Management Interview 1. What do you believe are your top well permitting problems? Answer: It is difficult to see where there are bottlenecks, and track dates or turn-around times. Communication is not timely and consistent. Very little automation is in place. A lot of issues arise from hand-offs that don’t get followed up on properly. 2. What do you believe are your top drilling rig utilization process problems? Answer: The rig schedule is difficult to update, optimize and publish. It is all manual. It is difficult to track and adjust rig use dates. Communication is inadequate and groups downstream of drilling are not always aware of changes to the rig schedule. 3. What is your perception of the percent of the time your rigs are physically drilling? Answer: Currently there are 10-20 rigs. The average drill time is 20-60 days, depending on the type of well that is being drilled. Right now, we don’t have information on the percent of time the rig is physically drilling, but we do know that we could run much more efficiently if we had an inventory of permitted wells that are ready to drill. 4. What information does the management team need to better run operations? Answer: We could do a better job of area-level prioritization if we could easily forecast the milestone dates for associated facilities, pipelines and wells. Management also needs accurate estimates for product ramp-up. 5. Can existing solutions such as Wellview, or Primavera P6, meet your well process management needs? Answer: Wellview is an effective well data repository, and P6 is an effective project planning solution. However, neither system was intended to manage a process. We need the solution to group work into efficient quantities (perform work once, and inherit data and forecasted completion dates back to the member wells and infrastructure,) to manage gaps between process tasks and resource schedules, and to provide users with process workflow alerts and task-specific guidance to enable consistent data collection and deliverable collection. ii.

6. What ‘data integration’ requirements do you feel must be addressed? Answer: The well planning, permitting and resource scheduling processes will be managed by the WPM solution. So by definition, it will be the system-of-origination for over 90% of the well data. Our other enterprise systems need to be able to access this data to improve efficiency. For data that originates in other systems, we need the WPM to import the valuable subsets of this data and display it along with WPM data in task-specific input forms, to enable efficient decision making and deliverable creation. 7. Do business executives and IT have a preference for the process solution to be a ‘custom developed’ or a proven ‘packaged’ solution? Answer: The anticipated productivity, revenue acceleration, and working capital benefits are too great to risk waiting on a custom solution. Our most pressing concern is how quickly we can implement. Custom development, even with platforms like SharePoint, requires an investment of time to document the business requirements, architect the solution, develop the custom workflow and analytical capabilities, perform QA, and test the solution. Long-term support is also a concern. We prefer an industry-specific solution, used by other E&P companies like ourselves, that is clearly going to be supported and enhanced by the vendor.

Process Review Upon completion of management interviews, the Acme Energy process team reviewed the process from Concept to Tie-In, and provided the following observations: 1.) The asset teams needed to transition from a Departmental focus, to a Process focus. 2.) Prior attempts to document the process failed because they were too detailed and focused on all the work that everyone does, instead of targeting what needed to be tracked to meet milestone and schedule commitments. 3.) Significant time was lost to perennial and avoidable rework loops. Acme Energy tracked and charted the permit deficiencies they received from the Bureau of Land Management. Where applicable, deficiency mitigations and mistake-proofing were incorporated back into the procedure template to minimize the risk of repeat occurrence and improve the process. 4.) Internally recognized risks, issues, and rework were captured, tracked, and analyzed for patterns. These resolutions were incorporated back into the procedure template to minimize the risk of repeat occurrences, again, improving the process. 5.) There was no easy way to identify and prioritize the most time-sensitive and critical work. Well planning team members were juggling work on hundreds of in-flight wells, at one time. They

ii.

needed indicators to illuminate the most important risks that could jeopardize key milestones and resource schedules. 6.) Hand-offs between tasks were very inefficient because everything was manual and dependent on email and weekly meetings. They needed a solution that would alert a successor task owner when the predecessor task was completed. 7.) All work was performed in sequence because the process wasn’t well known and manually managed.

ii.

Solution Requirements With the information available from the Management Interviews and Process Review, the Acme Energy team was able to define a “must have” list of solution requirements needed to meet Acme’s goals:

Business Need Process Management productivity and control.

Solution Capability  Template-based Process Management with task-specific guidance, document management, and data collection.  My Work notifications

Transparency into the process with schedule relationships and forecasted milestone dates

 Integrate resource schedules and process workflows.  Run a single procedure for a group of wells and translate the forecasted milestone dates back to the group members.  Display the impact of changes on downstream schedules and forecasted milestone dates.  Provide risk indicators for process delays, ‘no-drilling’ stipulations, and permit expiration.

Estimate product ramp-up dates

 Link Wells and their Infrastructure (Central Processing Plants, Field Compressor Stations, pipelines, ponds, other)  Forecast Tie-In dates for Wells and their Infrastructure

Management Reporting & Dashboards

View inflight work for individuals, wells, rigs, asset-teams, etc.

