Integrated planning: The key to

upstream operational excellence

Oil and gas operators often struggle to implement better

activity planning, but it’s essential to ensure safe, reliable
and cost-effective operations.

By John McCreery and Ethan Phillips

John McCreery is a partner in Bain & Company’s Singapore office and leads
Bain’s Oil & Gas practice in Asia-Pacific. Ethan Phillips is a partner in Bain’s
Houston office.

The authors would like to acknowledge the contribution of Keith Perrin, an

adviser with Bain & Company, based in Manila, Philippines.

Copyright © 2013 Bain & Company, Inc. All rights reserved.

 Integrated planning: The key to upstream operational excellence

Picture a Friday night after work in any oil town, from Why integrated planning matters
Aberdeen to Calgary or Perth. Drillers and maintenance
engineers recount the week’s small victories—not a few Planned work is safer, more cost-effective and more
of which include boasts of heroic efforts requiring long efficient than unplanned work. Poor planning is expen-
hours of overtime to fix unexpected problems, or pre- sive since it leads to labor overruns, overtime, missed
mium prices paid to rush parts and people to where they deadlines and expensive rush orders (see Figure 1).
were urgently needed—all part of the “can do” spirit for More significant, rushed operations and activities can
which the oil and gas industry is famous. create unsafe situations. Removing the inefficiencies
and nonproductive time from operations contributes to
While these make for good stories, this is no way to run a safe, reliable and cost-effective operations.
business. More than ever, oil and gas companies are under
tremendous pressure to improve performance and reduce Bain’s work with oil and gas companies improving their
labor overruns due to rising production costs, maturing integrated planning skills shows that quality planning
assets and a talent shortage. Integrated planning—which improves operational efficiency in significant ways.
aims to avoid the urgent jobs that make for great stories—
is key to achieving operational excellence. It can improve • Safer. Integrated planning ensures that adequate
safety, prevent accidents and work stoppages, and boost focus and resources are allocated to health, safety
the efficiency of operations and resources. and environmental (HSE) activities. It reduces the
number of rushed tasks that create safety risks.
Industry outsiders might be surprised by how often ex-
ploration and production (E&P) operators overlook or • Optimized use of resources, including labor, mate-
ignore detailed activity planning, either because more rials and equipment. Rising costs for exploration,
pressing break-fix problems take precedence or because development and production of hydrocarbons in
it just seems less interesting in an industry focused on more remote regions and in complex geologies
exciting discoveries and new production. Sometimes make it essential to optimize the use of resources.
plans are made but not implemented because they don’t Also, rising inflationary pressures and a shortage
align with the company’s centrally planned strategic and of technical talent make it more important than
financial priorities. Activity planning often gets dele- ever to remove inefficiencies and nonproductive
gated to inexperienced junior staffers, who may have time from the system, resulting in more uptime,
wildly optimistic assumptions about timing, costs and availability and reliability.
resource requirements.
• A stable plan is critical to successful performance
Leading companies take a more disciplined approach, management. It is difficult to hold people account-
recognizing that improving operational and mainte- able for delivering on their commitments with-
nance planning is a critical step toward operational out a stable, pressure-tested plan underpinning
excellence. It is difficult work, given the many interde- those commitments.
pendencies to coordinate, but it is essential to ensure
safe, reliable, sustainable and cost-effective operations. In North America, the rise of unconventional shale plays
Inflationary pressures and talent shortages raise the puts new emphasis on integrated planning as low gas
stakes further, making it even more important to prop- prices have increased the premium on operating and
erly allocate people, materials and equipment. capital efficiency. Many operators are retooling their
existing planning processes to adapt to the rapid cycle
This brief, one in a series on operational excellence for times and cross-functional decision making that uncon-
oil and gas operations, describes key aspects of inte- ventional plays require—and to avoid unproductive
grated planning, including aligning site goals with the idle time (see Figure 2).
larger organization’s business priorities.

1
Integrated planning: The key to upstream operational excellence

Figure 1: Actual operations and maintenance hours were triple their earlier estimates at one
energy company

Work hours

$7.2M
Operations
Plant change
Preventative

Repair

+ 233%
Corrective

$2.2M Uncategorized/other

2011 planned hours 2011 actual hours

Source: Bain & Company

Figure 2: Poor planning left an unconventional drilling site idle for nearly two-thirds of the
development time

Total dollars spent to develop well

$XM
Hookup

Fracking
and well
completions

Drilling

Land and Pad work

legal
Site vacant Site vacant Site vacant
0
0 50 100 150 200 250 300
Average duration (days)

