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What can we learn from CRINE?

Thursday, August 20, 2015

The 'CRINE' initiative of the early 1990s to reduce costs of North Sea operations, led to a reduction in new project costs of 30 per cent, according to Wood Mackenzie, but the benefits did not last forever. Is this something we can learn from now?

The CRINE 'Cost Reduction in the New Era' initiative of the early 1990s led to a reduction in costs of new projects of 30 per cent, according to Wood Mackenzie calculations.

Dr Rex Gaisford, who started and led 'CRINE', said that the benefits probably came as much from a change in attitudes and willingness to standardise, as from anything specific which was done, speaking at the Finding Petroleum forum on June 5 2015, 'Cost Reduction in This Era'.

It is perhaps a natural human inclination to always want to do a task differently rather than the same way that it was done last time, but this inclination can make projects much more expensive, he said. CRINE aimed to discourage this inclination.

The main intention behind CRINE was standardisation, 'which should put quality up because you're not experimenting all the time, you're using tried and tested equipment. [working with] people who've been through the processes before,' he said.

CRINE focussed on mainly project developments and drilling to a lesser extent.

Following his work, Dr Gaisford was awarded a CBE (Commander of the British Empire) in 1995.

Project managers

The inspiration for CRINE came from Dr Gaisford's experiences in the mid-1980s, working in Aberdeen as a project manager for oil company Amerada Hess. 'I was determined I was going to change the way things were done, there was no other way to get costs under control,' he said.

'I completely and utterly failed. The job came out on time and on cost, but it wasn't done in any different way than the way it was done before, by beating people to get things done on time, which is an exhausting process and not a repeatable one.'

'In that process I learned in quite a lot of depth why things in the industry were going wrong.'

'The reason I failed to change the mould was cultural. The oil and gas industry has an amazingly robust culture. I was the project manager, and I couldn't change anything. I couldn't change the way things were being done because 'that's the way it's done, boss.' You can have meetings and argue and insist, then nothing happens.'

'To test this hypothesis, on the next project I took on the entire personal responsibility, for off-shore cranes. Why? Because the simplest system we put on a platform in operational terms are the cranes. They sit there, lift stuff, swivel, drop stuff. It's the same whichever platform you are on. Therefore they should be standard.'

'I bought the cranes on a very clear requirement, but according to the manufacturer's specification.'

'I went through hell with my engineering contractor, my engineering team on the project, the construction people, the operations people, everybody you can think of wanted to change things. I refused to let anybody near it, no-one was allowed to interfere. They all predicted failure, 'it won't work.''

'At the end of the day, those cranes were bought as a manufacturer's standard piece of equipment. They were landed and installed on the platform, operated successfully and as far as I know still going today.'

A luncheon

'When I got to the next project I thought, 'there has to be a better way of achieving this'.'

'I invited all the project managers in the North Sea to a luncheon. Rather than discussing detailed current issues as we often did. I suggested, that we examine the whole N Sea problem and see if there was a way that we, the people supposedly in charge, could fundamentally affect the outcome.''

'I wasn't confident we could, but I thought I'd got the right people together to discuss it.'

'We peeled out of the hotel finally at 8.30 in the evening having been discussing it the entire day.'

'I said, 'if we're going to get this going, this isn't just a business of working out a few new ways of doing things, this is a matter of winning hearts and minds, this is a cultural change.''

'I suggested that to make a step change of this sort, it would have to have a 'name' - people have got to be able to talk about it as being 'something'. I told them that I had decided to call it 'Cost Reduction Initiative in the New Era' CRINE.

'Everyone present thought, it awful. I agreed, but pointed out that it was so awful people would remember it and that as 'we were all project people, we know that if we're going to achieve anything, what we're trying to achieve got to be clearly specified and there's got to be a clear date and a clear deliverable.

'I suggested that the deliverable is a CRINE report with recommendations, and a conference to launch the report in December next year.''

'They all fell about laughing and said, 'there's no way that can be achieved.''

'I said, 'well actually I've booked the Queen Elizabeth II Conference Centre in Parliament Square (London) for December 1993.''

Report

The 'CRINE Report' was published in December 1993, on the day of the London conference.

'The content is, I think, fairly good, all the things suggested in these 50 pages, they all add value,' he said. 'But the fact that the whole industry was involved in their production was the important thing.'

'It didn't stop at just the initial bunch of project managers, but involved all the people that operated, owned and interacted with those and future projects. This included all the non-operating partners of those companies and all the other myriad of companies working in the North Sea including the contractors, service companies, the suppliers, manufacturers, engineering companies.'

'We built a CRINE structure comprising overall co-ordination through a steering group and then individual elements addressing each of the issues we discerned were necessary. They all contained members from each of these segments of the industry.'

Conference

The conference to launch the report 'was almost a religious occasion, we had 1500 people in the hall, they were all CEOs of major oil companies from all over the world, ministers of energy from all over the world. The place was absolutely packed,' he said.

'It was so overbooked that I had to book another conference the week after in Aberdeen for another 1500 people, who all wished they had been able to get a seat on the first one. We'd won the hearts and minds.'

Practise

Putting CRINE into practise was another matter.

Mr Gaisford was reminded of Machiavelli's quote, 'There's nothing more difficult or uncertain in its success than to take the lead in introducing of a new order of things because the innovator has for enemies all those who have done well under the old conditions and lukewarm defenders in those who may do well under the new.'

'We had to defeat the enemies and win over lukewarm,' he said.

12 months after

We were fighting all the time an uphill battle to get the ideas understood and accepted. Every single thing we tried to do was a battle. That is exhausting,' he said.
We were talking to people of repute, people across our industry. A lot of them older than I was in those days. 'I remember one guy, at a conference toward the end of my involvement with CRINE, he said "it's all rubbish, you'll never get it to work because people won't play ball."

'I said, 'you come back in two years and if you've still got that attitude you won't be in our industry any longer, because the world has changed, everyone is onside''.

Dr Gaisford stood down from the Chair of CRINE in 1994 to become an Exec VP Western Hemisphere for his company and spent the next 5 years building business opportunities for his company including a new role in Brazil.

For CRINE, I was right for the next few years but sadly, slowly over time things in the UKCS have reverted to where they were before.

'If the UKCS industry is going to do a similar thing again, I advocate that it follows a similar track to CRINE, but it has to be more careful about guarding the result it achieves. 'The policing of CRINE afterwards, we didn't do well enough.'

There was a successful effort to develop standard construction contracts, but even this has now reverted to old ways with each project/company having its pet 'standard'.

Do it today?

The conditions which led to CRINE were 'exactly the same as we're facing today. Prices were going sky high, organisations were getting fat, and people were doing things in rote fashion because it had always been done that way,' he said.

The industry could get a lot out of repeating this process, but it must 'just be tighter on policing it afterwards,' he said.

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