SHELL GROUPS ASSET MANAGEMENT AND IMPLEMENTATION

ASSEM AL-HAJJ AND KHAMIS AL-SAADI

Al-Hajj is a lecturer with Robert Gordon University, Aberdeen, Scotland, theU.K. He holds a BSc degree in civil engineering from Beirut Arab University in Lebanon, an MSc in construction management from Heriot-Watt University in Edinburgh, Scotland, and a PhD in construction management from the University of Dundee, Scotland. Al-Hajj is a training consultant for project management and economics for Shell SPDC, Nigeria. He has closely worked with the oil and gas industry for seven years. Al-Saadi heads staff development and training for Well Engineering Petroleum Development Oman (PDO) Oil Company. He holds a BSc degree in petroleum engineering from Pennsylvania State University, Harrisburg, Pennsylvania. He obtained his MSc in asset management from Robert Gordon University in Aberdeen, Scotland. During 12 years with PDO, he has worked in well engineering areas, including operations, commercial and human resources in Oman and the U.K. covering onshore 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 management. Different methods to deploy asset management principles have been adopted in the oil and gas industry. However, there is a need for common understanding of the concept and a generic method for implementing asset

32 SAUDI ARAMCO JOURNAL OF TECHNOLOGY SUMMER 2002

management. Successful implementation of any new management principle requires promotion of a supportive change in culture that directs peoples energies to support the change, instead of opposing and rejecting it. Such change requires an organization that has provided the infrastructure for information and knowledge management. A successful asset management-based organization requires a management style that promotes the above and manages by principles of trust, respect and support. Asset management is based on getting the right balance between the main constituents of any organization, its people and their attitude, skills and behaviors: structure, roles, processes and systems. This paper focuses on Shells approach to the implementation of asset management as an example from the oil and gas industry. It gives an overview of the advantages and disadvantages of asset management in a typical oil and gas company. It also highlights the importance of people and knowledge management in the change process to an asset management-based organization.

INTRODUCTION
Managing an asset through single-point accountability was not a common occurrence until recently. For a typical oil and gas industry installation, subsurface assets used to be managed by a subsurface development manager; the surface infrastructure (platform) was managed by a platform manager; and sub-modules within the surface infrastructure (drilling) were managed by a drilling manager. Within these separate disciplines, both capital expenditure (CAPEX) and operating expenditure (OPEX) were managed separately, with the aim of each manager to optimize his own budget without any due considerations toward the total picture. Thus, the need for single-point accountability for an asset became essential in allocating expenditures (CAPEX and/or OPEX) so the value of an asset is maximized over its lifecycle.

the oil industry because it was introduced at a time when oil prices were increasing and operating company profit margins were at their maximum. The possible savings were perceived as small compared to the cost of mindset, organizational and cultural changes required to benefit from such change. Two major events occurred in the late 1980s that changed the way of thinking within the oil industry. The first was the dramatic drop in oil prices to below $10/barrel from $35/barrel during 1986. The second was the 1988 Piper Alpha disaster in the North Sea causing 167 fatalities. These two events led to major improvements in HSE awareness and business management, resulting in tightening up of the HSE regulations and dramatically reduced profit margins. This invited the implementation of techniques to reduce asset life cycle costs such as availability modeling, maintainability modeling, reliability-centered maintenance (RCM), whole life cycle cost (WLCC), risk-based maintenance (RBM) and risk-based inspection (RBI). Other initiatives aiming to standardize procedures within the industry have existed. These include: Cost reduction in the new era (CRINE) to standardize work procedures. Joint industry projects (JIP) to standardize the approach to the implementation and optimization of asset life cycle cost in the oil and gas industry. These techniques and philosophies alone are not enough to make asset performance economical and provide sufficient asset growth. Therefore, there is the need for a management principle that uses these techniques and establishes the best way to optimize asset life cycle to maximize the rate of return. Asset management is the concept perceived to provide the missing link that maximizes the use of these tools.