Activity steps Idle time between steps

Source: Bain & Company

2
 Integrated planning: The key to upstream operational excellence

Why is integrated planning difficult? where even well-planned work is constantly delayed,
creating a seemingly endless backlog of necessary but
Integrated planning requires coordination across teams not urgent work. Investing extra resources to clear such
and functions, and an extremely disciplined management a backlog is a critical step toward a more stable planning
of change. The trend to functionalize E&P organizations— process. Good planning and maintenance can reduce
that is, to manage them from a central function rather those surprises, but never eliminate them entirely. The
than by region—yields many benefits, but it also makes best organizations plan for the unexpected, keeping
integrated planning all the more vital. A change initiated some time and resources in reserve.
for good reason in one part of the organization can have
unintended consequences in another. For example, at Although this type of diligence may sound simple, the
one shale operation, the subsurface contractor wanted well-intentioned “can do” culture of the industry can
to change the drilling program, so it could study the work against it, leading some operators to forego dis-
results found in a recently drilled well and then optimize ciplined planning. The best E&P operators freeze their
the remaining wells on a pad. But the cost of changing plans at least 30 days before execution starts, and mak-
the rig schedule would have been greater than any incre- ing changes in this window of time requires approval
mental value they would have been able to generate. from senior management.
Wherever integrated planning sits within the organiza-
tional structure, it must work across functions in order The rewards of better planning
to plan effectively.
Leading organizations keep their business priorities in
The industry also suffers from a shortage of good plan- mind as they plan, making sure their investments in
ners, those with many years of experience in planning people, processes and equipment support larger goals.
processes, estimating costs and schedules. This is de- That means integrating the business planning done at
tailed, repetitive and relentless work, but it ensures that the center with the activity planning that happens at the
plans are ready to implement before resources are allo- business unit level and the scheduling that happens
cated. Veteran planners know the norms for their basin on site. That can be a long distance to bridge in some
or operating environment. Under their guidance, the or- organizations, but the effort pays off.
ganization becomes highly disciplined about not allow-
ing work to proceed without a high-quality plan in place. Sometimes a little experimentation is necessary to strike
Strict criteria ensure that any scheduled work is thor- the right balance. In the upstream units of one large
oughly vetted before entering the plan, which allows integrated company, each regional unit had historically
planners to avoid surprises and spot potential problems operated independently, deciding on its own which activ-
early. E&P organizations sometimes complain that activ- ities to execute, and when and how to do them. When the
ities veer off track almost overnight, but our experience company reorganized along functional lines, it developed
suggests that is seldom the case. Usually, the warning new centralized models but struggled to find a balance
signs are apparent well in advance, but poor planning between regional autonomy and central standardization.
leaves them overlooked. Eventually, executives established a process that empow-
ered the functions to set global priorities while still allow-
Another obstacle to integrated planning is having a ing the regions to decide how to integrate them into
range of different, unlinked planning systems across their activity plans. The plan aligned those priorities,
the enterprise. One group may depend on planning from business planning through activity planning and
software from one vendor, another may employ a differ- activity scheduling. The process even budgeted time
ent package, while a third group makes do with spread- and resources for inevitable emergent work to proceed
sheets. Management might tolerate this diversity as a without a central review and approval process.
nod to autonomy, but it can make integrated planning
a piecemeal process. Bringing everyone onto a common planning system is
another important step in promoting integrated plan-
Finally, planned activities often take a back burner to ning, especially when the system links next-day plans
more urgent corrective and breakdown work, delaying with longer-term planning. When a major integrated
scheduled work indefinitely. This can create a vicious cycle oil company standardized with one comprehensive

3
Integrated planning: The key to upstream operational excellence

Figure 3: At one upstream unit, better planning and greater accountability increased the percentage
of planned work that was accomplished each week

Planned work actually accomplished

100%
Q1 Q2 Q3 Q4 Q1 Q2
Year 1 Year 1 Year 1 Year 1 Year 2 Year 2

80

60
Project
implementation

40

20

Weeks since process was introduced

Source: Bain & Company

system worldwide, it faced resistance from units that At the site level, the impact of better planning can be
had depended on other systems for years. But manage- almost immediate, with ongoing, sustainable improve-
ment sent a strong signal that it would no longer tolerate ment. Examples of improvements that contribute to plan-
the confusion of multiple systems. The unification has ning at this level include transparent statistics (including
delivered benefits, such as tighter coordination and the staff on site or the use of boats and helicopters), better
improved productivity. understanding of lead times, linking planning to its effect
on oil or gas production and using key performance in-
Good integrated planning also builds in allowances for dicators to assess improvement. At one E&P production
external contingencies. Bain worked with one North facility, improved planning and greater accountability
American shale gas operator to redesign its field devel- boosted the group’s weekly plan attainment levels dra-
opment processes and optimize the value of its shale matically over five quarters, leading to significant im-
assets. A new integrated planning process helps the oper- provements in the predictability and efficiency of work
ator develop stable, economically viable annual activity (see Figure 3).
plans based on the current pricing environment for gas
and liquids. Tight feedback loops and contingency plans Integrated planning creates more efficient and effective
build in enough flexibility to allow the operator to rapidly operations while reducing safety risks, maximizing up-
react to new information—for example, the price of gas— time and making the best use of resources. It is a key
and adjust drilling schedules accordingly, without caus- component of Bain’s operational excellence tool kit,
ing significant disruption to its field operations. Similarly, which has helped many oil and gas companies plan
Bain’s work with an onshore gas producer in Southeast their path to excellence. For more on our perspective,
Asia streamlined its planning processes for acquiring land read the Bain Brief “Operational excellence: The imper-
and improving its relationships with local communities ative for oil and gas companies.”
for smoother access to and preparation of drilling sites.

4
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 Key contacts in Bain’s Global Oil & Gas practice:

EMEA: Luca Caruso in Moscow ([email protected])

Juan Carlos Gay in London ([email protected])
Christophe de Mahieu in Dubai ([email protected])
Roberto Nava in Milan ([email protected])
Peter Parry in London ([email protected])
Luis Uriza in London ([email protected])

Americas: Riccardo Bertocco in Dallas ([email protected])

Pedro Caruso in Houston ([email protected])
Jorge Leis in Houston ([email protected])
Rodrigo Mas in São Paulo ([email protected])
Ethan Phillips in Houston ([email protected])
José de Sá in São Paulo ([email protected])

Asia-Pacific: Sharad Apte in Bangkok ([email protected])

Francesco Cigala in Kuala Lumpur ([email protected])
John McCreery in Singapore ([email protected])
Brian Murphy in Perth ([email protected])

For more information, visit www.bain.com