Editorial

A new era for unconventional value

Project Production Management could reduce unconventional well cost and cycle time by more than 25%

Although unconventional operations have advanced consistently over the years, it’s time to reevaluate their efficiency. Sustaining the improvements made to multi-stage fracking, pad drilling, and end-to-end supply chain management requires a new methodology for unconventional development: Project Production Management.

Will PPM create value?

Project Production Management (PPM) is an operational science that facilitates continuous improvement throughout the well production system. First utilized in 2000 for onshore operations in Bakersfield, PPM established the system, framework of control and continuous feedback loop needed to ensure well production systems run consistently at maximum efficiency.

Since then, the methodology has been implemented in more than 300 diverse projects, including onshore field development applications, with a proven track record of delivering 20 to over 40%  improvements in time and cost. Unlocking this value for operators and investors should be a top priority as unconventional operations mature.

A singular priority

In fact, implementing a PPM system for the end-to-end well production system itself may be the single most valuable area of focus for unconventionals development. Today’s most prevalent approach still relies on conventional project management despite complex planning and execution challenges. Many of these systems, such as Gantt charts, work-breakdown structures and assumed tradeoffs among cost, time and scope have been in place since the 1950s These systems have created unaddressed technical gaps in unconventional well production processes. Unlike traditional project management, PPM takes into account inventory, work-in-process (WIP), and variability.

First used by Wood Mackenzie’s partner Strategic Project Solutions in 2000 for unconventional field development, it’s easy to see that PPM parameters are not a part of traditional operational process. When applied consistently and scientifically to well production, these continuous improvements begin to unlock seemingly hidden savings in time and cost.

Why inventory, variability and WIP matter

As seen above, the well production system process flow works on a “supply” and “demand” basis. Each operation supplies its output to  fill the demand of the succeeding input. When this dynamic is misaligned, inventory or WIP results in between operations, “waiting” for the next operation to be ready to accept it or for the supply from the prior operation to come in. This constitutes basic operational inefficiency.

PPM systematically addresses these inherent variabilities, optimizing inventory and WIP, which reduces cycle time and costs. Overall, unconventional well production systems inherently have high variability. Attempts to increase throughput by ratcheting up operational utilization or reducing time directly increase that operation’s cycle time. A lower-utilization system that is more uniform overall, even if it results in idle time from individual operations, will ultimately cost less and offer a quicker end-to-end cycle.

It may seem counterintuitive in a sector known for rapid growth, but aiming for 100% utilization will degrade well production system performance over time. A fully integrated PPM system can overcome those barriers, enable new capabilities faster, and promote higher performance.

A new era

Adopting and implementing PPM drives disciplined, controlled and systematically relentless performance improvement, and the time to act is now. A systematic approach approach to unconventional field development is well overdue, and it’s clear that PPM adds significant value to the process.

Wood Mackenzie’s analysis has highlighted the potential for cost reduction and release of cash by optimizing WIP — well before operators begin to tackle the complexities of multiple completion designs and revisions during planning and permitting. As much as 40% in cost reduction and over 30% in time cycle reduction have been calculated from comparative studies of operators in the Bakken.

The material benefits are real, and Wood Mackenzie has not seen a near-term opportunity which can offer this level of performance improvement in the capital efficiency of unconventional field development.

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