asset management

32 SAUDI ARAMCO JOURNAL OF TECHNOLOGY SUMMER 2002

SHELL GROUPS ASSETMANAGEMENT ANDIMPLEMENTATION

Al-Hajj is a lecturer with Robert Gordon University,Aberdeen, Scotland, theU.K. He holds a BSc degree incivil engineering from Beirut Arab University inLebanon, an MSc in construction management fromHeriot-Watt University in Edinburgh, Scotland, and aPhD in construction management from the Universityof Dundee, Scotland. Al-Hajj is a training consultantfor project management and economics for ShellSPDC, Nigeria. He has closely worked with the oil andgas industry for seven years.

Al-Saadi heads staff development and training forWell Engineering Petroleum Development Oman (PDO)Oil Company. He holds a BSc degree in petroleum engi-neering from Pennsylvania State University, Harrisburg,Pennsylvania. He obtained his MSc in asset managementfrom Robert Gordon University in Aberdeen, Scotland.During 12 years with PDO, he has worked in well engi-neering areas, including operations, commercial andhuman resources in Oman and the U.K. coveringonshore and offshore industries.

ABSTRACT

Asset managements goal is to optimize overall asset performance throughout a

life cycle. Single-point accountability is one of the main strengths of asset manage-

ment. Different methods to deploy asset management principles have been

adopted in the oil and gas industry. However, there is a need for common under-

standing of the concept and a generic method for implementing asset

ASSEM AL-HAJJ ANDKHAMIS AL-SAADI

SAUDI ARAMCO JOURNAL OF TECHNOLOGY SUMMER 2002 33

management. Successful implementation of any new man-agement principle requires promotion of a supportivechange in culture that directs peoples energies to supportthe change, instead of opposing and rejecting it. Suchchange requires an organization that has provided theinfrastructure for information and knowledge manage-ment. A successful asset management-based organizationrequires a management style that promotes the above andmanages by principles of trust, respect and support. Assetmanagement is based on getting the right balance betweenthe main constituents of any organization, its people andtheir attitude, skills and behaviors: structure, roles,processes and systems. This paper focuses on Shellsapproach to the implementation of asset management asan example from the oil and gas industry. It gives anoverview of the advantages and disadvantages of assetmanagement in a typical oil and gas company. It also highlights the importance of people and knowledge management in the change process to an asset manage-ment-based organization.

INTRODUCTION

Managing an asset through single-point accountabilitywas not a common occurrence until recently. For a typi-cal oil and gas industry installation, subsurface assetsused to be managed by a subsurface development man-ager; the surface infrastructure (platform) was managedby a platform manager; and sub-modules within the sur-face infrastructure (drilling) were managed by a drillingmanager. Within these separate disciplines, both capitalexpenditure (CAPEX) and operating expenditure(OPEX) were managed separately, with the aim of eachmanager to optimize his own budget without any dueconsiderations toward the total picture. Thus, the needfor single-point accountability for an asset becameessential in allocating expenditures (CAPEX and/orOPEX) so the value of an asset is maximized over its lifecycle.

BACKGROUND ON ASSET MANAGEMENT

To optimize asset-operating expenditures via an improvedfeedback loop between maintainers and designers, theU.K. Ministry of Industry initiated terotechnology back in1968. They concluded that significant savings could bemade provided that maintenance activities, experiencesand costs were fed back to the designers, leading to thereduction of maintenance costs and increased plant avail-ability. Terotechnology failed to provide industries withclear guidelines of business management and thus madelittle impact. Terotechnology philosophy did not attract

the oil industry because it was introduced at a time whenoil prices were increasing and operating company profitmargins were at their maximum. The possible savingswere perceived as small compared to the cost of mindset,organizational and cultural changes required to benefitfrom such change.

