Oil & Gas Upstream Integrated Operations Evolution

Once upon a time, a few large oil & gas companies developed point solutions to address specific production issues. A lot of lessons were learnt and a lot of money spent on bespoke software solutions, developed all under the quest for innovation. Many more niche solutions have been born from these early exercises and many academics developed papers and models around the new concept of ‘Integrated Operations’ (IO). Definitions vary through the industry, but evidence on true value realized was difficult to quantify.

Once these companies started to scale these bespoke solutions to standardization, then the ability to realize the same value on older, prized assets became less attractive, given these assets were developed many years ago under differing operating constructs and infrastructure. So, the return on investment case became less positive for expanding these solutions.

Under the environment of strong oil prices and innovation, most of these cases have mixed results (other than structured collaboration— in this context I refer to the formal process of team working, rather than collaboration centers).

Move onto current day where the focus has moved to reduction of operating costs within 3-6 month project cycles. Just knowing there is or was a problem is not enough to justify spending. In the industry, we have seen a dramatic change in how these projects are evolved with more expectations on cash flow from the business community.

Now that the industry now knows what can be done they ask how to improve their value chain using a process driven methodology on proven technology platforms across the enterprise. Involving all users in the value chain is no longer the domain of a niche solution, neither does this process get executed within the confines of a collaboration center. The enterprise is driving technology behavior to involve all users in the value chain rather than a specific group.

Before all the Change Managers provide their views on the well-trodden path of Change being important in IO, I hear you and agree. Change is more than teaching a user how to use an IO Center or a specific process and team working exercises. In fact, I see too many collaboration centers where Change Management teams have left an A4 piece of paper as the operating manual for their multi-million investment. The business community generally are left without any real context on how to use new tools and adopt new ways of working. Change in today needs to be different, and requires a much broader skill than traditionally accepted.

Today we are witnessing the emergence of a new form of Integrated Operations, I don’t want to call it ‘Next Gen….’ as this is not born from the same basics of IO and is challenging conventional thinking. Neither do I want to call it any other of the terms like ‘Born Smart..’ as this implies you have to chance to embed the right technology from the outset which does not apply to aged assets.

Today it’s not about technology, it’s about joining the dots, and I like what we are seeing emerge. We are moving to a more sustainable model that can adapt to the enterprise and leverage a wider audience without the context of a fixed working environment that is process driven to a controlled cost model and business outcome.

Instead, we now start to address some of the bigger questions, which is how to reduce cost of ownership in line with asset depreciation similar to models used in the car industry for example. IO ways of working must be able to flex to reflect that operators need to see a cost decrease over time in-line with the decreasing revenues from assets. This is a model I am now beginning to get some thoughts round, and look forward to applying those principles in the near future.

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Mobility – a promise of exciting possibilities in Exploration & Production

When was the last time you silently cursed a badly designed feature while using your email client, newly installed software at your firm, IVR menu of a call centre, your online banking system, your car or even your office coffee machine? Chances are it was last week —it’s another matter that you sucked it up and moved on with your life.

You could perhaps attribute your frustration to the ubiquitous mobile app (the poster child of the digital economy) for enhancing your sense of fine user experience. And you may not be alone in doing that as mobile apps quietly go about shaping many of the expectations we have from the products and services we consume on a daily basis.

In the last few years we’ve seen number of mobile apps skyrocketing to over 5 million  with over 90 billion downloads, yet users spend most of their time only on a handful of apps. This has not only intensified the competition for user mindshare, but also generated a vast body of knowledge and best practices for building quality apps that users love and want to come back to, again and again.

It is not hard to grasp why user experience (UX) can be a tough nut to crack for mobile apps. We expect them to be simple, elegant and yet highly efficient in getting the job done. Any app that is taxing on our thumbs (or fingers) and requires more cognitive effort than changing the channels on our TV can tick us off.

That said, not everyone is losing their sleep over the UX. Certainly not the Exploration and Production (E&P) sector, apparently.

UX in the E&P Sector

Just like any other digital technology, mobility is also creating certain excitement in the E&P sector with slow and steady uptick in app adoption. Quite expectedly, E&P CIOs along with their business counterparts have started putting together their firms’mobility strategy.

However, the main focus of the strategy has been around technical aspects such as data security, choice of enterprise mobility platforms and app development approach. As far as UX is concerned, it has yet to get much attention beyond the customary nods from the think tanks. It would be understandable if mobile apps were coming off-the-shelf, giving E&P firms little say in the UX design, but the majority of apps in the E&P sector today are custom-built (in-house or by service providers) and will continue to be for some time.

The general thinking is that the market offers enough expertise that E&P firms can summon to deal with the UX. True, but I also believe that external expertise will have limited value if the firms don’t have the internal capabilities and culture to absorb and complement the practices that mobility solution providers bring to the table.

Let me highlight a few such practices that merit attention from the E&P firms.

Design Thinking   

User experience is more than an attractive screen with fancy charts and colours as some tend to believe. UX is a greater whole delivered by various parts such as screen layout, controls, authentication, navigation and data access. Imagine a car, where a great driving experience is delivered by many parts of it such as: engine, powertrain, chassis, interiors and various utilities coming together – not just by the way the car looks.

