Friday Fact – Lean – Crafting excellence in the oil industry

October 4, 2019by Faber Infinite

Did you know, one of the world’s largest oil companies were able to save up to $5 million just by implementing lean principles?

One of the oil companies in California is using and implementing lean principles to improve various key processes, which include drilling new wells and repairing existing wells. Also, the company depends mostly on its enterprise-wide lean effort to help increase the number of crude barrels pumped every day at its extensive Baldridge oil field.

Roughly, the organization pumps around 1,50,000 oil barrels every day. The total revenue of the organization in the year 2011 was more than $5.6 billion. Until 2012, the company managed a 66-square mile oilfield with 300 employees and 2,500 contractor workers on site.

The company implemented lean concepts to improve various processes. The most important process was drilling of new wells and the careful and cautious management of operating wells in order to ensure maximum output and uptime. A specific branch of the organization has 7000 producing wells, with more than 1000 new wells that are being drilled every year and other 1200 wells being retired per year.

The lean implementation for process improvement has proven to be a major reason for an organization’s success. As per the President and CEO of the organization, the employees have learned to map out the steps in a process and improve them regularly. They have developed a culture where people in the organization are committed to continuous improvement and the team is always on the efforts to improve each day.

Although the organization is not into the business of manufacturing, the company has a manufacturing mindset. The employees perform numerous repetitive tasks each day which people from the oil industry believe are nonrepetitive. But the organization has proven otherwise. And the organization is appreciated for implementing lean saying that this is an innovative application of lean in their business.

By implementing Value Stream Mapping, the employees and the contractor both were able to adopt lean methods. For the organization, those things that were easy to translate from the manufacturing sector to their operations were things like single-piece flow, process improvements through continual improvement principles, and eliminating a lot of waste.

For the year 2012, the organization expected to drill around 1200 wells. But this incurred a lot of costs as oil prices increased, inflation also had kept pace. For the organization, it was a challenge to handle all this work and not have it cost three times as much. The organization kept the cost per foot of drilling steadily by $100 for the past decade and this was only accomplished by going from a functional organization to a lean organization.

In the year 2011, the organization was able to incur a total savings of $5 million including $3.7 million from process improvement and $1.1 million in the reuse of materials.

Hence, as you can see, the lean and continuous Improvement principals have been helping organizations apart from manufacturing incur millions of savings. So, have you implemented lean and continuous improvement principles yet?

by Faber Infinite

Faber Infinite is an International Business Management Consulting Organization offering consulting solutions and services for Increase Profitability in Business.

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