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How to be lean by Aker's Matt Corbin

Tuesday, September 6, 2016

The only way companies can survive at low oil prices is to improve productivity. How should they do it? Matt Corbin, managing Director, UK Subsea Business, Aker Solutions shared his thoughts.

'I believe we can have an industry successful at $30 [a barrel oil price], but not at the way we operate today,' he said.

When the industry wants to reduce costs, the first option is generally to reduce manpower. 'It means you do less with less. Let's not fool ourselves this is the answer,' he said. Similarly if we reduce contractor's rates, it doesn't solve the problem.

The only answer is to find ways to do what you currently do at lower cost, or be 'lean'.

He was speaking at the plenary session of Subsea Expo 2016 in Aberdeen on Feb 5, an event organised by UK trade body Subsea UK.

Everybody thinks they run an efficient company, but every time Aker assigns a new team to try to find ways to achieve efficiencies, they manage to find some, he said. 'I urge you to put a new graduate or apprentice on your 'lean' program, they will open your eyes.'

As well as looking at individual processes, you can also look at your entire value stream and work out how to make it more 'lean'.

'How many project managers manage project managers?' he asked. 'It works for individual companies. But as an industry, the opportunity is massive.'

Industry wide ideas on 'lean'

To take an industry wide view, Scottish Enterprise has set up an Energy Jobs Taskforce, with 20 very senior industry leaders from different types of organisations, including supply chain, unions, trade bodies, the Oil and Gas Authority, operators and tier 1 contractors.

The Taskforce had one event, with 88 industry leaders together.

People from different groups were asked what they would like the other groups to do - which turned out to be an easy question to answer. But the groups were also asked to work out what they could do themselves.

The people from Tier 1 contractors at the meeting said that they needed to change the way they recruit staff (including to stop recruiting from each other).

The group also wanted to find ways to overcome what some consider the 'permafrost' below top management, when top management decide to do something, but the senior management layer beneath them don't manage to implement it.

Standardisation and simplification

There is also a 'standardisation and simplification' subgroup, part of Oil and Gas UK's Efficiency Taskforce.

The industry has been talking about standardisation for many years but not making a great deal of progress. Mr Corbin found an acetate presentation on standardisation from pre-PowerPoint days. 'I think we'll have to ban the word at some point,' he said.

Perhaps the word 'simplification' is more useful, and for people to focus on short term quick wins, he said.

The group identified how much the costs of certain items such as valves and fabrication vary, and found that very similar items from different suppliers can cost 70 per cent more.

A great deal of money is spent on documentation, inspections and qualification

A lot of this could be cut for example if the industry all agreed on the same specification for paint, or it avoided the need to trace simple items such as fasteners.

There is too much bespoke engineering in the subsea industry, which is partly as a result of people's 'drive to engineer', he said.

It all leads to much more documentation than is necessary. One item can have a 200 page document, where the first page is a 'certificate of compliance', the other 199 pages are all the details.

Centrica's Matt Nicol also had a view on this, seeing lack of standardisation as one reason for the cost inflation.

'We produce a 4 inch valve today, there are 27 different specifications all with 1mm difference,' Mr Nicol said. '27 companies ask for essentially the same valve.' It is because 'an engineer in a company considered it should be slightly different.'

In the panel session, Gunter Newcombe, head of exploration and production with the Oil and Gas Authority, also expressed a view on this. 'Everybody has their own 'innovation',' he said. 'It's not innovation, its, let's make lots of different widgets.'

Condition monitoring

The industry should also move to better condition monitoring and maintenance regimes to help with asset stewardship.

As an example, consider that a few years ago we took our cars to a garage after a breakdown. Now we are moving more to doing maintenance at regular intervals, or cars which tell us when they need to be taken to the garage. At the same time, the average car mileage has increased from around 100,000 miles to 150,000 miles.

'Why is that beyond us in subsea - why can't we move to a proactive asset management?' Mr Corbin asked.

How to be more collaborative

In the panel Mr Corbin was asked how the industry can be persuaded to be more collaborative, when there is such a competitive culture.

'I think it's a silver bullet if we can find the answer to that question,' he said. 'We have a very commercial industry where everybody is out to win.'

'We're going to have to be willing to give up commercial advantages
I don't think that mindset is there. Are we moving fast enough? Absolutely not. Answers on a postcard.'

Chris Bird, managing director of MOL UK, also on the panel, had a different answer, saying that people just need to try a bit harder and understand what collaboration really means.

'People think it means 'we're going to be friendly,' Mr Bird said.

'But it is about alignment, selecting partners and an exit strategy.

'Some years ago [while at another company] we spent 1.5 days with another operator explaining how collaboration can work. At the end they said, it's too much work.'

Is there a permafrost?

In a discussion session, speakers debated if there really is a 'permafrost', a frozen layer thought to exist within middle and upper management, obstructing the changes senior managers want.

Chris Bird, managing director of MOL UK, said, 'there's no such thing. Senior level leaders want to believe in a permafrost (so they don't look bad).'

OGA's Mr Newcombe said he did believe there could be a 'permafrost'.

'Operators realise strategically they have to change, but when they've been moving in a certain way for many years it's really hard to change their behaviour,' he said.

Invest in young people

Mr Corbin is very keen on investing in young graduates.

'Investing in the next generation is self-funding,' he said. 'The (value) these people bring [is very large] even if just because they are keen and energetic and a low cost base.'

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