E&P firms have traditionally relied on their super users or Subject Matter Experts (SMEs) to design their desktop-based applications such as Dashboards. While taking nothing away from the SMEs, it’s a lot easier to design an interface for the large dual screens with fast internet speed —that many E&P engineers enjoy —compared to the smaller screens of mobile devices on unpredictable internet connectivity.

An efficient app design demands deep understanding of the users’information usage patterns, working styles, environment and smart trade-offs in the features. A field engineer raising (often with the gloves on) request for corrective maintenance on a tablet requires a different user experience than a manager approving that request on a smart phone. There is simply no cookie-cutter approach to the app design.

Forward-thinking E&P firms, being aware of this challenge, are embracing modern design concepts such as Design Thinking that help build deeper insight into the business problems being solved by the app and generate ideas to create the optimal design by drawing upon end users’diverse points of view.

At the same time success of such methods requires acceptance and wider participation of end users, many of whom may be getting exposed to them for the first time and may not feel “at home”with terms such as Personas or Journey Maps. This is where leadership needs to play an active role in creating awareness and breaking internal collaboration barriers.

Iterative Development

Experts advise that getting the right user experience is an evolving process that entails multiple iterations focussed on making design enhancements by learning from end users’feedback on incremental software releases.  This philosophy of “do fast and learn fast”has led to the wider adoption of the Agile methodologies with DevOps becoming a de-facto standard for mobile app development in many hi-tech sectors.

Moreover, emerging cloud-based architectural paradigms utilizing micro-servicesand low/no-code toolspromise faster release cycles, shrinking them down to a few weeks or even days. They also allow the development teams to experiment with a variety of technology components to achieve design innovations.

Embedding these practices, however, will require E&P firms to rethink their IT project management and software development practices that are probably suited for “certain”types of IT projects but could encumber the mobile apps that tend to have smaller scope and lesser complexity.

For example, many E&P firms still struggle with Agile in their IT projects due to functional silos, particularly those involving business and IT, combined with the documentation and approval-heavy project management stage-gates. On the technology front, E&P firms, barring some notable exceptions, still show reluctance to use cloud based infrastructure for software development, which creates dependency on physical infrastructure availability and limits the project teams’architectural options for meeting the design requirements.

Mobile Product Management

Mobile product management is one of the widely recommended practices for ensuring that UX keeps pace with changing operational realities and technology landscape. It combines the processes, governance and product championship focussed on continuous improvement of the apps through harnessing market innovation and constant engagement with end users, gathering their inputs and funnelling those into the planned release cycles.

So far E&P firms haven’t had to worry about the product management. Their flagship desktop applications come from the vendors while custom-built applications, once developed, receive reactive maintenance from IT until they get phased out.

In order to protect their investments on mobile apps, E&P firms may have to consider putting in place the structure, discipline and skills to manage the apps like products. Leaving the responsibility for upkeep of these apps on IT and service providers’may not bring the necessary innovation to keep the apps relevant to the users.

WrAPPing it up

While some of these practices may not be news to the E&P firms, not many —especially those in the early days of their mobility journey —will show appetite to go through all the pains to adopt them just for the sake of UX. Some, I suspect, wouldn’t even mind a few hits and misses with their apps as they navigate the mobility learning curve. After all, a bad UX has never put any E&P firm out of the business and failures of a few apps here and there may not burn a big hole in the managers’pockets. End users, on their part, might just put up with the average apps like they have with the clunky dashboards, sundry applications built with Microsoft Access or Visual basics and interpretation tools that still require running command lines or scripts.

However, the optimist in me believes that things may look better once mobility takes hold in the sector, E&P firms become more digital and a new generation of the users (a.k.a. millennials) —spoiled by the Instagrams, Snapchats, Dropboxes and Google apps of the world —have significant voice in their firms’digital affairs.

What we would see then are not only great apps in the E&P sector, but user experience taking center stage in development of almost everything that goes into a computer screen with a human on the other side of it. That would not be just hugely empowering to the end users, but could transform work practices in ways unimagined so far.

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Mastering the art of analytics: a Groundhog Day story of the exploration and production sector

Being data-driven is the new war cry of the E&P sector these days. Feverish frenzy around Digital and highly publicized business successes of the data-driven firms from the other sectors are driving most of the E&P firms’ fascination with Big Data, analytics or IOT these days. E&P leaders or senior executives, on their part, are also coming out in support of wider adoption of analytics and need to do a lot more with their data.

But beyond all the intent and excitement, not much has changed to suggest that E&P sector is on its path to becoming data-driven. Here is why I think so and most of it is based on my last 12 years of observation of the sector analytics initiatives.

Decoding data-driven

While there is no universal definition of what being data-driven truly means, various publications and experts’ commentaries on the subject identify three main acts that define data-driven firms.

1: They manage their data well

2: They leverage teamwork and wide variety of data sources to generate insights

3: They approach analytics objectively, acknowledging and addressing the human biases

Let’s look at these in the context of E&P sector.