Continuous Improvement Analysis

 Analyze process cycle times  Analyze permit deficiencies and other exceptions  Track Drilling - Planned vs. Actual times, and reasons for down-time

Data Integration

ii.

‘Business Entity’ API’s

SigmaFlow Well Process Management Solution Based on the solution requirements defined by Acme Energy, the team concluded that a template-based solution was the only practical technology that could run multiple templates within a single system. The team reviewed make vs. buy options and selected the SigmaFlow Well Process Management solution. To configure the WPM solution, the team broke the ‘Concept to Tie-In’ process into manageable activities and proceeded to build out the configured solution:  One team reviewed the ‘Concept to Permit-Approval’ process  A second team focused on ‘Maximizing Drilling Time’  The third worked on ‘Drilling to Tie-In, Scheduling and Inventory Efficiency.’

Concept to Permit-Approval, Process Efficiency Acme Energy analyzed their current well permitting process and determined that, on average, it was taking 140 calendar days. However, with the understanding gained by building the example process template in the WPM solution, the team discovered that the actual internal effort was less than 10 days. With the new process solution, the team estimated that the process would consistently run under 60 days and could be shortened even more if needed, based on operational conditions and demand.

Team note: the process improvement, achieved with the WPM template, easily provides the ability for Acme Energy to double exploration without hiring additional resources. To substantially improve process execution for deliverable creation and approvals, the Team determined that they needed:

A Procedure List that identifies Milestone tasks, status, documents, to-do’s and projected dates.

ii.

A Task Overview page that provides guidance and examples for consistent execution of To-Do’s, Deliverable Creation, and Data Collection.

Additional Benefits of Concept to Permit-Approval: As the Acme team worked through the impacts of the new WPM approach, they realized that the transparency, control, and work optimization of the new solution presented an opportunity for additional benefits, beyond the goal of doubling exploration without hiring new resources. These benefits covered: mitigating the risk of fines, and improving partner agreements including: 1.) Land. a. Joint Ownership Agreement (JOA) errors could be managed and avoided by providing the Land department with the transparency to ensure all partners’ elections are understood before proceeding. b. Surface Damage Agreements (SDAs) and Right of Ways (ROWs) could be better managed to ensure they are fully in place before commencing activity. c. Lease expiration could be more effectively managed, ensuring leases are utilized at a high percentage rate, avoiding the costs of downtime and re-leasing. (Note: Cost of downtime can be $40,000 per well, (per day or week) factoring in man hours, surveyor cost, permitting fees, legal fees, field personnel time for planning).

ii.

2.) Regulatory/Permitting. a. Government agencies’ expedited requests could be significantly reduced with proper oversight and transparency of the end-to-end process (improving relationships and future negotiations and requests). b. The causes of permit deficiencies could be more clearly identified, which would improve permit quality, approval rate, and Bureau of Land Management confidence. 3.) Construction. a. The solution could help avoid building from the wrong survey. (Template-based process execution provides a Single Source of Truth for technical documents like the well pad survey.) b. The solution could help prevent investment in site construction that is subsequently unused, and prevent incurring expedite fees to get sites built. (Root cause: inefficient linking of the construction schedule to the drilling schedule.) 4.) Drilling. a. The solution could prevent drilling prior to JOA and Stakeholder agreements being complete. b. The solution could prevent drilling of less-optimal wells because of insufficient transparency into the pre-drilling processes and schedules. (Drilling teams would be able to better manage the drilling rigs and the drilling schedule with an inventory of approved locations, and ‘what-if’ analyses.)

ii.

Maximizing Rig Drilling Time The Acme Energy team performed a rig utilization time study, to identify improvement opportunities. They were surprised to learn that the active drilling time was only 42%. The low percentage was primarily due to: longer than expected rig moves, unscheduled maintenance, shortage of permitted wells, sub-surface conflict with completions, and inefficient transparency into ‘no-drilling’ stipulations & permit expiration.

To substantially improve rig utilization, without increasing resources, the Team determined they needed:

A system-level analysis of the well and its supporting infrastructure (pipelines and facilities.) They needed a view of the forecasted milestone dates, scheduling conflicts and gap inefficiencies ii.

They needed an integration of all third party schedules with real-time feedback of schedule adjustment impact on downstream schedules. (For example, Survey for DE Well 19 turned red because of a scheduling conflict).

They needed Drilling rig-line Indicators to identify ‘no-drilling’ stipulations and permit expiration. In addition they needed to be able to click on a well and view any applicable information that is available from either WPM data collection, or data integration.

They needed the ability to benchmark Drilling’s ‘planned’ vs. ‘actual’ performance, and the ability to track the reasons for downtime. ii.