Two major events occurred in the late 1980s thatchanged the way of thinking within the oil industry. Thefirst was the dramatic drop in oil prices to below$10/barrel from $35/barrel during 1986. The second wasthe 1988 Piper Alpha disaster in the North Sea causing167 fatalities. These two events led to major improve-ments in HSE awareness and business management,resulting in tightening up of the HSE regulations and dra-matically reduced profit margins. This invited theimplementation of techniques to reduce asset life cyclecosts such as availability modeling, maintainability mod-eling, reliability-centered maintenance (RCM), whole lifecycle cost (WLCC), risk-based maintenance (RBM) andrisk-based inspection (RBI).

Other initiatives aiming to standardize procedures withinthe industry have existed. These include:

Cost reduction in the new era (CRINE) to standardizework procedures.

Joint industry projects (JIP) to standardize theapproach to the implementation and optimization ofasset life cycle cost in the oil and gas industry.

These techniques and philosophies alone are notenough to make asset performance economical and pro-vide sufficient asset growth. Therefore, there is the needfor a management principle that uses these techniques andestablishes the best way to optimize asset life cycle tomaximize the rate of return. Asset management is the con-cept perceived to provide the missing link that maximizesthe use of these tools.

DEFINITIONS

Terotechnology forms the basis for asset management(AM). It blends philosophies, techniques and methodolo-gies together, contributing to optimum asset life valuewithin an organization by achieving the right balancebetween risk and cost.

Although individual techniques focus on specific aspectsof the organization, the combined use of these techniques isthe desired overall achievement. The most importantrequirement for implementing such a combination of tech-niques is to create an organizational structure thatpromotes the use of these tools, a working culture to allowlateral learning and cross-fertilization of knowledge andexperience sharing, and to establish the right data andknowledge management systems.

Optimizing every single process within an asset is notnecessarily achieving the overall optimum economicalperformance. It is the balance of all the processes withinan asset that gives optimum performance. Asset manage-ment is all about finding this balance to optimize theassets life cycle value.

Defining asset management is not an easy task, espe-cially in an extremely demanding and fluctuatingbusiness environment, and with challenging health, safe-ty and environmental requirements and regulations.Also, fast developing information management and tech-nologies and operating at the best cost throughout theasset life further complicate the task.

British Standards (1997) define life cycle costing(LCC) as the process of economic analysis to assess thetotal cost of acquisition and ownership of a product.LCC applies managerial, financial, engineering, buildingand other practices to physical assets in the pursuit ofeconomic life cycle costs. At its most basic, life cyclecosting is simply the economic management of physicalassets over time.

Asset management is the application of engineeringand management tools to optimize the entire life cyclevalue of some form of engineering asset to enable thealignment of engineering decisions with corporate andbusiness objectives (Hodge, 1996).

Although the above definitions differ in describingasset management, they have common agreement in real-izing that it is the terminology that aims towardsachieving optimum overall asset economics, enhanced assetHSE performance and enhanced companies reputation, i.e., maximum value.

EVALUATION OF ASSET MANAGEMENT

Advantages

The Guide to Terotechnology (1992) highlighted the fol-lowing benefits to any organization.

Improve management control over the decision-mak-ing process. Decisions based on life cycle costinganalysis are of more value to management for long-term business competitiveness and survival. Wholelife cycle costing analysis is based on obtaining thedesign that optimizes maintenance strategy to achiev-ing maximum asset availability. As a result, there isan increased profitability through a reduction in totalcost of ownership.

Enhanced cross-fertilization of good ideas and datasharing improve data flow between designers andmaintenance managers. The wealth of experiences andknowledge from maintenance are then fed back to the

designers at early stages of any new project. This is acritical element of design optimization toward mini-mizing life cycle cost of an asset.

Improved control over expenditures through sin-gle-point accountability (asset manager). Spendingof any sort (CAPEX and/or OPEX) authorized byone person provides a winning edge over the tradi-tional approach of a number of managersoptimizing their budgets with little-to-no due carefor the other sub-modules.

Two main criteria that are more specific to the oilindustry are:

1. Cost of production deferment (loss of production atany time) and cost of asset demobilization (abandon-ment). These two elements must be captured in asseteconomic models.

