Can Lean Help Grease the Way in Oil & Gas?
Lean manufacturing is generally seen as being best suited to the automotive and similar industries
By Bruce Morey
Among the many things Mark Warren of Tesla2, a lean-focused consulting and research company based in Athens, GA, has learned in his decades of professional experience is that there are more similarities than differences when manufacturing of any product is concerned.
True, the parts that manufacturers serving the oil & gas industry produce are often much larger, with blowout preventers (BoPs) two stories tall and machined pipe sections 10' (3.05 m) long that weigh as much as an entire automobile. “Another difference is that much of oil & gas manufacturing is done in a job-shop environment, characterized by high-mix and low-volume production. Scheduling is random and unpredictable, while automotive sees thousands of identical pieces,” explained Warren.
However, automotive or other “high-volume” industries are not as predictable as one might think.
“When I worked at Cummins,” Warren said, “even when we built 800 engines a day, we dealt with about 10,000 permutations—different sizes, families, or optional turbochargers.” This gave Warren lessons and experience applicable to a variety of industries, including the cyclic, often unpredictable world of oil & gas. “It is still manufacturing bits and pieces, with people still putting things together, finding problems, and solving them,” he remarked.
It is these aspects of the industry, Warren (and many other experts) holds, that make lean just as applicable to oil & gas as it is to other areas of manufacturing.
The key is what lessons from lean to emphasize, he believes. Problem solving, who does it, when, and how, forms the core of his consulting philosophy. In any industry, whether oil & gas or any other, he pointed out that it is easy to be mesmerized by the tools and instruments of lean thinking. These include kanbans, kaizen events, and 5S. “As an engineer, like I am, you like the bells and whistles and get focused on them,” he explained. “But over time you begin to realize it is more about behaviors. The tools are a requirement, but you have to grow people and build habits.” These include habits of self-reliance, problem solving, and, for managers, how to coach and develop talent. Often, companies train professionals for certification in lean and Six Sigma, apply the tools, and get results that “look pretty,” as he put it. “But they don’t get the outcomes they should. It does not stick, and they know it,” he said. Why? Because lean transformations are really about behaviors driving use of the tools. He makes the iceberg analogy, where the tools are the 1/8th of the iceberg visible above the water. The crucial 7/8th is below the water—these are the invisible behaviors of coaching, employee empowerment, and problem solving.
Adaptive Lean for Oil and Gas
Franck Vermet, Testing and Subsea Manufacturing Manager for Schlumberger, (Rosharon, TX), agreed there are often problems with lean adoption. “Many companies struggle to implement lean,” he said. There is data from a survey conducted in 2007 by IndustryWeek that showed 74% of respondents had made little or no progress in their lean implementations, 24% made significant progress, and only 2% achieved world-class improvement.”
Vermet pointed out that, on the surface, lean facilities look very nice—but how you link that with actual performance is difficult to ascertain. He also agrees that lean programs are difficult to sustain over time.
Along with Warren from Tesla2, Vermet developed a unique, trademarked Adaptive Lean Framework for use by Schlumberger. “Sometimes the simplest methods are the best,” Vermet said. A happy workforce is one simple idea difficult to achieve. “You would wish that workers feel and are fully empowered,” he explained, “but I have not observed this often. We felt this was a key element in our development” of the Adaptive Lean Framework, which was developed to apply lean to high-mix, low-volume applications.
“The provocative message I would like to get across is that the practical solution is to create happy employees,” he stated. Making employees happy starts with creating organizational energy—defining purpose, beliefs and leadership principles. These are the foundations, or the part of the iceberg below the surface, that lead to enhanced performance. “When you have organizational energy, only then can you structure processes and stabilize them,” he explained. Once stable, processes are improved using a variety of familiar techniques, as reactive and proactive feedback loops, according to Vermet.
“After that, implementing solutions is the next key step, and ties back to employee empowerment,” he said. For instance, there is the theoretical way—open a lean book and take out all the standard solutions (think kanban or 5S) and push those solutions to people. “Or, you can do the practical thing and develop happy employees. Empowered employees will pull practical solutions from the theoretical tools available, and they will implement those solutions by themselves,” he said.
Like any good process improvement program, Schlumberger used metrics to measure progress. “We used weeks of orders on backlog. We started with about a year’s worth of backlog [52 weeks] and reduced that to one week of backlog during an 18 month improvement program,” he said.