They needed the ability to create custom modules for process and drilling dashboards:

They needed the ability to compress rig move times, via a ‘night move’ procedure involving pre-move check lists, process standardization, and measurements. The team piloted a rig move procedure that would actively manage the process and reduce the move time from eight (8) days on average, to three (3) days. This would enable each rig to now drill an additional 3 wells per year, without additional resources or cost.

ii.

By taking measures to better track and manage the non-drilling time of drilling rigs, Acme Energy would be able to drill 200 wells with 14 drilling rigs, instead of the previously required 17 drilling rigs. (Each drilling rig costs Acme Energy approximately $10,000,000 per year, and the team estimated that by improving rig performance they would be able to save $30,000,000 in rig-lease cost avoidance.)

Team note: The composite benefits of improved scheduling, down-time tracking, and instituting rig night move procedures, enabled $30,000,000 rig-lease cost avoidance benefit.

Additional notes from conversations with subject matter experts: 1.) Tracking the deviation between the planned rig schedule and the actual rig schedule, and tabulating the non-drilling reasons, was a watershed activity for enlightening everyone that the actual rig drilling time was well below their assumptions. (The schedule was often being adjusted at short notice to accommodate delays in the permitting process, no-drilling stipulations, and lease expiration.) 2.) Integrating the well production and cost attribute date with the ‘rig schedule time sequencing’ enabled reservoir engineers to create valuable financial what-if scenarios. 3.) Rig utilization and performance data enabled a more accurate comparison and benchmarking of Service-providers.

ii.

Drilling to Tie-In, Scheduling and Inventory Efficiency The team interviewed subject matter experts in order to identify issues and process inefficiencies that could be targeted for improvement by the WPM solution. From these interviews, the team found that: 1. There is a high inventory of completed wells that are not Tied-In, due to drilling and completions schedules that have not been optimized. This results in Wells that are drilled and completed, but then sit and wait for gathering infrastructure (schedule coordination.) The team noted that viewing wells and infrastructure as a ‘single related system’ enabled them to forecast key milestone dates for all related entities and improve field-level prioritization. 2. There is also a high inventory of drilled wells that are not completed, due to coordination challenges between drilling and completions teams, and completions service providers. The team also found that Acme Energy was frequently unable to complete wells because they were being drilled too close together (subsurface conflict.) The team determined that if Acme grouped the wells within a close radius, and scheduled drilling and completions between the wells, they could avoid subsurface conflict delays. 3. There was a high inventory of spudded wells that had not been drilled. This occurred due to lack of transparency between the spud and drilling schedules. The WPM would solve this with cross-functional scheduling through complete transparency and automatic detection of scheduling conflicts. 4. Inventory was not substantial enough to give Acme the scheduling flexibility (agility) needed to adapt to the realities of the complex business of Upstream E&P. The Team determined that Acme needed at least 90-drilling days of Ready-to-Drill wells prior to each rig. To improve the alignment between the well planning and drilling teams, the team identified the need for a dashboard module in the WPM solution that displays an inventory of permitted drilling days for each drilling rigs.

After developing a sample WPM solution process template to address the challenges identified in overall scheduling and coordination, the Acme drilling-to-tie-in sub-team next evaluated the current process, to uncover opportunities to accelerate revenue realization and reduce working capital. The team built example process templates for the Drilling Start to Completions process and for the Completions to Tie-in, resulting in an optimized end-to-end Concept to Tie-in WPM solution.

ii.

Based on these templates, the Team projected the following results:

The Team then projected the benefits of the improved Completions and Tie-in processes, and determined that optimizing these processes in the WPM solution would have a dramatic effect on cashflow and revenue realization.

The Team further believes that improved scheduling agility will also enable them to reduce the inventory of wells in the process, producing additional net benefits of over $57 million per year (see table below).

Team note: Effective scheduling and process optimization from Drilling to Tie-In represent the greatest financial benefit of the SigmaFlow WPM solution: $57 million savings in Working Capital Reduction, as well as accelerated cash flows.

ii.

How Acme Achieved its Goals A significant benefit of the SigmaFlow WPM solution was the sheer speed at which the solution could be configured, validated, and start providing benefits.

Configuration of the Process 1.) First, the Team defined the reports and dashboards needed to: meet stakeholder desires, coordinate activities, and provide transparency over all operations. The reports identified needed business entities, deliverable tasks, approval dates, and resource schedules. Example Reports:

ii.



Asset team report: to Forecast approval milestone dates, and schedule dates. (For example: AFE approval, land access, permit approval, construction start, drilling start, completions start, pipeline availability, tie-in complete).



Drilling What-if report: to Present anticipated well production and budget costs in the time-based context of the drilling schedule, or the tie-in schedule.