2. Huge financial losses can occur through mismanagedhealth, safety and environment-related issues. The costof the Piper Alpha incident was not only limited tocompensation and clean up costs, but also putOccidental out of business in the North Sea. BrentSpar is an ideal example of how environmental issuescan damage a companys reputation and cause it toincur huge financial penalties.

Although an asset management approach does not pro-vide the magic of putting up-front costs to these potentialdisasters, it supports a self-correcting safety, health andenvironmental management system that minimizes therisk of getting into disastrous circumstances.

IMPLEMENTATION COST AND DISADVANTAGES

Implementation of a new business strategy will always beaccompanied by reluctance to change and cultural barri-ers. These two main obstacles take the longest time todissolve and transformation processes are very slow. It iscritical, however, to demonstrate that the benefits ofimplementing an asset management business approachoutweigh all the associated implementation costs andshortcomings that come with it. Otherwise, the processwill fall apart and it would not make business sense to gothrough the change process.

In order to achieve adequate implementation of assetmanagement, the basic organizational requirements thatshould be met are (Guide to Terotechnology, 1992).

Up-front determination of production and cost tar-gets, and physical assets required to achieve thesetargets and planned asset lifetime.

Asset performance is specified, maintenance strategiesare optimized and performance-monitoring criteriaare put in place.


Experiences throughout asset lifetime are captured ina form of feedback loop information system thatimproves and optimizes total life cycle costs.

Time and life expectancy forecasting for an asset, partic-ularly for the oil industry, is extremely difficult due tomarket demand and oil prices dictating production strate-gies and investment attractiveness. Nevertheless, the aboveis essential to obtain benefits from implementing asset man-agement principles and might be why the oil industry waslate in adopting it.

This change, from minimizing the CAPEX way ofthinking of optimizing asset WLCC, requires accurateforecasting and a good understanding of asset finite lifeexpectancy and operations.

It is clear that such organizational changes start fromtop to middle management and finally move to the work-force level. Therefore, senior managements activeparticipation and understanding is vital to promote andreward all activities involving efforts to minimize the costof ownership and to optimize physical asset value. Thecosts to achieve such organizational features include train-ing senior management and the workforce, and time andeffort in dissolving cultural changes.

In addition, there is the cost for setting up appropriateinformation management systems to collect, store, analyzeand feed back data, experiences and knowledge, andenhance and stimulate a lateral learning culture internallyand externally. These costs include:

Cost of collecting additional data not already collectedfor management purpose.

The cost of making existing data compatible with theneed of AM.

The cost of any additional analysis. The cost of supplying feedback information or of pro-

cessing feedback received.The need for data collection and its conversion into

useful information on which to base decision-makingcannot be over emphasized. Such information includeshistorical trends on market fluctuation, asset and pro-duction performance, HSE performance and otherindicators critical for the decision-making processes.Currently, companies use only 7 percent of their data tomake decisions with 93 percent of the data goingunused (IBM research).

The main difficulties/challenges of asset managementimplementation can be summarized as follows:

Overcoming hurdles of getting to an asset manage-ment-based structure and dissolving the culturalresistance to change barriers. Changing to new orga-nizational structures does not happen overnight. Theorganization will struggle through the transformation

process, and the fear of not realizing the benefits mayquickly cause dramatic failures.

Main principles of the AM approach depend highlyon forecasting and accurate knowledge of lifeexpectancy of an asset. This single point forms thebiggest challenge for its use and thus weakens its prin-ciples for the oil industry.

Mind set changes are required to enhance continu-ous improvement via lateral learning and knowledgesharing principles.

In large international companies, in which manage-ment turnover is frequent, short-term thinkingprevails and thus AM principles are no longer applica-ble.

Organizations need to assess the need for change so thatcompanies do not change for the sake of change. Benefits ofthe outcome after the change must outweigh the associateddifficulties. Otherwise, the change becomes a total failure.