DEFINITIONS
Terotechnology forms the basis for asset management (AM). It blends philosophies, techniques and methodologies together, contributing to optimum asset life value within an organization by achieving the right balance between risk and cost. Although individual techniques focus on specific aspects of the organization, the combined use of these techniques is the desired overall achievement. The most important requirement for implementing such a combination of techniques is to create an organizational structure that promotes the use of these tools, a working culture to allow lateral learning and cross-fertilization of knowledge and experience sharing, and to establish the right data and knowledge management systems.

BACKGROUND ON ASSET MANAGEMENT

To optimize asset-operating expenditures via an improved feedback loop between maintainers and designers, the U.K. Ministry of Industry initiated terotechnology back in 1968. They concluded that significant savings could be made provided that maintenance activities, experiences and costs were fed back to the designers, leading to the reduction of maintenance costs and increased plant availability. Terotechnology failed to provide industries with clear guidelines of business management and thus made little impact. Terotechnology philosophy did not attract

SAUDI ARAMCO JOURNAL OF TECHNOLOGY SUMMER 2002 33

Optimizing every single process within an asset is not necessarily achieving the overall optimum economical performance. It is the balance of all the processes within an asset that gives optimum performance. Asset management is all about finding this balance to optimize the assets life cycle value. Defining asset management is not an easy task, especially in an extremely demanding and fluctuating business environment, and with challenging health, safety and environmental requirements and regulations. Also, fast developing information management and technologies and operating at the best cost throughout the asset life further complicate the task. British Standards (1997) define life cycle costing (LCC) as the process of economic analysis to assess the total cost of acquisition and ownership of a product. LCC applies managerial, financial, engineering, building and other practices to physical assets in the pursuit of economic life cycle costs. At its most basic, life cycle costing is simply the economic management of physical assets over time. Asset management is the application of engineering and management tools to optimize the entire life cycle value of some form of engineering asset to enable the alignment of engineering decisions with corporate and business objectives (Hodge, 1996). Although the above definitions differ in describing asset management, they have common agreement in realizing that it is the terminology that aims towards achieving optimum overall asset economics, enhanced asset HSE performance and enhanced companies reputation, i.e., maximum value.

designers at early stages of any new project. This is a critical element of design optimization toward minimizing life cycle cost of an asset. Improved control over expenditures through single-point accountability (asset manager). Spending of any sort (CAPEX and/or OPEX) authorized by one person provides a winning edge over the traditional approach of a number of managers optimizing their budgets with little-to-no due care for the other sub-modules. Two main criteria that are more specific to the oil industry are: 1. Cost of production deferment (loss of production at any time) and cost of asset demobilization (abandonment). These two elements must be captured in asset economic models. 2. Huge financial losses can occur through mismanaged health, safety and environment-related issues. The cost of the Piper Alpha incident was not only limited to compensation and clean up costs, but also put Occidental out of business in the North Sea. Brent Spar is an ideal example of how environmental issues can damage a companys reputation and cause it to incur huge financial penalties. Although an asset management approach does not provide the magic of putting up-front costs to these potential disasters, it supports a self-correcting safety, health and environmental management system that minimizes the risk of getting into disastrous circumstances.

I M P L E M E N TAT I O N C O S T A N D D I S A D VA N TA G E S
Implementation of a new business strategy will always be accompanied by reluctance to change and cultural barriers. These two main obstacles take the longest time to dissolve and transformation processes are very slow. It is critical, however, to demonstrate that the benefits of implementing an asset management business approach outweigh all the associated implementation costs and shortcomings that come with it. Otherwise, the process will fall apart and it would not make business sense to go through the change process. In order to achieve adequate implementation of asset management, the basic organizational requirements that should be met are (Guide to Terotechnology, 1992). Up-front determination of production and cost targets, and physical assets required to achieve these targets and planned asset lifetime. Asset performance is specified, maintenance strategies are optimized and performance-monitoring criteria are put in place.