Production ramp-up: to View the well and infrastructure (Central Processing Plan, Field Compression Station, Pipelines, Ponds, other,) as a system, to forecast the earliest date for flowing product.



Permit Discrepancy report: to Tabulate the reasons that permits are not approved in the first pass. Downtime reasons can be mined for continuous improvement.



Drilling Rig Planned vs. Actual utilization report: to Benchmark drilling performance by teams and service providers. Downtime reasons can be mined for continuous improvement.



Work-in-progress report: to Gain transparency into process transactions. workload for a specific well, and workload for a specific person.)



Shows

2.) The team then added the Business Entities and associated fields. 

Wells: Appraisal, Development, Exploration, Water Injection, etc.



Infrastructure: Facility (Field Compressor Stations), Pipelines, Gathering, etc.



Rigs: Offshore, single well, rails for multi-well pads

3.) Then the team created Procedures Templates with the key deliverable tasks, tollgate tasks, and any predecessor tasks required to collect data and documents for the supporting deliverables. (It is best to not burden the configuration process with tasks that aren’t directly required for milestone deliverables). 4.) Upon completion, the Team moved into role-based simulation with the solution, to validate the design and to identify any potential issues prior to moving the solution into production

Example Asset Team Report. Forecast milestone dates for associated assets (Wells, Pipelines, Facilities)

Example drilling what-if report. View production and investment by rig schedule scenario.

ii.

Template Authoring – Summary of Configuration Activity To enhance user-adoption, the team developed a library of procedure templates for each asset team. (Template tasks are usually 80% common and 20% unique). Templates were efficiently designed to contain only critical information: 

Forecasting Milestones (AFE, APD Approval, Tie-In)



Schedule Integration (Survey, Construction, Drilling, Completions, Gathering)



Deliverable creation (Drilling Plan, Surface Plan)



Supporting Processes (JOA - Joint Ownership Agreements, SDA - Surface Damage Agreement, ROW – Right of Ways)

The deliverable tasks were laid out from right to left, starting with the Drilling Permit: (Work Right to Left)

The Team began with a Jump-Start template for Concept to Tie-In, (provided within the WPM solution,) and then added task details as needed. Solution benefits entailed a ready list of: 

Common Scheduling tasks for Wells and Infrastructure (Survey Packaging, Construction, Drilling, Completions, Gathering, TieIn).



Common Milestone Tasks for Wells and Infrastructure.



Common Supporting processes.

The Jump-Start templates made it easy for the Team to concentrate on tuning the WPM solution to Acme Energy needs, rather than configuring the solution “from scratch.”

ii.

Validation Prior to Deployment The final step that the Acme Team went through, prior to moving the WPM solution into production, was to schedule a validation workshop to enable stakeholders to experience the solution for themselves. In the simulation, team members were able to experience: 1.) Work Assignments (to streamline handoffs and prioritize critical path work.) 2.) Automatic Forecasting of future ‘process and scheduling’ milestone dates. 3.) Risk Indicators for: process delays, no-drilling stipulations, and permit expiration. 4.) Transparency into the impact of schedule changes on downstream schedules. 5.) Running a single procedure for a package of wells, along withan infrastructure that saved time and enabled common data and forecasted milestone dates to be inherited back to the package members. 6.) Product Ramp-up Projections for ‘Green Field’ development projects associating Wells with Infrastructure (Central Processing Plants, Field Compressor Stations, pipelines, ponds, other) and determining the earliest production dates. 7.) Management Reporting and Dashboards for viewing inflight work for individuals, wells, rigs, asset-teams, etc. 8.) Analytical Reporting and process agility to incorporate reservoir production information and lessons learned from operating the asset.

Closing Comments The Acme Energy paper presents the challenges and benefits, from four different experiences of process improvement in Oil and Gas exploration and production, and integrates them into a single Business Guide. These real-world examples can easily be adapted to the content of each organization interested in the value of the template-based WPM solution. This is the only Well Process Management system that can be configured entirely through templates created by business users, and is also the only WPM solution that delivers an end-to-end E&P scheduling capability natively built into the product. The SigmaFlow Well Process Management solution manages the drilling permit process, enables efficient area-level prioritization by integrating all third party schedules (surveys, site construction, drilling, completions, and gathering), to enable an accurate forecasting of product ramp-up dates and volumes by linking wells with their pipelines and facilities. Analytics are provided for operational and continuous improvement reports and dashboards. ii.

Jay Holstine: Well Process Management for Oil and Gas

Articles inside

What do you believe are your top drilling rig utilization process problems?

What information does the management team need to better run operations?

What do you believe are your top well permitting problems?

Can existing solutions such as Wellview, or Primavera P6, meet your well process management needs?