SHELL MODEL FOR ASSET MANAGEMENT

Introduction

Shell reacted faster than other oil companies in imple-menting worldwide asset management principles. Shellcompanies in the United States and Europe have pio-neered asset management for the entire Shell Group,whereas companies in South America, Asia and Africaare slowly but surely following in these footsteps.Although this causes delays in capturing all the benefitsof asset management implementation to Shell, it maximizes the success by applying the learning fromprevious change processes and thus minimizes the risk of failures.

Functional-based organizational structure has longexisted in Shell. Indeed, such a structure worked effec-tively during the exploration phases with smaller teamcompositions.

A Typical Functional-Based Structure

Companies operating under such a structure do not man-age through single-point management. In an oil industryinstallation, a subsurface development manager managesthe subsurface assets; the surface infrastructure (platform)is managed by a platform manager, and sub-moduleswithin the surface infrastructure (drilling) are managedby drilling management.

Within these separate sub-assets, both CAPEX andOPEX are managed separately with the aim of eachmanager to optimize his own budget without any dueconsideration toward influencing the other part of thetotal picture.


Shell has expanded throughout the years to the pointthat the above structure is no longer effective to appropri-ately manage its business. The main drawbacks in operatingunder this structure are:

This structure creates silos between different depart-ments and therefore restricts communication;

Teamwork is extremely weakened; Diversity is discouraged; and There is a lack of information and knowledge sharing.Therefore, change to an asset management-based struc-

ture was a natural progression caused by businessexpansion and the management of mature assets during thelater asset life cycles.

The concept of asset management within Shell began in1993, when Shell International Petroleum Maatshappij(SIPM) issued its first guide to operations reference plan-ning as a user training guide, EP93-2015 - OperationsReference Plan for Assets (ORP).

Shell Expro led the group in implementing an asset refer-ence plan (ARP) in 1994 in its Brent Field Unit. An internalassessment within Shell Expro, in evaluating how wellExpro was performing compared to in 1995/96, led to thedevelopment of the asset/process management structure. In1997, Expro took the opportunity of the Northern BusinessUnit organizational restructuring to apply the asset/processmanagement structure as a pilot for Expro and Shell com-panies (Miri Asset Management Conference, 1998).

The overriding principles of implementing asset man-agement are the same across the board. The threereasons for Shell to apply as many synergies in assetmanagement principles implementation across all operat-ing companies are:

Demonstrable HSE and cost benefits of applying assetmanagement in the U.S. and European Shell operatingcompanies;

Competitive market and fluctuating oil prices justifychanges in all Shell operating companies in order tosurvive and stay competitive;

Shell staff movement among operating companiesbridged the gap between the cultures and maximizedlateral cross-fertilization.

Shells main office provided guidelines, but then left indi-vidual operating companies to develop the requiredstructure and management system to best realize their aspi-rations in implementing asset management principles. Anoverall model enhances:

Focus on bottom line; Responsiveness; Ease of operational processes and asset focus; Faster decision processes; Challenges to status quo and development personal

skills; and Communications and teamwork.Shells main office did not prescribe one, single organiza-

tional structure for asset management lines to suit all Shelloperating companies. However, fig. 2 shows the overridingexpectation of any structure applied (Shell InternationalMiri Conference, 1998).

Guideline Model for Asset Management Deployment

Since Shell Expro led Shell Group, its model was generallyaccepted. All Shell operating companies recognized that anasset/process model is the way forward.

The Shell model establishes asset management implemen-tation by concentrating on getting the right balance between(i) attitude, skills and behavior with the goal of creating aculture that will promote asset management principles; (ii)structure and roles to deploy the people and establishreporting relationships; and (iii) processes and systems toensure that technical integrity and proper management sys-tems are in place to manage the companys businesses.

Asset Management Benefits to Shell

The following main benefits were quoted from asset teamsin Shell operating companies (Miri Asset ManagementConference, 1998).

Single-point accountability at a lower level in theorganization;

Cost transparency; Growth and value creation through life cycle view of

the asset;


Drilling

Production

Fig. 1. Typical functional-based structure.