E VA L U AT I O N O F A S S E T M A N A G E M E N T
Advantages

The Guide to Terotechnology (1992) highlighted the following benefits to any organization. Improve management control over the decision-making process. Decisions based on life cycle costing analysis are of more value to management for longterm business competitiveness and survival. Whole life cycle costing analysis is based on obtaining the design that optimizes maintenance strategy to achieving maximum asset availability. As a result, there is an increased profitability through a reduction in total cost of ownership. Enhanced cross-fertilization of good ideas and data sharing improve data flow between designers and maintenance managers. The wealth of experiences and knowledge from maintenance are then fed back to the

34 SAUDI ARAMCO JOURNAL OF TECHNOLOGY SUMMER 2002

 Experiences throughout asset lifetime are captured in a form of feedback loop information system that improves and optimizes total life cycle costs. Time and life expectancy forecasting for an asset, particularly for the oil industry, is extremely difficult due to market demand and oil prices dictating production strategies and investment attractiveness. Nevertheless, the above is essential to obtain benefits from implementing asset management principles and might be why the oil industry was late in adopting it. This change, from minimizing the CAPEX way of thinking of optimizing asset WLCC, requires accurate forecasting and a good understanding of asset finite life expectancy and operations. It is clear that such organizational changes start from top to middle management and finally move to the workforce level. Therefore, senior managements active participation and understanding is vital to promote and reward all activities involving efforts to minimize the cost of ownership and to optimize physical asset value. The costs to achieve such organizational features include training senior management and the workforce, and time and effort in dissolving cultural changes. In addition, there is the cost for setting up appropriate information management systems to collect, store, analyze and feed back data, experiences and knowledge, and enhance and stimulate a lateral learning culture internally and externally. These costs include: Cost of collecting additional data not already collected for management purpose. The cost of making existing data compatible with the need of AM. The cost of any additional analysis. The cost of supplying feedback information or of processing feedback received. The need for data collection and its conversion into useful information on which to base decision-making cannot be over emphasized. Such information includes historical trends on market fluctuation, asset and production performance, HSE performance and other indicators critical for the decision-making processes. Currently, companies use only 7 percent of their data to make decisions with 93 percent of the data going unused (IBM research). The main difficulties/challenges of asset management implementation can be summarized as follows: Overcoming hurdles of getting to an asset management-based structure and dissolving the cultural resistance to change barriers. Changing to new organizational structures does not happen overnight. The organization will struggle through the transformation

process, and the fear of not realizing the benefits may quickly cause dramatic failures. Main principles of the AM approach depend highly on forecasting and accurate knowledge of life expectancy of an asset. This single point forms the biggest challenge for its use and thus weakens its principles for the oil industry. Mind set changes are required to enhance continuous improvement via lateral learning and knowledge sharing principles. In large international companies, in which management turnover is frequent, short-term thinking prevails and thus AM principles are no longer applicable. Organizations need to assess the need for change so that companies do not change for the sake of change. Benefits of the outcome after the change must outweigh the associated difficulties. Otherwise, the change becomes a total failure.

SHELL MODEL FOR ASSET MANAGEMENT

Introduction

Shell reacted faster than other oil companies in implementing worldwide asset management principles. Shell companies in the United States and Europe have pioneered asset management for the entire Shell Group, whereas companies in South America, Asia and Africa are slowly but surely following in these footsteps. Although this causes delays in capturing all the benefits of asset management implementation to Shell, it maximizes the success by applying the learning from previous change processes and thus minimizes the risk of failures. Functional-based organizational structure has long existed in Shell. Indeed, such a structure worked effectively during the exploration phases with smaller team compositions.
A Typical Functional-Based Structure

Companies operating under such a structure do not manage through single-point management. In an oil industry installation, a subsurface development manager manages the subsurface assets; the surface infrastructure (platform) is managed by a platform manager, and sub-modules within the surface infrastructure (drilling) are managed by drilling management. Within these separate sub-assets, both CAPEX and OPEX are managed separately with the aim of each manager to optimize his own budget without any due consideration toward influencing the other part of the total picture.
SAUDI ARAMCO JOURNAL OF TECHNOLOGY SUMMER 2002 35

Production Drilling
Fig. 1. Typical functional-based structure.

