New Processes Needlessly Reduce Recovery from Onshore Gas Fields, Part 2

Oil-and-gas-riskProcess safety management (PSM) represents a series of administrative processes that together have the goal of identifying all potential sources of risk and developing designs and procedures to eliminate or minimize those risks. The PSM administrative processes include things like: (1) management of change (MOC); (2) critical drawing reviews (CDR); and (3) hazardous operations (HazOp) reviews. To facilitate these processes, every wellsite must have both process and instrumentation diagrams (P&ID) and process flow diagrams (PFD).

Twelve years ago I was a "technical authority" for one of the so-called "majors" and had contact with all of its onshore gas operations conducted in the world. Even with that scope of participation, I had not been exposed to any of the PSM concepts listed above. I never even saw a P&ID before 2005. These PSM concepts simply did not exist for onshore wellsites. The process review was appropriate for the low risk-density of an onshore gas wellsite.

In the last few years, I've seen the full PSM principles applied to low-pressure onshore wellsites in the United States, Indonesia, India, Australia, Botswana, Mozambique, Canada, the United Kingdom, and Romania by companies as small as 100 wells limited to a single basin and as large as the integrated majors and second-tier producers. Risk intolerance has become global.

Today's extreme intolerance for risk has driven all of the PSM concepts to wellsites. A facilities engineer recently told me,"We have an ESD [emergency shutdown valve on the casing line so reservoir pressure is irrelevant." He also had a pressure-regulator-style choke on the line to protect the separator by maintaining the separator at a constant pressure. Pressure upstream of the regulator would vary by over 200 psig [1379 kPa during the course of a day.

Other wells in this field have demonstrated that constant flowing bottomhole pressure optimizes reservoir performance and ultimate profitability. That particular fact was totally irrelevant, since he did not feel that he could get higher-strength materials approved through the MOC process for future wells (since profitability is rarely a factor in PSM analysis).

Supply chain management is managing the wrong things in the oil and gas industry. In the 1970s and 1980s, MBA and Ph.D. candidates in business schools spent a lot of effort evaluating successful companies to determine factors for success. The most successful companies in that time period were the Japanese auto makers and nascent U.S. mega-retailers. Both of these groups were embracing the new computing power to work towards "just in time" inventory control.

Honda and Toyota were especially good at it, and several Ph.D. theses developed detailed analyses of these systems. The result was the concept of supply chain management. This term was coined by Keith Oliver from Booz, Allen, Hamilton management consultants in 1982 in an interview in the Financial Times.

At its root, supply chain management is the process of ensuring that all of the units of production are available when and where needed with a minimum of warehousing required.

There is so much more to this concept than simply taking headlights or dash assemblies off a train car and carrying them directly to the assembly line. The process must anticipate inevitable transportation delays, maintenance activities (both at the assembly plant and at the component fabrication plants), fluctuations in sales volume, to name but a few of the considerations. When the auto manufacturers get it right (which is quite often), it is a thing of beauty.

Oil and gas embraced this idea with vigor after 1995, completely disregarding the key concept. Supply chain management is designed to limit inventories of the units of production and not the tools of production. Tools of production are the things that are still in the plant when the finished product goes out the door. Things like the assembly line itself, various robots, compressed air systems, and assembly-floor lighting make up the tools of production.

In an auto factory, the maintenance departments are huge - critical equipment and spare parts are stockpiled, maintenance employee training is intense, repair-tool budgets are nearly unlimited. The maintenance/repair process accepts the principle that if a production line is shut down due to a broken hydraulic actuator on a robot, the line isn't making any product and the units of production start backing up within the supply chain - fixing that broken actuator is of critical importance.

A broken tool of production is an occurrence that must be minimized at all costs, so an effective implementation of supply chain management maintains very robust, flexible, and multilayered maintenance/repair strategies. Failure analysis is extensive and immediate, with results that make the tools of production more reliable with every failure.

In oil and gas, our units of production are hydrocarbon molecules, and we can't manage their availability from a computer screen in the head office. Our industry's implementation of supply chain management does not recognize this and tries to manage control valves, pipe, pumps, tanks, transducers, and meters in "just in time" mode.

We have work-order systems that require all work to be scheduled 30, 60, or 90 days in advance to allow level loading of repair crews - often while gas is shut in waiting for the schedule. We have spare-parts rules that require a work order to get a control-valve repair kit. It can take weeks to process the paperwork to replace a damaged diaphragm, a half-hour to affect the repair, and 10 minutes to return a well to production.

We have hard and fast rules against "squirrel stores" (i.e., repair items that are on people's trucks and are not charged to a well). We treat our lease operators as assembly line workers instead of maintenance workers. The original tenets of supply chain management would acknowledge that our field workers, their tools, and repair parts are crucial for facilitating production instead of what our industry has morphed the concept into - a cost that must be managed and ultimately minimized.

READ: New Processes Needlessly Reduce Recovery from Onshore Gas Fields, Part 1

David Simpson, P.E., is the owner and principal engineer at Muleshoe Engineering. David is an MVP in the professional forums at and is a member of the Engineering Writers Guild.

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