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Project management in drilling

Saturday, March 21, 2009

Oil and gas companies are increasingly turning to project management techniques to improve their efficiency of drilling.
By Tim Clay, projects director, Energy in Focus Ltd

The effectiveness with which an oil and gas production company plans and implements its well programmes will directly impact the bottom line of its business.

Drilling costs can account for up to 75 per cent of all exploration expenditure and that producers need to generate between $6-10 in production revenue in order to spend $1 on drilling activity.

By using an adaptable well project delivery process you can assist integrated multidisciplinary teams deliver well projects.

However, experience shows that technology alone cannot provide the assurance of delivering wells as they were planned, at lower cost and in a shorter time than budgeted.

Instead, we have found that it is the integration of people’s technical skills and technology using business process that can deliver success.

The well delivery process

The purpose of a well delivery process is to provide multidisciplinary E & P teams with a logical road map of all the activities necessary to plan and execute wells throughout the life cycle of the reservoir in which they are placed.

Most project-based business activity can be characterised by a simple phase-gate process (eg identify, define, design, implement, analyse) and such processes can be depicted at different levels of detail and in different ways.

For example, you can use process mapping software to generate a continuous process flow chart that shows all of the work phases and decision gates linked together.

Another way to depict the process is as a project schedule Gantt chart using standard scheduling software.

The key activities are to define the project objectives, assess technical and commercial threats and opportunities, and initiate technical studies (formation damage testing, directional planning and well bore stability studies).

Using these inputs, the team can develop and evaluate alternative conceptual designs in a consistent way.

This is where fundamental development choices can be made. For example, looking at the technical, cost and schedule impacts of using surface or subsea Christmas trees.

It is also a timely opportunity to identify applications for technologies that are consistent with the project objectives and aligned with the risk culture of the company.

Thus the process uses front-end loading techniques to deliver the optimum conceptual design to the gatekeepers at the concept selection decision gate before proceeding into detailed design.

Each gate is a milestone that controls the progression of activities into the next work phase. It will have one of four possible outcomes; proceed, recycle, suspend or stop.

Energy in Focus

Since 2000, my company Energy in Focus has adapted and implemented our “Well Constructed” well delivery process in several North Sea wells projects.

The flexibility of this process enables the project leadership to focus on activities that can maximise upside and mitigate risks rather than being constrained by a ‘one size fits all’ product.

Occasionally, people will question whether the process is value-adding or simply a ‘box-ticking’ exercise to satisfy corporate procedures.

I am pleased to report a 100% conversion rate after these process sceptics get engaged in the process and share ownership in delivering the project successfully!

The key benefits of the process are:

To enable a structured and consistent approach to projects particularly with respect to objective analysis and decision making;

To energise and focus multi-disciplinary teams and define their roles and responsibilities;

The close-out phase ensures that organisational learning takes place and is recorded;

To ensure the alignment between overall business strategy and project objectives.

Because the process is both adaptable and scalable, it can be operated at several levels.

At the highest level, it can be used to manage a portfolio of assets to ensure that all business opportunities are evaluated and progressed in a consistent, objective and auditable manner. This ensures that finite financial and human resources can be assigned to the most value-adding opportunities.

At a subordinate level, it is used to manage a discrete wells campaign and, at the next level down, to manage the delivery of each well as an individual project.

Where clients have an established well delivery process in their own management systems, we have found it easy to run with their processes in our role as outsourced wells project managers.

We have also been able to apply our process development and implementation skills in several consultancy assignments.

These include developing and rolling-out a wells delivery process to a North Sea mobile rig team and adapting an existing client process to the specific needs of a Gulf of Mexico deepwater development.

It is encouraging to see an increasing number of companies using such processes to manage their wells projects and a common terminology is emerging within the industry to describe these activities.

As more organisations embrace the concept of the digital oilfield, there is a big opportunity for them to embed such process in geographically-dispersed organisations via secure websites, visualisation environments and other IT media.

If E&P companies are seeking repeatable successful outcomes from their wells projects, a wells delivery process is essential to ensuring that the right people are doing the right things at the right time.

Experience from 1980s

A lot of today’s ideas about how to do project management for drilling grew out of experience from the late 1980s, when the industry needed to improve drilling efficiency, in the face of depressed commodity prices and increased costs of drilling, often in hostile offshore environments.

In 1988, Amoco applied learning curve theory in its analysis of drilled depth vs time data from 2000 wells, many of which had been drilled in the multi-well programmes by the same rig teams.

Performance benchmarks were set by geographical area, so that operations performance could be assessed in terms of quality of planning, organisational learning and application of technology.

At the same time, BP took a different tack by focussed on stuck pipe events, which were directly impacting their operations by $30m per annum.

While their investigations identified different stuck pipe mechanisms, many of the incidents had two common attributes.

First, that downhole conditions, such as pore pressure, fracture gradient and the location of geological faults were often different from what had been predicted. Second, the drillers were poorly equipped to react to the deteriorating downhole conditions in the correct way.

A task force was established which promoted a rig team approach, involving drilling contractors and other service providers, and raised awareness through stuck pipe prevention training schools. Within 2 years stuck pipe costs had been reduced by 70%.

Later, Shell launched its “Drilling in the 90’s” initiative where it harnessed Total Quality Management methods that had already been successfully adopted by other industries and adapted them for the E & P industry.

Late 1990s

Fast forward to the late 1990’s when, while commodity prices had remained essentially flat, many large field were in decline and reserves replacement by exploration alone was failing. In mature basins like the North Sea and Gulf of Mexico, the challenge was to develop smaller accumulations by tying them back to existing infrastructure.

However, the economics of such projects are particularly sensitive to CAPEX over-runs and late delivery.

Far-sighted companies had sustained and built on the performance strategies they had rolled out in the late 80’s, using IT to leverage internal communications and reorganising to break down the functional silos which they found to be barriers to performance improvement.

Both the E & P companies and their shareholders were becoming conscious of their portfolio performance as benchmarked by external organisations.

In 1997, I joined ARCO British to work on its Southern North Sea gas field developments.

At that time, the technical and commercial outcomes of the wells projects we were drilling were inconsistent.

Our sister company, Vastar Resources, had recently addressed similar performance issues in its Gulf of Mexico operations.

Adopting the same approach, our management established an in-house change management team comprising geoscientists, engineers, HSE, commercial and facilities disciplines.

Our brief as internal consultants was to identify what was going wrong with the existing well planning and execution process and fix it in order to deliver a step change improvement in performance.

We found that the existing processes were not properly documented and so it was not transparent to or owned by the functional groups in the organisation. We also found that 70 per cent of the unplanned operational events analysed were attributable to either inadequate project definition or detailed planning rather than operational issues.

After rolling out a new well design and construction process in 1998, ARCO achieved a “Best in Class” gas field development and annualised Southern North Sea drilling cost savings of $340/ft compared with the industry benchmark.

There were three key levers to the successful outcome of this project: the commitment of top management to bring about a step change in performance; the imagination of the team to develop and map a simple and transparent phase-gate workflow process; and the significant effort put into rolling-out, implementing and mentoring process effectiveness with each project team.

If you have any comments on this article or want further information about Well Constructed TM, please email timclay at

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