Decision Support Improve Teamwork Volumes for Value Major Project Realization

Asset Focus

Enhance Communications
Common Interest Network Life Cycle Planning

Asset Management Model

Responsiveness Quality Work

Personal Skills Development Bottom Line Focus

Fig. 2. Guideline model for asset management deployment.

Shell has expanded throughout the years to the point that the above structure is no longer effective to appropriately manage its business. The main drawbacks in operating under this structure are: This structure creates silos between different departments 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 structure was a natural progression caused by business expansion and the management of mature assets during the later asset life cycles. The concept of asset management within Shell began in 1993, when Shell International Petroleum Maatshappij (SIPM) issued its first guide to operations reference planning as a user training guide, EP93-2015 - Operations Reference Plan for Assets (ORP). Shell Expro led the group in implementing an asset reference plan (ARP) in 1994 in its Brent Field Unit. An internal assessment within Shell Expro, in evaluating how well Expro was performing compared to in 1995/96, led to the development of the asset/process management structure. In 1997, Expro took the opportunity of the Northern Business Unit organizational restructuring to apply the asset/process management structure as a pilot for Expro and Shell companies (Miri Asset Management Conference, 1998). The overriding principles of implementing asset management are the same across the board. The three reasons for Shell to apply as many synergies in asset management principles implementation across all operating companies are: Demonstrable HSE and cost benefits of applying asset management in the U.S. and European Shell operating companies; Competitive market and fluctuating oil prices justify changes in all Shell operating companies in order to survive and stay competitive; Shell staff movement among operating companies bridged the gap between the cultures and maximized lateral cross-fertilization.

Shells main office provided guidelines, but then left individual operating companies to develop the required structure and management system to best realize their aspirations in implementing asset management principles. An overall 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 organizational structure for asset management lines to suit all Shell operating companies. However, fig. 2 shows the overriding expectation of any structure applied (Shell International Miri Conference, 1998).
Guideline Model for Asset Management Deployment

Since Shell Expro led Shell Group, its model was generally accepted. All Shell operating companies recognized that an asset/process model is the way forward. The Shell model establishes asset management implementation by concentrating on getting the right balance between (i) attitude, skills and behavior with the goal of creating a culture that will promote asset management principles; (ii) structure and roles to deploy the people and establish reporting relationships; and (iii) processes and systems to ensure that technical integrity and proper management systems are in place to manage the companys businesses.
Asset Management Benefits to Shell

The following main benefits were quoted from asset teams in Shell operating companies (Miri Asset Management Conference, 1998). Single-point accountability at a lower level in the organization; Cost transparency; Growth and value creation through life cycle view of the asset;

36 SAUDI ARAMCO JOURNAL OF TECHNOLOGY SUMMER 2002

 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 there has been a notable improvement in cost transparency and awareness, a greater focus and wider involvement in optimizing the use of assets and a sharpened sense of accountability. Functional silos are becoming a feature of the past said P. Rowlands, managing director of Shell Gabon, 1998. The asset management process enables one to maximize the value of an asset by making use of resources, i.e. staff, money and technology, over the life cycle of the asset. It will certainly enhance efficiency, integrity, productivity, reserves replenishment and ultimate recovery (growth) of a company and therefore profit. said H. Hombroek, managing director of Shell Brunei, 1998.

Management System Framework

Shell Expro classifies an asset as anything that has potential value for the company, from the natural fields and reservoirs and functional offshore installations, onshore plants, pipelines, wells and equipment to skilled people, cash and information to reputation.

SHELL EXPRO ASSET/PROCESS STRUCTURE

Roles and Responsibilities

Every job has associated with it one or more of the following roles, each of which has a corresponding set of responsibilities. Fig. 3 indicates the Shell Expro interaction process between different owners (Corporate Management Manual, 0100-001), 1997.

Corporate Direction
Why we are in business and the core values and controls that give direction to our actions.

