Lean is a customer-focused methodology that aims to deliver value, reduce waste and achieve continuous improvement. You’ll also hear Six Sigma mentioned within discussions about lean. Six Sigma is all about reducing defects. Some companies and practitioners also create Lean Six Sigma programs that combine the principles of both approaches.
Although lean principles first appeared in manufacturing plants, they now assist businesses in various industries, from software development to health care. Here’s a look at how they can improve the performance of companies in the oil and gas sector.
Staying on top of preventive maintenance is crucial in the oil and gas industry. That’s because removing even one component of equipment used in the sector can lead to costly downtime and delays. Many leading companies capitalize on data analytics tools to find instances of abnormal operation.
The compiled information can sometimes spotlight trends that eliminate costly major repairs. Even so, company leaders know there’s not always a way to get around sending a part or machine for repairs. In that case, lean principles can speed up turnaround times at specialty facilities that fix the parts.
Sultzer provides pumps to the oil and gas sector. The company also offers a 24/7 repair service. It used lean principles to reinvent its customer service capabilities and shorten repair times.
For example, an internal investigation found each service center maintained a unique technical documents library. Thus, some locations did not have adequate resources for every job, which delayed completion time. The company relied on lean principles when deciding to standardize the documents at every site.
Recall that waste elimination is a fundamental goal of the lean methodology. Sultzer’s repair professionals consider excessive time as the primary type of waste to avoid, especially given the critical nature of oil and gas equipment. However, other companies may view waste differently. For example, might using a data analytics interface to improve maintenance stop businesses from prematurely stocking up on parts before equipment breaks down?
When companies implement Lean Six Sigma approaches into their operations, the goals are to reduce defects, limit product variation and get to the bottom of production problems. When people first became familiar with Lean Six Sigma, there was a target of 3.4 defects per million parts. Keeping the number of defects low increases customer satisfaction because it improves reliability.
Adopting lean principles can also assist companies with cutting the error rates associated with major projects. For example, when Hess launched work on its Tubular Bells deepwater development in the Gulf of Mexico, it did so within the lean methodology framework.
That led to a fast-tracked timeline of sanction to first oil in three years. Although the team working on the project made some mistakes along the way, they learned from each blunder and applied the new knowledge to the initiative’s later phases.
Extensive planning sparked more informed decisions, too. During the field development segment, specialists designed several possible scenarios before drilling a well. This choice meant the planning took more time than the execution. Additionally, it resulted in better drilling and well placements, which removed the time workers might have otherwise spent resolving preventable mistakes.
Most leaders in the oil and gas sector understand the dangers of becoming stagnant. Failing to innovate and remove ineffective processes or other weaknesses could quickly harm profitability. Decision-makers at a Hungarian oil and gas company called MOL Group realized that and acted purposefully by implementing lean principles during an all-encompassing process. The defining goals were to improve financial performance and improve the company culture. Lean facilitators helped MOL Group get through the process successfully.
One aspect of the lean plan concerned looking for the most significant sources of waste. The lean facilitators once observed only 15 minutes of value-adding work in three hours. Another decision made within the company was to bring in external lean experts. However, most of those people had manufacturing backgrounds. Thus, it took them longer to learn the oil and gas sector’s intricacies than for MOL Group employees to understand lean principles.
Once the company implemented its lean principles, data analytics helped show concrete evidence of the results of that work. The oil and gas sector faces an exceptionally high number of variables, including many outside the direct control of an individual company. The MOL Group team sought to control what they could by improving internal processes, then analyzing data to see the effects.
This approach was not a quick one, nor was it free from difficulties. However, it did pay off eventually. Five years after facing the financial struggles that caused company leaders to first explore lean principles, the business had a record-setting year.
As consumers become more aware of how today’s actions affect the planet’s future health, some of them assert that oil and gas companies must do more to reduce their adverse effects on the Earth. Some brands in the industry have committed to making drastic changes. For example, BP is ramping up its focus on low-carbon energy while scaling back its oil and gas activities.
In another signal of positive change, oil and gas companies with assets on five continents recently agreed to show more transparency when reporting methane emissions. The number of companies promising to do this has already surpassed 60, and participants will monitor, measure, verify and report their statistics.
Delivering more value to customers is a significant part of the lean methodology. Indeed, oil and gas companies can do that in numerous ways. However, it is increasingly evident that stakeholders demand them to step up efforts to safeguard the planet’s future.
Moreover, consider the challenges arising from oil and gas companies operating worldwide. For example, the European Union (EU) has a methane strategy to reduce emissions associated with human activities. It will eventually include regulations to cut methane levels in the EU and address any methane-related links in supply chains used by countries in the region.
Conversely, the situation is less straightforward in the United States. President Trump moved to roll back emissions limits. However, with a change in power happening soon, the U.S. may soon see emissions caps imposed again. Analysts say President-elect Joe Biden faces pressure from environmental groups to regulate methane. It’s still not clear how things could pan out. However, focusing on the continuous improvement that the lean methodology demands could help oil and gas companies meet new requirements.
Companies cannot successfully adopt the lean methodology overnight. Doing it right requires time, effort and diligence. However, these examples show why it’s worthwhile for oil and gas businesses to strongly consider making the transition.
Emily Newton is the Editor-in-Chief of Revolutionized Magazine. She has over three years experience writing industrial topics for the manufacturing and supply chain industries.