Report

Special

Assessing & Managing Risk

Front End Loading provides foundation for smarter project execution

Integrated approach paves the way for business and technical success
Luigi Saputelli, Landmark/Halliburton, Houston Rob Hull, Landmark/Halliburton, Kuala Lumpur, Malaysia Alvaro Alfonzo, Landmark/Halliburton, Villahermosa, Mexico

recent analysis of project management literature generated alarming results; approximately 70% of projects in the last five years were not completed on time or within budget. When placed in the oil and gas industrys current landscape of escalating demand, increasingly complex assets and tightening profit margins, the challenge before todays operators is clear: How can you optimize resources, account for numerous environmental, political and social constraints and still meet a projects technical and business goals? Meeting this challenge requires strategic knowhow from the very beginning of a project. Front End Loading (FEL) is a methodology that takes a deliberate

approach to capital project planning. The FEL methodology is currently being applied by many operators to optimize asset production operations and well construction design and maintenance. Where traditional project plans seek to help an operator reach production targets and budgets, FEL methodology aligns an operators technical and business goals to create a more comprehensive development plan. By integrating professionals from multiple surface and subsurface disciplines and equipping them with the industrys latest technology, the FEL approach increases project definition and lowers risk to positively impact total investment costs and return on investment. While the FEL approach is an established project

Reprinted from the July 2008 edition of OIL & GAS FINANCIAL JOURNAL Copyright 2008 by PennWell Corporation

planning method in many industries, it is widely underutilized by upstream oil and gas operators. Organizations like Halliburtons Landmark Consulting and Services group are now pairing the methodology with established implementation processes to create field development plans that serve as springboards to smarter project execution, less nonproductive time, and greater return on capital. At the heart of Landmarks FEL approach are three critical elements: a well-defined uncertainty and optimization framework, the industrys best technologies for integrated asset modeling, and the creation of multidisciplinary teams that generate unique project insights.

assets are tied to numerous uncertainties about reservoir characteristics, well performance, and equipment failure rates. At the same time, market volatility has contributed to reduced confidence in profit margins and increased the cost of moving equipment and employees to the jobsite. Add to this social, environmental, and political questions, and the oil field may have never seemed so vague. Conventional project planning methods account for some uncertainties but tend to ignore those that dont fit into existing models or those that pose untraditional challenges. Traditional approaches also direct professionals to work only within their discipline, so uncertainties that are accounted for in subsurface operations are often Increased project definition not projected to corresponding surface operations. A FEL project plan is created in three distinct phases to The result is an inaccurate, unreliable field develensure an exhaustive alternative capital analysis. During opment plan. The FEL methodology overcomes the faults of conventional project planning by leveraging the first two phases visualization and conception all the industrys latest visualization and analysis technolpossible business opportunities are examined. As the ogy and a multidisciplinary project team to examine all benefits and risks of each opportunity are explored, the scope of the project at hand is refined and the number of uncertainties from a whole-asset perspective. Technology is possible scenarios a critical comis decreased. ponent of a FEL During definiFigure 1: FEL methodology development tion, the third FEL phases plan. Software FEL phase, basic Operation Conceptualofferings like engineering is Pre-FEL Visualization Denition Execution and ization numerical and completed for feedback stochastic simulathe best field Basic Detailed design Track plan Plan for Identify Quantify development tors and risk resources opportunities economics engineering vs. real Plan and logistics and scenarios scenario. analysis software Dene roles Dene options Operations plan Measurement Risk management Classify risks and portfolio Between each allow Landmark Dene success Risk plan KPI monitoring FEL phase, consultants to Execution criteria Align objectives Rank by value, risk, and effort Contracting Plan correction Landmark conevaluate hunrequired Supervision Dene models Identify quick and scope wins Sanctioning sultants impledreds of developMeasurement ment several key ment scenarios peer reviews. and account for Identify and evaluate options Design and materialize options Conducted by a complex uncerA FEL project plan is created in three distinct phases to ensure an exhaustive alternative capital analysis. multidisciplinary tainties. In turn, Using FEL methodology, Landmark consultants have helped oil and gas operators integrate business and team, these peer teams working technical goals to lower project costs, improve operational efciencies and maximize protability. reviews provide a under the FEL chance for execuapproach can tives and employees who are not intimately involved gather critical insight into the project and confidently with the project to evaluate the plan as it is created and identify the best development plan for the asset at hand. to offer recommendations. Additionally, peer reviews provide an opportunity Collaborative project planning for the project team to adjust the development plan in Traditionally, project planning is done sequentially. a projects early stages before costly equipment has Reservoir engineers model reservoir response to the botbeen purchased or irreversible execution steps have been tomhole, production engineers model the wellbore to the wellhead, and process engineers model surface facilitaken. Because the FEL approach requires exhaustive ties from the wellhead to the tank. Under this divided identification, screening, and optimization of all posplanning approach, each individual draws conclusions sible development scenarios, it proactively avoids costly about the inputs and outputs of his or her specific secrework at later project stages. tion of the process without regard to holistic project Technology for complex uncertainties optimization. The technical complexities found in todays oil and gas The FEL project planning approach calls for a project

