In Search of Lost Knowledge in Oil & Gas
Part 1: One Major Capital Project, Four Characters
Capital intensive industries such as oil & gas clearly deal with a good deal of technical complexity, uncertainty, risk and regulation. In Major Capital Projects (MCPs), specifically, one can point out to evident inefficiencies associated to (1) capital allocation, (2) time-to-barrels (for upstream MCPs) and (3) risk management.
While we tend to gravitate to discussions on new technologies and transformation frameworks, I argue that “fragmentation of knowledge” is also a systemic root cause behind these inefficiencies. This might be a consequence of over-specialization across many domains, siloed corporate cultures and arguably, a relatively low cross-pollination from other industries. In many ways, I believe “siloed knowledge” is also “lost knowledge”. I here try to paint the picture of what this means in an imagined story…
Oppal E&P sets out to develop the Tulip Deepwater Field
Tulip’s Project Manager
Kit Granados holds a BSc in Structural Engineering and a MSc in Ocean Engineering. She joined Oppal E&P in 1995 and has held different positions in MCPs and Upstream Operations with increasing responsibility in Aberdeen, Gulf of Mexico, and West Africa.
As a Project Manager for the Tulip MCP, Kit is ultimately responsible for leading all MCP phases (concept selection, engineering design, construction and commissioning) over the next 5 years, with an estimated CAPEX of $5 Billion.
Kit’s Drivers:
• Maximize Tulip’s ultimate Net Present Value (NPV), through (1) robust and cost-effective engineering design, and (2) effective execution controls to minimize any negative impacts on cost and schedule.
• Manage effectively different key Tulip MCP stakeholders, including partner E&Ps, Oppal’s Top Executives and Board, and regulatory agencies.
• Progress to a Top Executive role at Oppal, following successful handover of Tulip MCP to Operations.
Kit’s Pain Points:
• Long decision-making cycles. In Kit’s own words: “finding an optimal engineering design takes input from 10 different interrelated engineering disciplines. Very often we find out a given design is not feasible only after several months of studies. Some other times, cost estimates prepared after engineering design prove a contending option is not viable”.
• Siloed functions. In Kit’s own words: “All my engineering teams are highly competent, and often over-specialized. They rely on each other’s input but often fail to collaborate and cover their interfaces”.
• No comprehensive benchmarking. Kit often needs to answer questions to Oppal’s Board and Tulip Joint Venture partners on how key decisions in Tulip stack against other projects. She also heard Oppal’s CEO talk about the criticality of standardization of MCP execution and handover to operations. While she knows this is critical, she struggles to re-construct the puzzle of ‘How Tulip compares to others.’ out of isolated pieces of information.
• Latent risks. Although she would not admit openly, Kit’s biggest fear is that on Tulip’s first day of operation, 5 years from now, oil might not flow. Kit is very aware major issues in MCPs are often discovered on that very day. Kit constantly asks her teams to actively uncover any blind spots they might have.
Tulip Engineering Discipline Lead
Claire Shen is the Process Facilities Lead Engineer for Tulip. Claire holds a PhD in Chemical Engineering and has 15 years of professional experience. She is an independent contractor to Oppal. In early stages of the MCP, Claire and her team are responsible for defining the engineering concepts for Tulip’s subsea and topsides facilities. Process engineering takes input from adjacent disciplines, and also provides input to other parts of the project, e.g., structural engineering. In later phases of Tulip, Claire will manage Oppal’s interface with a large Engineering Procurement and Construction (EPC) contractor, responsible for detailed engineering design and construction of Tulip’s facilities. Claire’s “piece of the puzzle” is essential for Tulip.
• Manage completion of Tulip’s process engineering design with no impact on the project’s critical path.
• Secure approval from Oppal’s central engineering process engineering authority.
Claire’s Drivers:
• Manage completion of Tulip’s process engineering design with no impact on the project’s critical path.
• Secure approval from Oppal’s central engineering process engineering authority.