Asset ManagementModel

DecisionSupport

Common InterestNetwork

Life CyclePlanning

Volumes forValue Personal Skills

DevelopmentResponsiveness

Bottom LineFocus

EnhanceCommunications

ImproveTeamwork

Asset Focus

Quality WorkMajor Project

Realization

Fig. 2. Guideline model for asset management deployment.

Asset optimization by scenario planning; Cross-discipline understanding and ownership of the

asset; Common key performance indicator (KPI) between

assets; Healthy competition between asset teams; Identification of technology and resources needs for

the asset; and Lateral learning between assets and operating companies.There can be little doubt that since the adoption of

the asset management principles in Shell Gabon therehas been a notable improvement in cost transparencyand awareness, a greater focus and wider involvementin optimizing the use of assets and a sharpened sense ofaccountability. Functional silos are becoming a featureof the past said P. Rowlands, managing director ofShell Gabon, 1998.

The asset management process enables one to maximizethe value of an asset by making use of resources, i.e. staff,money and technology, over the life cycle of the asset. Itwill certainly enhance efficiency, integrity, productivity,reserves replenishment and ultimate recovery (growth) of acompany and therefore profit. said H. Hombroek, manag-ing director of Shell Brunei, 1998.

ASSET MANAGEMENT IMPLEMENTATIONMONITORING

To ensure a common understanding of asset managementand to allow cross-fertilization among Shell operating com-panies, periodic asset management conferences are held toevaluate the progress of the implementation process. Thefirst conference was held in 1997 in Oman with the objec-tive of having a common understanding of the keyprinciples of asset management, implementation tools andthe best knowledge sharing practices.

A second conference was held in November 1998 inMiri, Malaysia, with emphasis on asset managementimplementation and maturity. Issues discussed includedasset management, ARP, service agreements, asset management tools, skills management and performancemeasurement.

The results of this conference proved very valuable to Shellto ensure that all companies are on the right track towardbeing fully integrated into the asset management style.

Asset Management Organizational Structure

Shell Expros management system provides the overallframework, structure and guidelines to manage its assets,people and processes as shown in fig. 3 below CorporateManagement Manual, 0100-001, 1997.

Management System Framework

Shell Expro classifies an asset as anything that has potentialvalue for the company, from the natural fields and reser-voirs and functional offshore installations, onshore plants,pipelines, wells and equipment to skilled people, cash andinformation to reputation.

SHELL EXPRO ASSET/PROCESS STRUCTURE

Roles and Responsibilities

Every job has associated with it one or more of the follow-ing roles, each of which has a corresponding set ofresponsibilities. Fig. 3 indicates the Shell Expro interactionprocess between different owners (Corporate ManagementManual, 0100-001), 1997.


Corporate DirectionWhy we are in businessand the core values and

controls that give directionto our actions.

AssetsThe management of

our assets and theopportunities forgenerating wealthfor the company.

OrganizationHow we deploy

and work with ourstaff to achieveour objectives.

ProcessesThe way in

which our workis carried out.

Fig. 3. Management system framework

CorporateProcessOwner


LocalProcessOwner

LocalProcessOwner

LocalProcessOwner

LocalProcessOwner

LocalProcessOwner

LocalProcessOwner

LocalProcessOwner

LocalProcessOwner

LocalProcessOwner

Asset Asset

Manager

Asset

Manager

Asset

Manager

Asset

Manager

Asset

Manager

Manage Assets

Process Owner

ProcessForum


LocalProcessOwner

LocalProcessOwner

LocalProcessOwner

LocalProcessOwner

LocalProcessOwner

Asset

Management

Forum

ExecutionProcessh

Execution

Process

Push

Support /Proce

Support

& ServiceProcess

Push

Support & Service Processes

BBU GSPGSGNBUCBU NBD

Bottom Line Pull (Aspirational Goals)

Fig. 4. Shell Expro asset/process structure

RELATIONSHIP BETWEEN ROLES ANDRESPONSIBIL IT IES

Asset Reference Plan (ARP)

ARP emerged from EP95 - Conceptual Operation ReferencePlan in 1995. It is the principal management tool by whichassets are effectively and efficiently managed throughouttheir life. ARPs reflect the impact on cash flow and prof-itability of the activities, resources, policies, standards,threats and opportunities that can affect the asset during itsoperational life, through quantifying and categorizing thoseactivities with reference to technical integrity, deferment,servicing and support (Corporate Management Manual,0100-00, 1997).

