Performance Management for the Oil, Gas, and Process Industries

Performance Management for the Oil, Gas, and Process Industries: A Systems Approach is a practical guide on the business cycle and techniques to undertake step, episodic, and breakthrough improvement in performance to optimize operating costs. Like many industries, the oil, gas, and process industries are coming under increasing pressure to cut costs due to ongoing construction of larger, more integrated units, as well as the application of increasingly stringent environmental policies.

Focusing on the ‘value adder’ or ‘revenue generator’ core system and the company direction statement, this book describes a systems approach which assures significant sustainable improvements in the business and operational performance specific to the oil, gas, and process industries. The book will enable the reader to: utilize best practice principles of good governance for long term performance enhancement; identify the most significant performance indicators for overall business improvement; apply strategies to ensure that targets are met in agreed upon time frames.

Chapter 1. What is Performance Management?

1.1. Introduction
1.2. Performance Management Theory
1.3. Why Have a Structured Approach to Performance Management?
1.4. Performance Management Structure
1.5. Performance Improvement Process
1.6. Summary

Part 1. Systems

Introduction

Overview

Chapter 2. The Business Unit

2.1. Introduction
2.2. Advantage of the Business Unit Approach Using the Black Box Concept
2.3. The Systems Approach Using the Business Unit
2.4. Boundaries and Content of the Business Unit
2.5. Business Unit Types and Relationships
2.6. International Standards Organization Certification
2.7. Integration
2.8. Summary

Chapter 3. Models

3.1. Introduction: What Are Models and Why Do We Need Them?
3.2. The Scope of Models
3.3. Business Models
3.4. Mass and Energy Balance Models
3.5. Process Simulation Models
3.6. Utility Models
3.7. Operating Expense Models
3.8. Benchmarking Models
3.9. Summary

Chapter 4. Management Systems Determination and Requirements

4.1. Introduction
4.2. Analogy and an Example of a System
4.3. Definitions
4.4. Boundaries of a System
4.5. The Key Elements of a System
4.6. Detailed Comparison Between Management Systems and Processes
4.7. Primary Groups of Systems
4.8. Underlying Computer Systems
4.9. System Examples
4.10. System and Process Ownership
4.11. Sustainability of the Systems Approach
4.12. Integrating Systems in a Business Unit
4.13. Integrated Management Systems: Specific and Generic Examples
4.14. Benefits of a Management System Approach
4.15. Summary

Chapter 5. The Business Cycle

5.1. Introduction
5.2. Strategic Planning (Strategy Formulation)
5.3. Annual Planning and Budgeting (Strategy Implementation)
5.4. Performance Management (Strategy Evaluation and Control)
5.5. Business Cycle Timing
5.6. Benefits of Strategic Management
5.7. Summary

Chapter 6. Business Process Management

6.1. Introduction
6.2. Flowcharting
6.3. Business Process Management As a Result of Benchmarking
6.4. Evolution of Business Process Management
6.5. Process Industry Focus
6.6. Summary

Part 2. Governance and Performance

Introduction

Overview

Chapter 7. What Are the Principles of Good Governance?

7.1. Introduction
7.2. Two Questions
7.3. Definitions of Corporate Governance
7.4. Discussion of Corporate Governance Codes
7.5. Core Principles
7.6. The Extractive Industries Transparency Initiative
7.7. Governance Surveys
7.8. Leaders in Corporate Governance
7.9. Summary

Chapter 8. Governance Framework

8.1. Introduction
8.2. Before and After
8.3. The Model Governance Framework (GF)
8.4. Physical Picture of the Model Governance Framework
8.5. The Model Governance Framework Document: Discussion of Contents
8.6. Examples From Industry
8.7. Benefits of a Good Governance Framework
8.8. Summary

Chapter 9. How Does Governance Affect Performance?

9.1. Introduction
9.2. Governance Principles
9.3. Attitude to Risk and Adverse Selection
9.4. The Board: The “Fulcrum” of Business Performance
9.5. Conflict of Interest and Ethics Corporate Statements
9.6. Governance, Risk, Integrity, and Performance
9.7. Procurement and Governance
9.8. The Cancer of Corruption
9.9. Whistleblowing
9.10. Summary

Chapter 10. Alignment

10.1. Introduction
10.2. Vertical Alignment
10.3. Horizontal Alignment
10.4. Alignment and Systems
10.5. The Development of a Policy or Direction Statement
10.6. Alignment and Organization
10.7. Document Hierarchy
10.8. Summary

Part 3. Risk and Performance

Introduction

Overview

Chapter 11. Risk Management

11.1. Introduction
11.2. Risk Definition
11.3. ISO 31000, Risk Management
11.4. Categories of Risk
11.5. Risk Appetite
11.6. Statement of Risk
11.7. The Four Strategies of Risk Control
11.8. Three Lines of Defense
11.9. Assurance Services
11.10. Individual Risks and the Risk Management Framework
11.11. Risk Maturity
11.12. Risk Management Survey
11.13. Potential Benefits of Enterprise Risk Management
11.14. Summary

