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Westhill Consulting & Career Development: Seizing opportunities for South East Asia's oil and gas industry10 Years Ago
2010, South-East Asia has consolidated its position as an important contributor
to the global downstream market with Petronas’ recent announcement of its plan
to build the new RAPID facility in Malaysia one further example of the region’s
growing importance. In
reality the timing couldn’t be better - as populations across Asia continue to
grow, the demand for fuel will grow exponentially, offering oil & gas
operators a real opportunity to make a significant contribution to the region’s
continued economic development. However, with this growing demand comes
additional pressures, and with the sector still vulnerable to fluctuating oil
prices, operators can ill-afford to rest on their laurels. The need to ensure
their operations are as productive as possible and that cost inefficiencies are
stripped out from the very outset is arguably more important than ever before. Minimizing
operational costs When it
comes to new projects oil & gas operators have traditionally been good at
minimizing their CAPEX spend. However, there has been much less focus given to
limiting the cost of operation of their assets. With maintenance costs
typically responsible for 20-30% of the overall OPEX expenditure, this is one
area where the downstream sector in South-East Asia is increasingly focusing
its attention. According to some analysts the costs incurred across the globe
in maintaining the next generation of oil & gas assets could equate to
$0.75 trillion highlighting the scale of the prize that could be on offer here. For a
typical refinery the operational expenditure is principally dictated by three
prime factors: the quantum of work carried out on the asset, the efficiency at
which it can be delivered and the agreed cost rate of the resource used. In
each instance there is an opportunity to significantly reduce cost outlay by
focusing on a range of inter-related issues including maintenance strategies,
work scheduling and the approach taken to cost & commercial management
challenges. However,
it is vital that these issues are considered during the FEED (Front End
Engineering Design) stage of a project for if they’re not factored in at that
juncture, operators will find themselves in a situation akin to trying to catch
a handful of sand. Whilst they may be able to plug some holes, the reality is
that some cost inefficiencies will inevitably slip through their grips.
Similarly, when it comes to the initial contracts, good intentions can quickly
be forgotten as pressure to ‘get the project signed off’ sees decisions taken
that result in a legacy of unnecessarily high OPEX costs for the lifetime of
the asset. Given that many of these assets are in operation for over 30 years,
this haste to push a project through can very easily become an expensive
mistake. Location,
location, location Another
challenge facing operators when it comes to minimizing these costs is that very
often their maintenance strategies are based on the Original Equipment
Manufacturer’s Operations and Maintenance (OEM O&M) manuals. Whilst this
ensures they comply with warranty conditions, it often overlooks two key points
- the operating environment in which the refinery is located and the
criticality of each asset. In the
first instance a ‘one size fits all’ approach is simply unrealistic as the
operating challenges will be markedly different depending on whether the asset
is located in the Arabian Gulf, the Arctic Peninsula, Jakarta Indonesia or the
South China Sea. In the second case, a lack of awareness of the criticality of
each asset can see operators adopt an overly expensive maintenance regime for
some assets whilst at the same time under-maintain those assets whose
performance is critical to the overall production levels. The
business opportunity Those
owners who focus on the key issues that affect operational costs, and who
implement the right processes during both the CAPEX and OPEX phases, can
significantly increase their overall productivity. Some recent examples across
the globe suggest that by focusing on just 20-30% of those assets where
maintenance costs are unnecessarily high, there is the potential to make
savings ranging from $10-40 million per year. When considered in those terms it
soon becomes clear that minimizing operational cost can have a marked impact on
their business’ bottom line. Over the
past 12-18 months the downstream sector in South-East Asia has made significant
steps. However, the next challenge will be to show that it can deliver
sustainable improvements that will enable the region to strengthen its role as
a key supplier of fuel in an ever evolving global economy. In changing times
this is an opportunity the industry should not let escape from its grasp. Westhill Consulting Career & Employment
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