ARP is an integral part of the Shell asset managementmodel. It aims to develop a single information source that:

Defines the management strategy for the asset (pro-duction, operations, well engineering, maintenanceand engineering);

Provides a key events plan, being the base case overthe life of an asset;

Contains a record of the key assumptions and uncer-tainties; and

Provides a detailed analysis of the cost of operations(activity-based cost modeling).

ARP Objectives

According to the asset Reference Plan Guidelines, 1998, thekey objectives of an ARP are to:

Optimize asset planning, sub-surface studies, facilitiesdesign and equipment selection (e.g. better cost visual-ization for planning control and what if scenarios);

Define the boundaries of the asset (asset mandate); Encourage regular review of the health of an asset; Integrate the various process strategies; and Assess decommissioning dates and critical decision

points in the operation of an asset throughout itslife cycle.

Its primary uses are to: Determine predicted cash flow, remaining net present

value (NPV) and end of field life (EOFL) from variousscenarios;

Anticipate future technology developments; Assess future manpower requirements; Manage interfaces and handover throughout the asset

life cycle; Provide the basis for economic modeling; and Provide a baseline for testing the impact of future

opportunities.It is clear that before ARP, everybody had their own

idea of their base case and the impact of their work on


Relationship between Roles and Responsibilities

Asset OwnershipManage Asset

Activity Executor orServices Provider

Manage Activities or Services

Process OwnershipManage Processes

Accountable for all aspects of managementof an asset in line with corporate objectives.They are required to: Ensure asset performance and provide

assurance of asset integrity. Develop and maintain an asset

Reference Plan from which annualcapital and operating costs are derived.

Initiate and plan for the provision ofservices to the asset.

Authorize, release and control thecapital and operating budgets asapproved by management.

Ensure that all activities achieveoptimum performance.

Obtain support and advice from theappropriate technical disciplines on allmatters affecting the safety, designand operational integrity of the asset.

Accountable for the design and improvement ofspecific processes. They are required to: Develop and document their process. Identify critical activities, staff competency

profiles for the operation of the process and risksassociated with their process and ensure thatappropriate controls and standards aredeveloped and communicated to thoseresponsible for operating the process.

Monitor and report business performanceand health of the process against company andprocess objectives.

Establish performance indicators. Monitor, analyze and communicate process

performance. Implement, or recommend implementation

of, the optimum process to line management. Make improvements through elimination of

non value-added activities. Measure and improve the efficiency and

effectiveness of the process. Approve and authorize implementation of

business improvement proposals.

Executes activities within an operationalor service related business process.Generally required to: Acquire the resources necessary to

execute the activity. Execute activity optimally while

managing inherent business risks. Manage expenditures against the

activity's budget. Monitor and analyze activity

performance. Apply continuous improvement to maximise benefit to the customer.

Fig. 5. Relationship between roles and responsibilities

their budget (compartmentalization) and ARP forces peo-ple to smooth activity timing and people on board (POB)requirements and hence reduce costs (integration)(Auk/Fulmar ARP document, 1998).

The asset reference plan provides: Record of the strategic management of an asset over

its life cycle; Record of the key assumptions and uncertainties; Means to influence project planning, facilities design

and equipment selection (i.e. better cost visualizationfor planning/control and optimization opportunities);

Detailed analysis of the cost of operating the assetduring its life cycle;

Accurate assessment of the manpower and resourcerequirements during the operating phase of the asset;

Assessment on abandonment dates; and Critical decision points in the operation of the asset

installation/plant/field ARPs. The above are part of the overall planning cycle and

are updated annually to aggregate into Business Unit Plansthat subsequently form the basis of the Expro BusinessPlan (EBP).

