Ewers and Bernardini ... implementing lean operating models

For NOCs, an integrated transition approach should focus on including activities and processes, new ways of working, digital and technology, and decarbonisation

National oil companies (NOCs) need to rethink their operating model and clearly link it with their strategic objectives to deliver the expected future production, cost, and greenhouse gas reduction impacts.

The new BCG report entitled ‘The Future Operating Model for National Oil Companies’, observed a clear value of implementing lean operating models, as they can deliver 30-40 per cent efficiency gains across the whole O&G upstream value chain.

This includes levers such as applying deeper resolution reservoir models and linking them with production optimisation that can result in a 4-6 per cent increase in well production and 80 per cent shorter cycle time in early design and evaluation.

'Like any transformation effort, implementing a new operating model requires a detailed roadmap, a defined team with clear accountabilities, active change management, risk assessments, and supporting IT systems,' says Bjorn Ewers, Managing Director and Senior Partner, BCG.

Additional levers include applying Artificial Intelligence (AI)/Machine Learning (ML) models and digital twins to predict non-productive-time events and optimise oil recovery can result in a 2-6 per cent production increase and 25 per cent reduction in drilling and completions Capex.

Utilising predictive maintenance and management by exception to increase uptime can lower maintenance expenses by 15-25 per cent.

International oil companies (IOCs) have already started to transform their operations. They have realised that current upstream operating models are not sustainable; oil price volatility, oversupply, and energy transition are forcing them to evolve.

Individual portfolio strategies may differ, but it has become clear that success in any future model requires radically new ways of working. To a similar extent, NOCs are also in the same position as IOCs, and a transformational change is a requirement.

Transforming an oil and gas company’s operating model is a 3-step journey:

• Transform the way to operate: NOCs will need to build cost and carbon considerations into all aspects of their operating philosophies. This may include embracing the lean approach to continuous improvement – optimising operations, eliminating waste, and increasing customer value. It may be anchored around key operational shifts, like commitment to unmanned operations.

• Streamline core processes and rationalise activities: This begins with simplifying core production, maintenance, and safety processes. This is also the time to revisit and rationalise the integrated operational planning process, correcting gaps and cutting non-value-added work.

• Develop a digitally enabled holistic operating model for the future: This step involves developing a digitally enabled and holistic operating model for the future. This means building advanced capabilities and fully leveraging the range of digital tools. Companies must be able to move at pace from localised pilots to integrated large-scale implementation delivering maximum impact.

'Innovative ventures are rapidly unfolding in the sector, equipping NOCs—along with the countries that depend on their revenues—with long-term capabilities to facilitate green solutions,' says Jean-Christophe Bernardini, Partner & Associate Director, BCG.

'NOCs are thus providing important elements of stability for economies during this process, especially if streamlining innovative processes within their future operations.'