Work Together - Tracking key oil sands industry trends
Written by Andy Mackintosh
Some of the challenges that the maintenance function is facing today come from international competition for skilled resources ("brain drain"), an aging workforce and working in one of the harshest industrial environments [oil and gas sector] for most of the year. In the global industrial market, young engineers are seeking international experience and a work-life balance, which is a much higher priority than previous generations. Ensuring the talent and expertise needed to tackle maintenance on all fronts is a growing challenge in Canada.
Product-oriented companies slow the pace of research and development (R&D), as the existing technologies aren't fully understood or adopted. This in itself is a risk in relation to potential brain drain, as other countries are higher adopters and adapters of the same technologies.
Where there is a lack of collaboration between operators and third parties, the result is a slower pace of improvement, less technology transfer to enable greater reliability and lower unit costs. There is a gap between technology availability, uptake and resultant plant optimization.
Lack of speedy access to the Canadian industrial markets will turn some niche third parties to other international markets, resulting in the loss of expertise and potential to innovate. The inability to tackle multi-factor productivity issues will continue to add to the cost of production, which needs to be addressed through simple but effective management, training, systems and processes.
Some sustaining capital projects will result in third parties unable to deliver in a lump-sum environment. While this approach may stir competition and supposed cost certainty, it will inevitably drive some companies out of business, as they move from a cost reimbursable to lump-sum environment without requisite project management and project controls expertise.
What role does the operator have to play in pursuit of improved outcomes?
Simply put, plants need to be operated within their design parameters and managed as a complete system. All too often, production is king and the inevitable occurs, resulting in plant downtime for various reasons. A systematic approach to technical integrity is an important attribute to attaining business sustainability in any plant environment. This approach must have a maintenance and reliability regime, which is underpinned by systems and processes that consider safety first followed by production priorities. Also, conditioning-monitoring systems that generate meaningful information-in order to predict outcomes that can avert unplanned failure and resultant loss of production-are important success factors.
Often, requests are made of third parties despite a lack of quality in problem solving around the actual outcomes expected from a long-term perspective. Short-term fixes aren't sustainable solutions.
Equipment is often procured without a full understanding of its operating and maintenance requirements. There is also a lag between implementation and the integrity of maintenance-management system data. This often creates earlier than expected failures, and it becomes the responsibility of maintenance to fix the problem.
Operators need to create a learning environment for both client and third parties to enable collaboration, and for a culture of accelerated improvement to prevail. This is essentially about knowledge management and retention. Third parties have capabilities that are often underutilized, insufficient or misunderstood. In the 1990s, the North Sea underwent a revolution in terms of collaborative performance-based contracting. This was driven by operators enabling the delivery of higher standards of services, quality, value, and ultimately, significantly improved reliability and lower unit costs.
This type of value-based environment is essential in Canada, whereby industry goes beyond traditional command and control of third parties to a more integrated and collaborative environment. Lessons learned should be captured and not repeated. This requires total transparency and greater outcome focus on the long-term through robust relationships at all levels.
Performance-based, third party delivery requires clear alignment and understanding of business objectives, goals and targets. This means higher levels of plant education, training and measurement to deliver year-on-year value add in an environment where high levels of trust are prevalent, as healthy contract governance exists at executive and operational levels.
What role do the third parties have to play in pursuit of improved outcomes?
The most important role is to understand your customers' short and long-term needs and view these within a value-based relationship framework. The second important role is to ensure that you have not only the knowledge, systems and processes, but also the capacity to deliver consistently in the execution of services.
Most operators are looking for long-term relationships whereby organizations can mature together and complement each other in a sustainable manner. In a highly resource-constrained market, adding value can be created in numerous ways. The solution may require collaboration between like-minded third parties to create a full services capability and just as important-greater capacity.
The future for third parties is in the value-add rather than the volume of business generated, which was previously the driver. Niche specialists, or large players that bring global expertise to bear in a timely and efficient fashion, will dictate the third-party market. The use of low-cost engineering services has not been fully exploited in the Canadian market, but will become a necessity going forward. Global third parties focus on major projects around the world and place their best resources where the highest returns are to be attained.
The use of temporary foreign workers will continue to be a feature particularly in the oil sands and other heavy industry sectors. This is due to the frequency and scale of turnarounds and sustaining capital projects. And competition for resources will be stiff due to the number of projects internationally, as well as the number of tradespersons retiring over the next 10 years globally. It's estimated that there will be a shortage of 20 million tradespersons by 2020 within the major industrial countries.
Operators will seek alignment to their business objectives, which will be measured through performance-based contracts using key performance indicators (KPIs) within a balanced scorecard arrangement. The challenge for third parties will be to ensure that the KPIs are well understood and a robust risk management regime is implemented prior to agreement. This understanding will help ensure profit and overhead is transparent to all parties and the risk and reward structures (pain share and gain share) are managed in a disciplined manner. The level of risk undertaken could be the difference between success and bankruptcy for smaller niche organizations.
Canada has the opportunity to seize the initiative and rapidly develop its industrial maintenance environment beyond what exists today. These changes have occurred in many other countries. Canada needs to compete globally to address its skill shortages during a climate of relative resource availability.
The challenge for third parties will be to sustain a position where value is recognized and remunerated accordingly in a climate of increasing global competitiveness.
These factors can be overcome by close collaboration and integration with other third parties that bring international experience and the appetite for change and accelerated improvement to Canada.
Performance-based contracting is a proven means of delivering such improvement, but requires trust, business alignment and collaboration to deliver the necessary plant reliability and unit-cost reduction outcomes. Third parties that move first will develop the knowledge and experience in delivering value-add solutions to their respective markets, but will need to bring global best practices to succeed over the longer term.
The level of integration between operators and third parties will depend on complementary skill-sets, performance and the appetite to execute within a culture of accelerated improvement. This will need to occur rapidly in order to keep up with industry growth aspirations particularly in the oil sands sector. To deliver world-class performance in a sustainable manner, value partnerships will become a common theme and a necessity.
This is an edited article provided by Calgary-based FT Services. Andy Mackintosh is president and CEO of Calgary-based FT Services. You can reach him by email:
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