OVERVIEW OF ARP PROCESS

The asset reference planning process is a generic methodol-ogy, using activity-based cost forecasting to determine theimpact on cash flow of all activities planned throughout theasset life cycle. The ARP contains key information on:

Asset strategy;

Base case; EOFL prediction; References supporting information sources (e.g. activity-

based cost model, production forecast); Documents assumptions and uncertainties; and Summarizes the growth and development plans for

an asset.The ARP is reviewed, updated and issued annually

throughout an assets life to take into account changes tothe above listed information. The Expro Business Planmodel below (fig. 6) shows where the ARP Process sitswithin the process (Asset Reference Plan Guidelines, 1998).

EBP/ARP Planning Process

The ARP is a working document that does not include alarge amount of very detailed information. Only key infor-mation is summarized and the relevant information sourcesare referenced. ARP provides only a snapshot of the assetstatus at the time of preparation. Asset Reference PlanGuidelines, 1998, gives a typical information system refer-enced in the AR document.

Typical Information Systems referred to by ARP

The asset life cycle reflects different stages of an assetsdevelopment, from acquisition to decommissioning. TheARP maturity cycle indicates how the ARP develops inline with the asset life cycle (Asset Reference PlanGuidelines, 1998).


BU Strategies

Expro Vision

CommercialAgreements &

Markets

TechnologyPlan

Asset Strategy

Activity Portfolio

Stretch Targets

Business Plan

Interface withEBPProduction &

Sales Forecast

ProcessStrategies

Follow-UpActions

Final ARPDraft ARPAsset BaseCase

ABCM

ActivityPlans

DevelopmentPlan

Kick-Off Meeting ARP Team Workshop(s) Reviews

PreparatoryWork

AP5

ARP PROCESSES

AP4

AP6

AP7

AP8

AP9

AP10

AP11 AP13 AP14

AP12 AP15

AP1

AP2

AP3

Fig. 6. EBP/ARP planning process

ARP MATURITY CYCLE

ARP can be generated from the point of acquisition of alicense block. During the early phases of development, theevolving ARP will reference key development documentscontaining data relating to field development plans (FDP).This approach allows the ARP structure to be establishedfrom the start, while avoiding duplication of data.

Furthermore, ARP forms the basis of business unitplans and may interface directly with the EBP. New devel-opments can either tie in to existing assets or have ARPsin their own right and consequently input directly to thebusiness unit plan.

Effective transfer of experience is considered to be anintegral part of business management and fundamental toachieving quick and risk-minimized improvement. To pro-mote its application, process owners and process forumshave specific responsibilities to ensure that lateral learningis applied consistently across their process and requiredactions are implemented in all local applications of theprocess. Lateral learning must be a standard agenda item atall process forum meetings and given specific attention inthe annual process assessments and reviews.

SUMMARY

Shell Internationals implementation of asset managementhas been based on the three areas of which any organiza-tion structure consists: people, structures and processes.Although Shells main office did not prescribe any organi-

zational structure for its operating companies, it providedthe overriding principles such a structure must deliver. Itleft each operating company to develop its structure tosuit its unique circumstances. Shell companies agreed thatthe single most important tool for implementing assetmanagement is the ARP, and thus ARP is a common toolused by all Shell operating companies. Shell companiesperform periodic implementation health checks to ensurethat all companies are progressing towards a commonunderstanding of asset management principles.

Shell Expros implementation of asset management hasbeen the model for the rest of the Shell operating compa-nies. The concept of asset and process was introduced andfirst piloted by Shell Expro. In its transformation processtoward enhanced Expro culture, Expro set an inspirationalworking culture to strive for. Its Expro model is based onsetting mandates for the process owners, service providersand individuals. Shell Expro did not just participate inShell companies periodic implementation health checks,but primarily relied on its internal monitoring and per-formance control mechanisms to ensure progress towardits aspirations.


