The Middle East oil and gas industry has been described as one of the most resilient globally, bucking the trends of falling oil prices, job cuts and huge operating losses.
But as times become more challenging, companies in the region are increasingly having to rethink their strategies and continue to improve and evolve.
This was one of the main messages at the third edition of Operational Excellence in Oil, Gas and Petrochemicals Conference – OpEx MENA 2015, which took place in Abu Dhabi last month.
The event shed new light on operational excellence, drawing hundreds of delegates from all over the world who gave excellent presentations and shared some oftheir experience with industry peers in the GCC.
The show further highlighted the importance of operational excellence in assisting energy companies with maximising production and improving efficiency.
The conference was inaugurated by Stefan Chapman, vice president of Euro Petroleum Consultants (EPC), organiser of the event.
Chapman commented: “Operational Excellence is an important element of organisational leadership that stresses the application of a variety of principles, systems, and tools toward the sustainable improvement of key performance metrics.”
“In other words, operational excellence is the ability to confidently demonstrate and prove that everyone is using resources to do more of the right things, more of the time,” Chapman added.
In a keynote speech, Ahmed Omar Abdullah, chief operating officer of Abu Dhabi Oil Refining Company (Takreer), urged oil and gas companies in the region to not only focus on efficiency of production, but also on operational safety.
General consensus between speakers at the event was that the human factor is key to achieving operational excellence.
Defining a clear goal and communicating effectively across the different departments of the organisation were also identified as some of the ingredients for success.
The two-day event included seven sessions covering key topics related to operational excellence including sustainability, HSE, operational effectiveness, implementation and benchmarking, asset performance and reliability, asset optimisation and productivity and enabling technologies.
The event was an opportunity for operating companies in the Middle East to share their success stories in achieving operational excellence at their plants, as well as learning how they could improve their efforts in the future.
Bassam Al-Bokhari, vice president for Industrial Relations at Petro Rabigh, and keynote speaker at the event, presented a paper entitled ‘Transformation roadmap towards sustainable operational excellence’, highlighting some of the milestones the highlighy successful joint venture between Japan’s Sumitomo Chemicals and Saudi Aramco has recently achieved.
“Accountability, integration, measures and sustainability are key principals to achieve a sustainable operational excellence,” Al-Bokhari said.
As every year, the event hosted an exhibition alongside the conference, housing the stands of some of the region’s most esteemed refiners such as Takreer and Yasref, along with technology heavyweight Aveva.
“OpEx MENA has cemented its position as a must attend conference given the quality of papers presented and attendees,” said Colin Chapman, president of EPC.
“The fourth edition of the event will take place in Abu Dhabi in December 2016, and we promise our industry colleagues that it will offer all the knowledge that attendees expect from such events,” Chapman concluded.
Can we have Opex without capex?
For years, oil and gas companies in the GCC have been known for their lavish spending on mega projects, best-in-class facilities and the latest state-of-the art technology. But as the oil price more than halved since June 2014, revenues have shrunk significantly and CEOs are now having to think twice before making any financial commitments.
Speaking on the sidelines of an oil and gas event, one industry expert told RPME that while in the past he could walk up to a client and sell a piece of technology on the basis of how innovative and revolutionary it is, today he has to answer some pretty tough questions such as: what’s my return on investment; is it going to help me make savings; and ultimately — do I really need it?
The current market volatility has without doubt prompted oil and gas producers to exercise caution when it comes to spending cash. But Badar Alam, global solutions architect leader at DuPont, is of the opinion that to stay truly competitive, companies need to make at least some investments.
“I don’t think it is a zero sum game. I think you have to invest energy, time and some capital potentially and maybe some infrastructure that you may need to build to drive this change in processes. But it is not anything so significant that should stop any one of us from pursuing operational excellence.”
He added: “What we have to do is rationalise that relatively small investment versus the relative loss that we are experiencing today — not having operational excellence is costing each organisation a significant amount of money. If we benchmark ourselves versus world-class we are giving up a lot if we are not at that world-class level.”
Alam seems to know the subject inside out and this is perhaps thanks to his long experience at DuPont, where he has worked for over 15 years. Today DuPont is one of the largest and most renowned chemical companies in the world but this was only possible thanks to its ability as an organisation to evolve and remain profitable even during the most challenging of times.
In the past, the company has experienced a number of shake-ups and financial downturns, most prominent of which is its massive sell-out of plants during the world economic crisis in 2008. As a result, the company lost significant processing capacity and to stay competitive, it had to realise more value from its existing plants and increase production significantly.
According to Alam, DuPont was only able to adapt to this new environment and quickly readjust to the changes thanks to its so called ‘Production System’, which at the time acted as the company’s operational excellence strategy.
“For us to remain viable and to maintain stakeholder value we really needed to focus on capacity release to impact our costs.
“In terms of the value that we’ve been able to generate. When we did our benchmarking we felt that due to our improvement we are now world class and we could achieve about $200-300mn worth of improvement on an annualised basis.
