To achieve sustainable cost reductions, industry must break old paradigms, adopt more technology standardization

Downturn has already prompted greater willingness to share among stakeholders, can also bring opportunities to make lasting changes

By Kelli Ainsworth, Editorial Coordinator

Mike Bowie is North America Region Executive-Subsea Systems and Drilling at GE Oil & Gas. Mr Bowie also serves as the IADC Division Vice President of Drilling Services and is a member of the IADC Executive Committee.

What do you consider to be some of the biggest challenges facing the upstream industry at this time? How can we begin to address these challenges?

All companies are challenged with cost reductions due to the market. The real question is how to address fundamental opportunities to improve productivity and efficiency, not just cut costs through the brute force of asking for price discounts. Our industry continues to drive efficiency through the deployment of technology. The more difficult approach is to evaluate our processes across operators, service companies and equipment providers to find ways to become more efficient.

To say it a different way, if we are to progress to a state where we have improved efficiencies and improved productivity, where we have minimized NPT and the costs of development, the biggest opportunities lie in collaboration.

We can’t simply say the market is going to come back, so let’s just get through this and we’ll add people on the upside. That won’t work this time. We can get incremental gains from our own independent methods, but I think only collaboration will deliver sustainable opportunities.

What can the service sector do to help operators to reduce their costs in this low price environment?

The easy answer is to assume more commercial risk on the supply and service sides, which I don’t believe is the best answer. We have to look at touch points and process maps – the interfaces among service companies, equipment suppliers and operators. Where do we share responsibilities? Where can we eliminate duplicate tasks? Where can we make the supply and logistics chain more efficient?

When people really do collaborate across businesses, we have seen outstanding performance. Drilling is a good example. We’ve seen offshore well plans that can be reduced by a significant number of days through dedicated collaboration among the drilling contractor, service companies and equipment suppliers.

One common theme around collaboration is that it needs to begin early. What are the challenges to starting collaboration earlier in the process?

I had the opportunity to sit in on an operator’s strategic review of 2016, which is part of their five-year plan. They recognized that their organizational structure sometimes presented the biggest hurdle to achieving efficiency across their value chain. This operator recognized those barriers and encouraged service companies and equipment manufacturers to push hard to break through.

I can see where every organizational structure by nature creates its own barriers. We really have to work as an industry to reshape how we engage to reach the level of collaboration that’s going to be required to evolve.

Collaboration has been a major focus of GE in recent years. What changes to the industry’s approach to collaboration have you seen as a result of this downturn? Do you believe that longer-term collaborations will continue even when the market improves?

As an industry, we have a tendency to fall into practiced behavior. Considering the speed at which this downturn manifested itself and the responses that I’ve seen across the industry, now is the time to make lasting changes to how we do business.

From GE’s perspective, we have seen a greater willingness to share, from both drilling contractors and operators. We’ve seen more openness to talk about structured products, standard solutions and the sharing of care, custody and control of equipment that’s in service. These are all great discussions focused on desired operational outcomes that we can bring to life through technology deployment and new commercial models that include risk and reward. We are leveraging learnings from other GE businesses, such as aviation and power & water, to reduce operational costs and minimize unplanned downtime. Once our customers feel the impacts, I think the changes have a chance to stick.

What are some examples of changes to commercial models that are in the works or that have been made?

Specific to drilling contractors, we’ve seen engagement on several fronts to look at alternate, non-transactional service models. We see willingness from some drilling contractors to engage in contract-specific discussions about targeted performance, with risk assumption on the part of the service provider.

If you look at their openness and willingness to share, as well as GE’s willingness to assume performance responsibility, I see a real readiness to change the model.

If we can break through the paradigms in terms of “who does what” in each of our companies, then we can deploy available technologies and structure the commercial models and relationships to jointly benefit our businesses.

What opportunities do you see for the industry to collaborate on technical innovation, and what is required to normalize that sort of collaboration?

Where I see the most immediate opportunity will be product structuring and standardization. For any particular field development, we often see operators requesting bespoke solutions. They have unique specifications for a particular field, but it could actually be more cost effective if we look at a standard solution that has been proven in other developments. These standard solutions are a norm in other safety-critical industries such as the aviation and power industries.

From what I’ve seen in GE’s work in those sectors, I think moving as an industry with structured products will drive action toward critical schedule, safety and cost improvements.

Where do the opportunities lie for changes to efficiency and processes that could enable cost reduction without further pressuring service providers to lower prices?

Drilling pressure control equipment is a great example. If you look at the care, custody and control of blowout prevention equipment that’s delivered and then the operational maintenance that is assumed by the drilling contractor, it’s quite possible that equipment providers and service companies could perform those activities more efficiently. If we do that, at the end of the day, the drilling contractor, as a service company, could become more efficient, enjoy higher reliability and uptime. That logic could potentially extend to other parts of the industry.