Figure 2: Leveraging Landmarks latest visualization and analysis technology helps identify all possible capital investment scenarios.

the scenario did not provide any alternatives to capital investment or consider the effects of uncertainties. To ensure that the operator could obtain the necessary drilling and environmental permits, the company needed to demonstrate that it had a well-informed plan that worked within the fields constraints. Under a traditional planning process, a small number of realizations are examined to determine the best, worst and most likely development scenarios for the project at hand. Utilizing the FEL approach, the project team was able to visualize more than 100,000 scenarios to confidently choose the best field development plan one that maximized production and profit. Using rapid wellbore planning and a reservoir qualCase study: FEL in rapid field development ity index, more than 200 possible well target locations An operator recently experienced the benefits of the were identified with multiple architectures, completion FEL project planning approach firsthand in the face of zones, and surface locations. When these targets were an urgent deadline. In only two months, the company exhaustively analyzed based on the dynamic response of needed to efficiently and intelligently develop a field the field, including an integrated evaluation of reserdevelopment plan for two offshore gas fields that not voirs, surface facilities, and economics, 16 well locations only met technical goals, but would minimize environwere optimally chosen for the two fields. After just eight mental impact, navigate local social development issues weeks of analysis and evaluation, the FEL approach and, ultimately, accomplish the greater business goals of yielded a fully integrated conceptual development plan the organization. that met all project objectives. Landmark immediately turned to FEL because it As a result of such effort, the project team provided a offered an organized thought process for efficiently plan that could drain the fields reservoirs more effecevaluating many development scenarios. tively with even fewer wells than the base case previThe project team started with a single, most likely, ously thought an insight that saved the operator more base-case scenario from previous field analyses. However, team that integrates professionals from several upstream disciplines. Integrating previously divided field development functions brings new perspectives and levels of experience to project planning discussions and prevents confusion by laying out goals and expectations before a project is underway. The result is a comprehensive plan that accurately accounts for uncertainties through all stages of development to maximize production and returns. The FEL process ensures that key stakeholders have the opportunity to contribute to the plan from insight to project execution.

than $150 million. The plan provided under the FEL methodology also showed that early production could be higher than originally thought production could be increased by 30% for the first five to eight years and water production could be delayed for several years.

Better insight for smarter execution

FEL aligns technical goals and businesses objectives to pave the way for intelligent field development planning. The insight developed by this comprehensive projectplanning process generates confidence that an operators capital resources are being deployed efficiently and effectively. The result is project success in terms that everyone can agree on: lower costs, greater efficiencies, and maximized profitability. OGFJ About the Authors Luigi Saputelli, PhD, has 18 years of experience in the oil industry working with major integrated operators and service companies. He is widely recognized in the industry with regard to reservoir and production applications. He currently serves as Halliburtons Landmark Global Practice Manager for Field Development.

Rob Hull, MBA serves as Landmarks Asia Pacific Practice Manager in Kuala Lumpur, Malaysia. He has 24 years in the industry working directly with various operators, technology providers, and consulting groups. He established a specialty in work process improvement, technology deployment and project management. His background as a geophysicist and reservoir engineer has provided him with a keen understanding of the entire E&P workflow from field development to facilities optimization. He received a bachelors degree and an MBA from Canterbury University in the United Kingdom. Alvaro Alfonzo, PhD serves as Landmarks Mexico Managing Consultant in Villahermosa, Mexico. He has 25 years of experience in the oil and gas business. Dr. Alfonzo has practical experience in Venezuela, Mexico, Algeria, and Trinidad. He obtained a bachelors degree from The University of Tulsa, a masters degree from MIT, and a doctoral degree from URBE University, Zulia Venezuela.