“In terms of the actual value that we were able to deliver, we have been able to get over $1bn worth of value on an annualised basis from 2009 through 2012 and that continues to this day,” Alam said.
The human factor
To really round off its operational excellence, DuPont realised its strategy had to address its employees as well, changing their mind-sets and behaviours.
“For a company that has been existent for over 200 years, you would think we have a strong foundation of capability in our organisation and we truly did. But that capability was focused at certain levels of our organisation and it was more technical than it was around leadership.”
As part of its transformation, DuPont management decided to introduce specially dedicated teams that would go to the operations experts working in the field and try to motivate them.
“They would do that on an incremental basis. But as soon as those technical professionals were removed from the site, we found ourselves degrading back to the normality we were at before,” Alam explained.
“The key challenge is really getting the full organisation having the same view, the same priority, the same goals and the same motivation. Until you get that you can apply it in discrete places and you can have people that are really capable and that are highly motivated but as soon as those people change their motivation or are appointed to a different role that improvement process can drop down significantly. So, you need an approach where everybody has the same view, the same priorities and the same goals, can see progress and visualise what they are delivering versus what the objectives of the organisation are,” Alam added.
According to OpEx expert Ahmed Al-Mahfoudh, one simple mistake that most oil and gas companies make is to focus on policies and operations. Whereas what they really should be doing is working with people directly, instilling their OpEx strategy into people’s minds and making them buy into it.
“The best people to achieve operational excellence are those [working] on the ground. Most of the times, you will find that both the problem and the solution lies with them,” he said.
As team leader of TASNEE’s award-winning Manufacturing Transformation Programme, Al-Mahfoudh is perhaps best placed to share insight on the topic.
The programme was designed and implemented at its 400, 000- tonne High Density Polyethylene (HDPE) plant in Saudi Arabia, and in 2015 won Operational Strategy of the Year at The RPME and Oil&Gas Middle East Awards. With no capital investment whatsoever the MTP team managed to achieve new daily, weekly and monthly production records, as well as 42% reduction in off-grade production and 8%-10% increase of output rate for different grades, while also improving Overall Equipment Effectiveness (OEE) by 25.3%.
“We did something simple,” Al-Mahfoudh explains. “We went to people who work in the plants and asked them to identify the main problems. We then gave them the required technical support. They also underwent training which helped change their behaviour in terms of how they respond to issues within the operations.
“We also ensured that different departments within the company communicate and cooperate sufficiently as well as challenge one another.”
Despite their recent success in significantly improving the company’s performance, Al-Mahfoudh maintains that he and his team still have a lot of work to do.
“We have a long journey ahead of us. We probably completed around 50% of our operational excellence strategy for the current plants and we are due to complete the remaining 50% in five other plants — one plant at a time.
“We also make sure everything is documented in order to make the process sustainable,” Al-Mahfoudh added.
So far so good, but what next?
Asked how the region is performing compared to the rest of the world, Alam said: “It is a transformational process right now.”
“I think we are moving [but] we are certainly not where everybody here would say we want to be.
“The [oil] price is a negative in a lot of ways but I think it is increasing the motivation in the region. The organisations, the leadership, the stakeholders are really initiating change and that’s key.”
However, to really move forward, the GCC needs to focus on initiating organisation culture change, as Alam explains.
“We have a little bit of a traditional culture. In terms of how we manage in the hierarchy. Each person has their own role and they don’t want to really deviate and dig into levels that are outside of their scope.
“For a plant manager, we believe that they have to get down directly to the operations organisation and into the shift teams, similarly to what we do with safety, and be able to really exhibit ‘felt leadership’, build that priority and value and recognise success.”
“That’s the part that’s probably most challenging here because we tend to be a little bit more traditional in terms of the management and process systems here, in the Middle East,” he added.
Another more long-term challenge not just for oil and gas companies but for most organisations worldwide is how to stay motivated and continue to drive positive change even when economic conditions improve.
“If you are not improving, you are falling out. If we stay static we know our competitors are going to be moving forward and really moving past us.
“It is a very competitive environment today so even when oil prices go up, your revenue is going to increase, but your profitability is going to depend on how efficient you are. So if we focus on the relative profitability and competitiveness, then we shouldn’t change our mind-set at all,” Alam concluded.
Key takeaways from OpEx MENA 2015:
DuPont:
• The key is to initiate the process. The hardest step is always the first step.
• Organisational culture change is going to be key for this region.
• If you are not improving, you are falling out.
• Technology is a very important enabler.
Takreer:
• Continuous improvement is a very important aspect of operational excellence.
• Operational Excellence is a journey that never stops or ends.
Honeywell:
• Operational Excellence is not just an objective to aspire to, it is a mandatory requirement for everyone in the industry.
• Mobile technology will play a key role in improving performance.
• Companies must act now and shape the digital trend or risk being shaped by it.
Tasnee:
• If you want to compete on a global scale, operational excellence is a must.
• Instil your OpEx strategy into people’s minds and make them buy into it.
• The best people to achieve operational excellence are those [working] on the ground.