Earlier you mentioned the need to better manage the data that is collected at the wellsite. What do you see as the challenges to better data management and use?

We can quickly overwhelm ourselves with data. Having data is one thing. What you do with it is what really matters.

Once you are armed with the data underlying the health of your equipment, you are then able to base business decisions on predictive analytics. For example, use of condition-based maintenance (CBM) solutions can optimize the scheduling and required maintenance for BOPs over time, reducing unplanned downtime.

How can the critical data needs be identified?

Every part of the business is different, but this gets back to collaboration. If we all agree on what the KPIs or critical-to-quality (CTQs) are for a particular operation, then the data that supports those KPIs and CTQs can be collected. Then, we can begin to focus on which data streams are more relevant than others.

What types of R&D projects do you see continuing or even thriving in this environment, and are there certain types of projects that are being delayed or canceled?

It all balances on market acceptance. I see traction on big data, where there is more opportunity for operators and service companies to use data to more efficiently manage their operations and gain productivity.

The more we can reduce what I characterize as wrench turning and manual intervention, and the more that we can begin to deploy CBM technology that will allow us to perform maintenance on a needed basis rather than on a scheduled basis, the better our impact will be on the industry.

As far as new technology overall, the focus areas will be where we can see an immediate need, where we can get the biggest bang for the buck, and where there’s a willingness of the operators and service companies to deploy technology. That’s where we see the biggest impact.

What innovations might help offshore operators reduce their costs?

I think the clever use, minimization and standardization of the materials and labor to create hardware for subsea architecture presents a big opportunity.

From the drilling and cost basis, I see the opportunity to minimize nonproductive time as low-hanging fruit.

I think there are significant gains to be made in how we structure processes. I’ll use the example of pilots – the captain and the first officer. They still use checklists to prepare for departure. I am confident that those two individuals could do without the checklist, but they don’t. As a passenger, I’m happy about that. Their maintenance crews do the same thing. These are some practices that our industry could continue to learn from.

What can GE and other service providers do to help offshore operators shorten their cycle times?

The more we avoid bespoke engineering for an individual project and the more we can leverage standard solutions across a wider range of field developments, the better off the industry is going to be.

How far away from being standard are we? Is this standardization operator to operator, or even service company to service company?

I think it’s across the board. Different fields, water depths and types of production require different solutions. However, at the end of the day, if operators can agree that a specific set of quality standards, materials, type of oversight and equipment architecture are suitable, then the cost and schedule savings could be material.

Are you seeing hesitation from operators to adopt standardized solutions?

Every organization has its own difficulties in communicating and driving behavioral change. The larger the organization, the more difficult it becomes to change paradigms. If we work together to set the requirements, I think we will see buy-in, over time, across the industry.

There’s been a lot of discussion in recent years about how the industry can attract new graduates and young professionals. What do you feel the industry can and should do to recruit new talent, and what are the added challenges to doing that in an environment like this?

Talent attraction and retention is about more than just compensation. People like working in places where they feel they are learning, where they believe they receive as much as they give – above and beyond compensation – and where they can make a difference on things that really matter to the industry. I started with Cameron Iron Works back in 1976. They immersed me in a training program that lasted three months. I worked in service, I worked in the manufacturing shops, and I worked in engineering. That created a sense of worth that made a big difference for me. Today we tend to have higher expectations, moving people quickly into roles before they’re totally prepared.

For the people that we want to grow in our industry who will continue to add value, we could invest in more training that would support retention. Some nonmonetary investments, such as work/time structure, can be just as attractive to new talent.

Is it challenging investing in training for new recruits in this market?

Think of it this way: If we choose not to invest in training or if we choose not to invest in skills development, we can’t expect different results operationally. We must invest in our future if we are going to drive change in the industry. Fortunately, at GE, we believe that fueling the future also means fueling our people’s futures.

Are you concerned that people are going to cut corners on safety and equipment?

From my perspective, I have not seen a reduction in the focus on safety and overall compliance. Fundamentally, we have driven the safety culture so deep in our companies now that I don’t believe that the workforce would allow cutting corners to happen. I see a cultural change over the past five to 10 years. The health and safety of our employees is vital to all that we do. Our focus on safety directly impacts our local communities and the environment. And I think that focus will continue.

Looking at the young man from Cactus Drilling who was given an award at the IADC Annual General Meeting in November 2015 for his focus on safety gives me the confidence that this type of behavior is ingrained across the industry. DC

Click here to watch a video with Kenny Baker of Cactus Drilling,  who received the inaugural IADC Chairman’s Anniversary Award at the 2015 IADC Annual General Meeting in San Antonio, Texas.