First Act

Act 1 needs no introduction having been a proverbial thorn in the E&P firms’ flesh and deservedly received significant attention, if not action, for last as many years as one can remember. Data gurus have warned us—and rightly so—enough about the perils of poor data quality in anything even remotely to do with analytics. So any further discussion on this will be preaching to the choir.

Second Act

In the world of big data, Variety, and not Volume, is what drives the business value of the analytics, according to the experts. There is a reason why it’s the case. New correlations from analyzing different data sources (both structured and unstructured) can create new knowledge of performance drivers—a key to insight generation. While Variety is gaining greater currency in the consumer-facing sectors such as retail, it’s not a common practice in the E&P sector.

I can think of two reasons for that.

First, data sources being analyzed could belong to multiple departments which, in many E&P firms, don’t naturally share data or collaborate with each other. This limits the opportunity to develop broader perspective into a business problem, necessary to explore a range of the performance drivers. For example, through collaboration with the technical teams, supply chain teams can develop better understanding of how different plant configurations, field characteristics or operational activity patterns influence the material demand, as opposed to only analyzing their own datasets.

Second is the unknown or poorly understood causalities in new correlations that are bound to show up when analytics involves multiple data sources. In a science-driven E&P sector, engineers are predisposed to look for causalities in the correlations in order to trust the analytics. So any correlations which engineers can’t explain with their domain knowledge are likely to be dismissed.

For instance, in equipment failure prediction analytics, operations teams feel comfortable exploring the correlations between the past failures and equipment performance data because causality is well established there.  But when it comes to exploring the correlations between equipment failures and, let’s say, weather cycles or workforce demographic patterns, causalities may be less obvious to the engineers. Such “unusual” correlations require deeper analysis and experimentation to verify the causalities and many E&P managers may not have the appetite, analytics acumen or resources (read data scientists) for such experimentations.

Third Act

Which brings us to the third act: navigating the human biases in the analytics.

We all have been told to mind the dangers of “garbage in, garbage out” with computers, but “bias in, bias out” could soon replace that advise in the age of Big Data.

Experts argue that knowledge gaps and individual incentives can create hidden biases in both the collection and analysis of the data compromising the analytics results. They also recommend addressing these biases through experimentation (ref to Act 2), research and training.

In E&P sector, given the typical data uncertainties and intuitive decision making styles, biases can occur naturally and are well documented in the SPE literature. Left unchecked, they can limit the adoption or quality of the analytics efforts especially when the latter are misaligned with the managerial incentives.

For example, in the E&P capital projects, pro-project sanction bias of the engineering teams is described as one of the main reasons for overly optimistic production forecasts and poor concept selection. In this scenario, any attempt to bring analytics to improve the accuracy of project evaluation is likely to meet resistance if it reduces the chances of project getting approved and in turn career advancement of the individuals.

Managerial incentives also rub off on their teams in the way they approach the analytics. Technical teams incentivized on oil gains from well intervention opportunities, may focus their analytics efforts on identifying expensive drilling and workovers targets than exploring cheaper production optimization alternatives on the surface. Operations teams compensated for meeting the production targets may sidestep the competing advice from equipment predictive model if it incurs production loss. The unfortunate BP Macondo incident is an example of this behavior where the rig staff, under pressure to make up for the lost drilling time, reportedly misinterpreted the negative pressure test.

Groundhog Day Story?

Many would agree that mastering these “softer” aspects of analytics is as critical to being data-driven as harder aspects such as skills or technology. However, in my experience, “soft” is seldom acknowledged, much less addressed, in the analytics initiatives in the E&P sector. Many E&P firms still tend to approach analytics as a tool to solve tactical—and often one-off—problems than a philosophy of doing things. This mind-set has led to analytics projects being IT group or departmental endeavors than leadership-driven initiatives.

It’s not hard to see why so many sector analytics pilots after promising starts have failed to deliver. Without hands-on and committed leadership involvement, initial momentum from successful, if at all, pilots is lost as soon as the projects run into the issues described above.

Are the things looking any different on the front line? Not much I’m afraid.

E&P workforce, especially the earlier generation, still identifies analytics with the first principle methods such as reservoir simulation or engineering models while viewing data sciences based methods (e.g. statistics, machine learning) with skepticism. The current crop is more open to the latter but has a steep learning curve to climb in large part due to the absence of formal data sciences learning programs in the sector or academia. And while conferences are good forums for knowledge exchange, E&P analytics conferences are fast losing their novelty. Once you have attended a few, you have probably seen it all.

In one such conference, sitting in a big data session, I overheard a couple of participants sigh and mutter “the same old stuff!” Another one at the end of the session called the whole event as Groundhog Day in an obvious reference to a popular movie (with the same title) where the lead protagonist is forced to live the same day over and over again. Even though ironic, I thought that was an apt summary of the current state of the analytics in the E&P sector.

But let me end with a note of optimism. In the movie, at the end of the day (literally), hero emerges transformed and enlightened. I hope E&P sector ends its Groundhog Day on the same note and emerges truly data-driven.

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