Claire’s Pain Points:
• Constant need to re-do engineering work. The frequent variation on reservoir engineering parameters (input for process engineering), requires Claire’s team to re-do extensive numerical simulation work. Often times these updates affect major decision areas in Tulip.
• Ensuring appropriate Quality Assurance. Claire is sometimes requested to reduce engineering effort in order to meet different project milestones. Claire often has to outsource work to process engineering consulting firms and relies on junior resources. Although she does not admit openly, Claire worries there is insufficient QA controls in Tulip’s design.
• Keeping up with Central Engineering. Claire understands the criticality of meeting Oppal’s Process Engineering Standards (ES) managed by central engineering. Many times, ES can be unclear or overly complex. On occasions, she needs to persuade the central engineering authority (Luca Eklund) to issue ES waivers for Tulip. While she keeps a fluid relationship with Luca, there is certainly periods of tension. After all, Luca holds approval authority for Claire’s process design work.
Oppal E&P Central Engineering Authority
Luca Eklund is the top Process Engineering Authority in Oppal’s Central Engineering organization. He holds a PhD in Chemical Engineering and has over 25 years of experience, all of it at Oppal. Luca has sign-off approval authority for process engineering design of all of Oppal’s MCPs. He is also responsible for maintaining and enforcing process engineering standards.
Luca’s Drivers:
• Audit MCP’s process engineering design and surface vulnerabilities.
• Ensure MCPs adhere to Oppal’s Process Engineering Standards.
Luca’s Pain Points:
• Most MCP knowledge leaves Oppal. Luca mentions that the design of most of Oppal’s upstream facilities has been heavily influenced by external parties, e.g., EPC contractors and even MCP lead engineers who are not Oppal’s full-time employees (like Claire). Luca thinks Oppal’s Engineering Standards suffer as a consequence.
• The knowledge we do retain is highly siloed. According to Luca: “In Oppal we not only design facilities, we also operate them. Tulip will produce oil for 30 years, we have other assets like that. Too often we fail to draw the connections from our knowledge in engineering design and operations. When first oil in an MCP gets delayed we quickly go for a Root Cause Analysis. Most of the time we find out we could have anticipated these risks, they have happened before”.
• Central Engineering does not have sufficient leverage. Even though Luca is a top technical authority at Oppal, he feels his influence over MCPs such as Tulip is limited. In Luca’s own words: “MCPs many times get away with many things. The higher the CAPEX they are allocated, the less I can influence their decisions. In Tulip for instance, they often challenge why Oppal has a stringent design standard when other E&P companies do not have them”.
• Not enough time, not enough rigor. Luca admits: “My team of 5 engineers cannot keep up with auditing all work from MCPs. I worry about the inconsistency in categorization of risk and the large effort involved. Delaying an MCP is a bad outcome, and many times business drivers overrule my desire to bring more rigor to our auditing”.
Oppal E&P Ops - Offshore Installation Manager (OIM)
David Joyner is the OIM for the Balkan Deepwater facility in the Gulf of Mexico, operated by Oppal (producing 150,000 bbl/d). David has over 30 years in oil & gas operations. He does not have an engineering degree and frequently reminds colleagues that on many occasions has proven ‘smart engineers’ wrong. In 5 years’ time, David will become the OIM for the Tulip Facility. He regularly gets emails from the Tulip project, asking him about Balkan operations feedback. He is keen on engaging with them, but often thinks Tulip project engineers do not know much about operations.
David’s Drivers:
• Safety of the personnel and environment for the facility he is responsible for.
• Ensure that lessons learned from current operations make it to new designs.
David’s Pain Points:
• Lack of standardization leads to operational vulnerabilities. Throughout his career David has seen how little standardization exists across Oppal’s upstream facilities. He is concerned that Tulip will not be an exception. He worries there will be steep learning curve for operations personnel, which could jeopardize the operability and could lead to safety incidents.
• Not sufficient leverage in engineering design. While he engages with Tulip MCP on a regular basis, David feels that cost and schedule often over-rules his input to the project on operability.
Does the Tulip story resonate? Keep an eye for Part 2.
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