Diverse Industry, Diverse Solutions
After initially consulting in applying lean principles with oil & gas companies that developed wells, John de Wardt of De Wardt and Co. (Steamboat Springs, CO) added equipment manufacturers to his client list. “The issue is that the industry is both cyclic and fragmented,” he said. “We do have some big players, such as Schlumberger or NOV [National Oilwell Varco], but also a lot of small players.” These smaller players can arise abruptly when the business booms, and disappear just as quickly when the market declines.
As a result, manufacturers in oil & gas have a broad range of capabilities and a broad range of strengths as well. “There are some who are quite well organized, and others you can see when you walk into their facilities they are highly disorganized, they have not even thought about it,” de Wardt related.
The cyclic nature of the business means some companies either do not have the time to apply lean when struggling to meet demand, or cannot afford it when demand slackens, according to de Wardt. The smaller shops also refurbish used equipment as maintenance and repair organizations as well as make original equipment, further complicating matters. These are practical professionals, struggling through one end of a cycle or another. “Many of these companies are not ready for a theoretical approach using detailed measurements and analysis,” he said. He has seen it tried with little actual progress made.
For him, the key to such a practical audience is a visual approach. He is also a big believer in kaikaku, or “radical change” in the lean lexicon. One of his favorite techniques, when applicable, is to completely empty a workspace of its equipment and rebuild it with shop-floor personnel, along with company leadership. Sometimes it is the only way to effect meaningful change.
“Too often people want to come in and perform kaizens or apply 5S on highly inefficient processes,” he explained. “They are wasting their time. You cannot clean up a workflow process that is chaotic or nonfunctional.” What he experiences at the end of such a process is a “trash bin filled with stuff not needed,” essentially performing kaizens, and 5S in the pursuit of a higher goal.
Exploration and Drilling: Lean is Compatible
While lean is undoubtedly useful for manufacturing oil & gas components, the concept also extends itself to exploration and drilling (E&D). This is where de Wardt got his start. “We invented and trademarked the concept of Lean Drilling,” he said.
Starting with one-off wells, the concept has since been applied to wells drilled with highly repetitive processes. These are typically highly repetitive wells that often employ hydraulic fracturing (fracking). The next step he sees is automating well drilling and completion. While increasing productivity, and making the process more consistent, using automation is safer, taking people out of harm’s way.
“If you look at the entire front end of an oil & gas company, it is just like an assembly line,” said Alex Buehler, a senior project manager with The Marshall-Teichert Group (MTG), Houston. He explained that there are four basic processes that operate in this assembly line: Find the oil and lease the surface and mineral rights; move a drilling rig into location and drill; complete the drilled well and frack as necessary; and, finally, install the surface equipment to start extracting the oil and gas out of the ground. It can cost thousands of dollars per hour to drill and complete wells. The equipment is expensive and usually locked in by long-term leases—idle time represents loss of real dollars, not just opportunity cost. Ideally, drilling and completing fleets should have a backlog of future locations to keep them busy.
“Each of these discrete steps [in the assembly line] typically contains hidden waste,” he explained. “For example, it can take up to 90 days from selecting an ideal location to securing title and land usage rights to drill. How you mobilize the rig and minimizing the number of times the drill string is pulled and put back in the hole [tripped] also reduces cycle time.” To help E&D operators, he points to the complete list of lean tool and concepts, from kaizens to SMED (single minute exchange of dye). “For example, we find that the SMED concept works quite well,” he remarked. “Instead of having the end-to-end sequential steps in a process laid out, we find many times that some steps in a process can be completed simultaneously.” Aggressive preventive and predictive maintenance are other concepts borrowed from lean that he believes contribute, on average, 5–10% in increased production capability.
Safety is another major concern for E&D operators, and not just for individual workers or the crews. A major blowout or other accident represents untold damage to the environment and liability to the companies involved. “There is a natural reaction from clients who have not worked with us before to say that they simply cannot work faster,” Buehler explained. “They are concerned that working faster will compromise safety. What we typically do is show our clients that what we are after is working more efficiently.” Eliminating downtime, rework, and unnecessary steps are simply eliminating waste—not forcing workers into doing the same inefficient work faster at greater risk to themselves. “The value stream process becomes compressed and the cycle time is faster and they are now paying much closer attention to individual steps along that process,” he said.
When all is said and done, efficiency curbs rather than accentuates hazards.
This article was first published in the 2013 edition of the Energy Manufacturing Yearbook.