A S S E T M A N A G E M E N T I M P L E M E N TAT I O N MONITORING
To ensure a common understanding of asset management and to allow cross-fertilization among Shell operating companies, periodic asset management conferences are held to evaluate the progress of the implementation process. The first conference was held in 1997 in Oman with the objective of having a common understanding of the key principles of asset management, implementation tools and the best knowledge sharing practices. A second conference was held in November 1998 in Miri, Malaysia, with emphasis on asset management implementation and maturity. Issues discussed included asset management, ARP, service agreements, asset management tools, skills management and performance measurement. The results of this conference proved very valuable to Shell to ensure that all companies are on the right track toward being fully integrated into the asset management style.
Asset Management Organizational Structure
Assets

Organization
How we deploy and work with our staff to achieve our objectives.

Processes
The way in which our work is carried out.

The management of our assets and the opportunities for generating wealth for the company.

Fig. 3. Management system framework

Asset Management Forum

Manage Assets Process Owner Corporate Process Owner Corporate Process Owner

BBU
Asset

CBU
Asset Manager
Local Process Owner Local Process Owner

NBU
Asset Manager
Local Process Owner Local Process Owner

GSG
Asset Manager
Local Process Owner Local Process Owner

GSP
Asset Manager

NBD
Asset Manager
Local Process Owner

Execution

Executi Process on Proce Push ss h

Process Forum
Support & Suppo Service rt / Process

Local Process Owner

Local Process Owner

Corporate Process Owner

Local Process Owner

Local Process Owner

Local Process Owner

Local Process Owner

Local Process Owner

Support & Service Processes

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

Proce Push

Bottom Line Aspirational Pull (Goals)

Fig. 4. Shell Expro asset/process structure

SAUDI ARAMCO JOURNAL OF TECHNOLOGY SUMMER 2002 37

Asset Ownership Manage Asset

Accountable for all aspects of management of 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 annual capital and operating costs are derived. Initiate and plan for the provision of services to the asset. Authorize, release and control the capital and operating budgets as approved by management. Ensure that all activities achieve optimum performance. Obtain support and advice from the appropriate technical disciplines on all matters affecting the safety, design and operational integrity of the asset.

Process Ownership Manage Processes

Activity Executor or Services Provider Manage Activities or Services

Executes activities within an operational or 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.

Relationship between Roles and Responsibilities

Accountable for the design and improvement of specific processes. They are required to: Develop and document their process. Identify critical activities, staff competency profiles for the operation of the process and risks associated with their process and ensure that appropriate controls and standards are developed and communicated to those responsible for operating the process. Monitor and report business performance and health of the process against company and process 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.

Fig. 5. Relationship between roles and responsibilities

R E L AT I O N S H I P B E T W E E N R O L E S A N D RESPONSIBILITIES
Asset Reference Plan (ARP)

ARP Objectives

ARP emerged from EP95 - Conceptual Operation Reference Plan in 1995. It is the principal management tool by which assets are effectively and efficiently managed throughout their life. ARPs reflect the impact on cash flow and profitability of the activities, resources, policies, standards, threats and opportunities that can affect the asset during its operational life, through quantifying and categorizing those activities with reference to technical integrity, deferment, servicing and support (Corporate Management Manual, 0100-00, 1997). ARP is an integral part of the Shell asset management model. It aims to develop a single information source that: Defines the management strategy for the asset (production, operations, well engineering, maintenance and engineering); Provides a key events plan, being the base case over the life of an asset; Contains a record of the key assumptions and uncertainties; and Provides a detailed analysis of the cost of operations (activity-based cost modeling).

According to the asset Reference Plan Guidelines, 1998, the key objectives of an ARP are to: Optimize asset planning, sub-surface studies, facilities design and equipment selection (e.g. better cost visualization 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 its life cycle. Its primary uses are to: Determine predicted cash flow, remaining net present value (NPV) and end of field life (EOFL) from various scenarios; 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

38 SAUDI ARAMCO JOURNAL OF TECHNOLOGY SUMMER 2002

their budget (compartmentalization) and ARP forces people 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 visualization for planning/control and optimization opportunities); Detailed analysis of the cost of operating the asset during its life cycle; Accurate assessment of the manpower and resource requirements 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 Plans that subsequently form the basis of the Expro Business Plan (EBP).