AssetReference

Plan

Cost Planning Systems (e.g. Controller,Primavera)

Production Reporting Systems (e.g.EPPROMS)

Hydrocarbon Accounting Systems (e.g.SPOTS)

Economic Tools (e.g. Activity Portfolio,KwikLook, ARP Tool, Screener)

PSV Premises

Cost Planning Systems (e.g. Controller,Primavera)

Production Reporting Systems (e.g.EPPROMS)

Hydrocarbon Accounting Systems (e.g.SPOTS)

Economic Tools (e.g. Activity Portfolio,KwikLook, ARP Tool, Screener)

PSV Premises

General Ledger (e.g. SAP)

Contracts and Agreements

Sales Contracts

Market Trend Analyses

Supply Agreements

Benchmarking Studies (e.g. McKinsey)

General Ledger (e.g. SAP)

Contracts and Agreements

Sales Contracts

Market Trend Analyses

Supply Agreements

Benchmarking Studies (e.g. McKinsey)

POB Records (e.g. MAPS)

Service Level Agreements

Tanker Schedules

Flying Schedules

Shipping Schedules

POB Records (e.g. MAPS)

Service Level Agreements

Tanker Schedules

Flying Schedules

Shipping Schedules

Work Management Systems (e.g. SAP)

Maintenance Management Systems(e.g. SAP)

Availability Modelling Tools (e.g.MAROS)

HSE Documents (e.g. Safety Case,EDOs, ETSAR)

Integrity Monitoring Systems (e.g. SAP)

Work Management Systems (e.g. SAP)

Maintenance Management Systems(e.g. SAP)

Availability Modelling Tools (e.g.MAROS)

HSE Documents (e.g. Safety Case,EDOs, ETSAR)

Integrity Monitoring Systems (e.g. SAP)

Production & Planning Financial & Commercial

Logistics

Operations & Maintenance

Reservoir Modelling Tools (e.g. GFP Tool)

Production Forecast Systems (e.g. IPSE)

Technology Plan

Development Plan (e.g. Convergence Plans)

Drilling Sequence

Reservoir Modelling Tools (e.g. GFP Tool)

Production Forecast Systems (e.g. IPSE)

Technology Plan

Development Plan (e.g. Convergence Plans)

Drilling Sequence

Development & Engineering

Fig. 7. Typical information systems referred to by ARP

DefineIdentify ExecuteExplore Produce Decommission

Development Manager Asset Manager Project ManagerProject Manager

DSNAsset

Strategy

Key EventsPlan

ProcessStrategies

AssetMandate

Decommissioning

EOFLPrediction

GrowthOpportunities

ProductionForecast

SWOT

ABCM

SWOT

ABCM

DevelopmentEconomics

ProjectSpecification

OptionSelection Report

Basis forDesign

OperationsStudies

FieldDevelopment

Plan

ProjectInitiationNote

Fig. 8. ARP maturity cycle

Key words and acronyms

AM = asset managementARP = asset reference planCAPEX = capital expenditureCM = change managementCRINE = cost reduction in the new eraEOFL = end of field lifeFDP = field development plansJIP = joint industry projectLCC = life cycle costingNPV = net present valueOPEX = operating expenditureRBI = risk-based inspectionRBM = risk-based maintenanceRCM = reliability-centered maintenanceWLCC = whole life cycle costing

ACKNOWLEDGMENTS

The authors acknowledge the help and support provided bySteve Spreckley, Shell Expro, Aberdeen, Scotland, the U.K.,in providing information, advice and encouragementthroughout the course of this work. Thanks are alsoextended to Paul Garnham, Andrew Ritchie and MarkEadie for reviewing the paper and granting permission topublish it.

REFERENCES

British Standard. 1996-1997. Guide to Lifecycle Costing, BS 5760: Part 23: 1997, British Standards Institution.Prepared by BS technical committee and identical to: IEC,Dependability Management, Part 3, Application Guide,Section 3, Lifecycle Costing, IEC 300-3-3: 1996,International Electrotechnical Commission (IEC).

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