Implementing Lean Manufacturing Principles in New Well Construction

Abstract

The Aera Energy LLC (Aera) Development Team has drilled and completed, each year since 2000, about 1,000 oil producers and water/steam injectors, and constructed the associated surface facilities. Such a high activity level, which involves some 800 contractors and hundreds of pieces of mobile oilfield equipment, leads to unsurpassed congestion and logistical complexity, requiring a different approach from traditional planning and execution methodologies. In 2001, Aera turned to the manufacturing industry for ideas. The company realized that drilling and constructing a well is not just a step in delivering a commodity; it is manufacturing a new well. The decision was made to implement Lean principles in the development process. Some of the Lean principles that were adopted were: moving from large batches of wells to near single-piece flow; just-in-time execution of planning and implementation activities; relentless focus on continuous improvement through mapping of work processes and eliminating the identified waste; designing and constructing oilfield equipment that is right-sized for the application needed; and creation of a very transparent system of visual tools that shows the status of key indicators at any point in time. The transition to Lean has paid off. The desired high release rate of wells has been maintained despite significant oil price volatility. The safety performance of the Aera Development Team and its contractors improved continuously and the injury frequency was reduced by a factor of 10. The drilling and completion cost (on a per-foot basis) for the most common well type was held flat in nominal terms between 1997 and 2011, while industry costs more than doubled over the same period. In 2011, Aera was the first oil company to receive the Manufacturing Excellence Award from the Association for Manufacturing Excellence. The award recognizes "demonstrated excellence in their operations" and has a primary focus "to acknowledge continuous improvement, best practices, creativity, and innovation." This paper describes the Lean journey including the culture change that was needed, the obstacles that had to be overcome, examples of Lean implementation (e.g., tools, processes, results), and the critical success factors to successfully implement Lean in new well construction.

Adoption and implementation potential of the lean concept in the petroleum industry: state-of-the-art

“…Ratnayake and Chaudry (2015) used VSM in the valve requisition process, which results in standardization and reduction of documentation. VSM enables the determination of the efficiency and effectiveness of the current process while pinpointing potential process improvements (Popa The utilization of visual systems during the frontend phase of a field development project and a well construction project is reported by Itua and Shamuganathan (2015) and Charles et al (2012), respectively. Itua and Shamuganathan (2015) emphasized the significance of a visual system as a tool to inform the team on the current progress of the project, as well as to impend project milestones.…”

“…Itua and Shamuganathan (2015) emphasized the significance of a visual system as a tool to inform the team on the current progress of the project, as well as to impend project milestones. Charles et al (2012) highlighted the importance of a visual system to create transparency within the project team to enable immediate identification of issues and corresponding mitigations.…”

“…Traditional command and control management is replaced by coherent cross-functional teams with related deliverables, interdependent relationships among team members and participatory management (de Wardt et al, 2000;Fulks and Cook, 2002). Moreover, a "gain sharing agreement" is used to share risk and reward and align the contractors/suppliers with the E&P company's goals, while giving the contractors/suppliers a sense of greater responsibility (Charles et al, 2012;de Wardt, 2004). Charles et al (2012) stated that integrated project organization, early involvement of contractors/suppliers, alignment of objectives, cross-functional teams and sharing of risk and rewards actually embody the elements of an alliance type of relationship.…”

“…Moreover, a "gain sharing agreement" is used to share risk and reward and align the contractors/suppliers with the E&P company's goals, while giving the contractors/suppliers a sense of greater responsibility (Charles et al, 2012;de Wardt, 2004). Charles et al (2012) stated that integrated project organization, early involvement of contractors/suppliers, alignment of objectives, cross-functional teams and sharing of risk and rewards actually embody the elements of an alliance type of relationship. In addition, Allan et al (2013) emphasized the reduction of the number of contractors/ suppliers as part of lean implementation.…”

“…The review of the literature reveals the utilization of the Last Planner ® system (LPS) in an infill development program and a well construction project. Allan et al (2013) and Charles et al (2012) used LPS to switch from large projects consisting of a large number of wells to weekly projects with a smaller number of wells, resulting in a reduction of the project cycle time.…”