Base case; EOFL prediction; References supporting information sources (e.g. activitybased 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 to the above listed information. The Expro Business Plan model below (fig. 6) shows where the ARP Process sits within the process (Asset Reference Plan Guidelines, 1998).
EBP/ARP Planning Process

The ARP is a working document that does not include a large amount of very detailed information. Only key information is summarized and the relevant information sources are referenced. ARP provides only a snapshot of the asset status at the time of preparation. Asset Reference Plan Guidelines, 1998, gives a typical information system referenced in the AR document.
Typical Information Systems referred to by ARP

O V E RV I E W O F A R P P R O C E S S
The asset reference planning process is a generic methodology, using activity-based cost forecasting to determine the impact on cash flow of all activities planned throughout the asset life cycle. The ARP contains key information on: Asset strategy;

The asset life cycle reflects different stages of an assets development, from acquisition to decommissioning. The ARP maturity cycle indicates how the ARP develops in line with the asset life cycle (Asset Reference Plan Guidelines, 1998).

Expro Vision

Technology Plan

ARP PROCESSES
AP7

Process Strategies BU Strategies

AP1 AP5 AP8

Activity Plans
AP9

AP11

AP13

AP14

Asset Strategy
AP2

Asset Base Case

Draft ARP ABCM

Follow-Up Actions

Final ARP

Stretch Targets

Development Plan
AP4 AP3 AP10

Business Plan Interface with EBP

Commercial Agreements & Markets

Activity Portfolio

Preparatory Work

Production & Sales Forecast

AP6

AP12

AP15

Kick-Off Meeting
Fig. 6. EBP/ARP planning process

ARP Team Workshop(s)

Reviews

SAUDI ARAMCO JOURNAL OF TECHNOLOGY SUMMER 2002 39

A R P M AT U R I T Y C Y C L E
ARP can be generated from the point of acquisition of a license block. During the early phases of development, the evolving ARP will reference key development documents containing data relating to field development plans (FDP). This approach allows the ARP structure to be established from the start, while avoiding duplication of data. Furthermore, ARP forms the basis of business unit plans and may interface directly with the EBP. New developments can either tie in to existing assets or have ARPs in their own right and consequently input directly to the business unit plan. Effective transfer of experience is considered to be an integral part of business management and fundamental to achieving quick and risk-minimized improvement. To promote its application, process owners and process forums have specific responsibilities to ensure that lateral learning is applied consistently across their process and required actions are implemented in all local applications of the process. Lateral learning must be a standard agenda item at all process forum meetings and given specific attention in the annual process assessments and reviews.
Explore

Development Manager

Project Manager

Asset Manager

Project Manager

Identify

Define

Execute

Produce

Decommission

DSN

Project Initiation Note

Option Selection Report Basis for Design

SWOT ABCM

Asset Strategy Key Events Plan

Field Development Plan

Development Economics Project Specification

Process Strategies

Asset Mandate

Operations Studies

SWOT

EOFL Prediction

ABCM Decommissioning

Growth Opportunities

Production Forecast

Fig. 8. ARP maturity cycle

S U M M A RY
Shell Internationals implementation of asset management has been based on the three areas of which any organization structure consists: people, structures and processes. Although Shells main office did not prescribe any organi-

Production & Planning

Financial & Commercial

Cost Planning Systems (e.g. Controller, Cost Planning Systems (e.g. Controller, Primavera) Primavera) Production Reporting Systems (e.g. Production Reporting Systems (e.g. EPPROMS) EPPROMS) Hydrocarbon Accounting Systems (e.g. Hydrocarbon Accounting Systems (e.g. SPOTS) SPOTS) Economic Tools (e.g. Activity Portfolio, Economic Tools (e.g. Activity Portfolio, KwikLook, ARP Tool, Screener) KwikLook, ARP Tool, Screener) PSV Premises PSV Premises

General Ledger (e.g. SAP) General Ledger (e.g. SAP) Contracts and Agreements Contracts and Agreements Sales Contracts Sales Contracts Market Trend Analyses Market Trend Analyses Supply Agreements Supply Agreements Benchmarking Studies (e.g. McKinsey) Benchmarking Studies (e.g. McKinsey)

zational structure for its operating companies, it provided the overriding principles such a structure must deliver. It left each operating company to develop its structure to suit its unique circumstances. Shell companies agreed that the single most important tool for implementing asset management is the ARP, and thus ARP is a common tool used by all Shell operating companies. Shell companies perform periodic implementation health checks to ensure that all companies are progressing towards a common understanding of asset management principles. Shell Expros implementation of asset management has been the model for the rest of the Shell operating companies. The concept of asset and process was introduced and first piloted by Shell Expro. In its transformation process toward enhanced Expro culture, Expro set an inspirational working culture to strive for. Its Expro model is based on setting mandates for the process owners, service providers and individuals. Shell Expro did not just participate in Shell companies periodic implementation health checks, but primarily relied on its internal monitoring and performance control mechanisms to ensure progress toward its aspirations.

Asset Reference Plan

Operations & Maintenance

Logistics

Work Management Systems (e.g. SAP) Work Management Systems (e.g. SAP) Maintenance Management Systems Maintenance Management Systems (e.g. SAP) (e.g. SAP) Availability Modelling Tools (e.g. Availability Modelling Tools (e.g. MAROS) MAROS) HSE Documents (e.g. Safety Case, HSE Documents (e.g. Safety Case, EDOs, ETSAR) EDOs, ETSAR) Integrity Monitoring Systems (e.g. SAP) Integrity Monitoring Systems (e.g. SAP)

POB Records (e.g. MAPS) POB Records (e.g. MAPS) Service Level Agreements Service Level Agreements Tanker Schedules Tanker Schedules Flying Schedules Flying Schedules Shipping Schedules Shipping Schedules

Development & Engineering

Reservoir Modelling Tools (e.g. GFP Tool) Reservoir Modelling Tools (e.g. GFP Tool) Production Forecast Systems (e.g. IPSE) Production Forecast Systems (e.g. IPSE) Technology Plan Technology Plan Development Plan (e.g. Convergence Plans) Development Plan (e.g. Convergence Plans) Drilling Sequence Drilling Sequence

Fig. 7. Typical information systems referred to by ARP

40 SAUDI ARAMCO JOURNAL OF TECHNOLOGY SUMMER 2002

Key words and acronyms

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). British Standard 3843. 1992. Guide to Terotechnology (The Economic Management of Assets, part I). Hodges, N. 1996. The Economic Management of Physical Assets, London, MEP. Shell International. 1998. Asset Management Conference (held in Miri) Presentation Materials. Shell International. 1998. Asset Management an Overview. Shell U.K. 1998. Exploration and Production Auk/Fulmar Asset Reference Plan Document. Shell International. 1997. Asset Management Conference (held in Oman) Presentation Materials. Shell International SIEP 97-5504. 1997. Asset Management the Model Operating Unit. Shell U.K. 1997. Exploration and Production Corporate Management Manual 0100-001. Shell U.K. 1997. Exploration and Production Enhanced Expro Asset Management Guide. Shell U.K. 1996. Exploration and Production Process Owners Guide. Shell International EP95-0600. 1995. Operating Reference Planning Guidelines. Shell International EP93-2015. 1993. Operations Reference Plan for Assets.

AM = asset management ARP = asset reference plan CAPEX = capital expenditure CM = change management CRINE = cost reduction in the new era EOFL = end of field life FDP = field development plans JIP = joint industry project LCC = life cycle costing NPV = net present value OPEX = operating expenditure RBI = risk-based inspection RBM = risk-based maintenance RCM = reliability-centered maintenance WLCC = whole life cycle costing

ACKNOWLEDGMENTS
The authors acknowledge the help and support provided by Steve Spreckley, Shell Expro, Aberdeen, Scotland, the U.K., in providing information, advice and encouragement throughout the course of this work. Thanks are also extended to Paul Garnham, Andrew Ritchie and Mark Eadie for reviewing the paper and granting permission to publish it.

SAUDI ARAMCO JOURNAL OF TECHNOLOGY SUMMER 2002 41