Chapter 12. Risk Control Mechanisms

12.1. Introduction
12.2. Accident/Incident Causation Theory
12.3. Three Ps
12.4. Swiss Cheese
12.5. Bow Tie
12.6. Scenario Planning
12.7. Black Swan
12.8. Tools for Operational Risk and Performance Analysis and Evaluation
12.9. Environmental Aspects and Risk Registers as Required by ISO 14001 and OHSAS 18001
12.10. Summary

Chapter 13. Merging Performance and Risk

13.1. Introduction
13.2. Procurement Risk and Performance
13.3. Outsourcing: A Risk Reduction and Performance Improvement Tool
13.4. How Do Performance Management Systems and Enterprise Risk Management Come Together?
13.5. Prioritization of Risks and Opportunities
13.6. The Risk and Opportunity Cycle
13.7. ISO 14001, Environmental Management, and ISO 45001, Health and Safety Management
13.8. Production Performance and Risks
13.9. Ernst & Young “Top Risks and Opportunities”
13.10. Summary

Chapter 14. Incident Preparedness and Operational (Business) Continuity Management

14.1. Introduction
14.2. Definitions
14.3. Applicability of Standards
14.4. Establishing Incident Preparedness and Operational Continuity Management
14.5. Incident Preparedness and Operational Continuity Management Plans
14.6. The Relationship of Incident Preparedness and Operational Continuity Management Plans to ISO 31000, Risk Management Process
14.7. Incident Preparedness and Operational Continuity Management Sequence
14.8. Emergency Response Plan Development
14.9. Safety Cases
14.10. Scenarios for Emergency Response Planning
14.11. Business Resilience
14.12. Accidents and Knowledge Transfer: Do We Learn from Mistakes?
14.13. Incident Preparedness and Operational Continuity Management Key Performance Indicators
14.14. Summary

Part 4. Performance Indicator Selection

Introduction

Overview

Chapter 15. Performance Focus

15.1. Introduction
15.2. Definitions
15.3. Discussion of Approach
15.4. How to Select Indicators
15.5. Target Audience for a Common Data Source
15.6. Key Elements of a Key Performance Indicator
15.7. Primary Indicators
15.8. Performance Gap
15.9. Competitiveness and Efficiency
15.10. Health, Safety, Environment, and Integrity: Change of Focus
15.11. Scorecards and Numbers
15.12. Summary

Chapter 16. Key Performance Indicator Selection Guidelines

16.1. Introduction
16.2. Elements of Good Performance Indicators
16.3. Approach to Selection
16.4. Development Process
16.5. Consequences of Poor Selection and Definition
16.6. Center for Chemical Process Safety2 Focus
16.7. Physical Asset Integrity Key Performance Indicators: An Introduction
16.8. Examples of High-Level Key Performance Indicators
16.9. Summary

Chapter 17. Relationships

17.1. Introduction
17.2. Size and Complexity
17.3. Mass, Volume, and Heating Value
17.4. Utilization and Availability
17.5. Money of the Day and Real Terms
17.6. Human Capital
17.7. Energy
17.8. Greenhouse Gases
17.9. Competitiveness, Efficiency, and Effectiveness
17.10. Soft Relationships
17.11. Summary

Part 5. Asset Performance Management

Introduction

Overview

Chapter 18. Types of Assets and Applicable Standards

18.1. Introduction
18.2. Summary of Types of Assets
18.3. Primary Relationships
18.4. Standards
18.5. Reputation: An Intangible Asset
18.6. Third-Party Compliance Checks
18.7. Summary

Chapter 19. Information

19.1. Introduction
19.2. Organizational Capability: The Information Asset Aspect
19.3. Control of Information
19.4. Information Governance Policy and Suggested Format
19.5. Information Security
19.6. Information Systems
19.7. Collection and Utilization of Information
19.8. The Maturity of Information Systems
19.9. Data Flow for Performance Improvement
19.10. Information Key Performance Indicators
19.11. Summary

Chapter 20. Human Capital

20.1. Introduction
20.2. Organizational Capability: The Human Capital Aspect
20.3. Organizational Effectiveness and Learning
20.4. Competencies
20.5. Process Safety Management and Safety Culture
20.6. Human Asset Key Performance Indicators
20.7. Summary

Chapter 21. Finance

21.1. Introduction
21.2. Standards
21.3. Financial Risks and Underlying Computer Systems
21.4. Operating Expense
21.5. Capital Expense/Investment
21.6. Financial Statements—The Basics
21.7. Cost Escalation
21.8. Carbon Credits
21.9. Profit and Investment
21.10. Finance Key Performance Indicators
21.11. Summary

Chapter 22. Physical Assets

22.1. Introduction
22.2. Asset Management System Standards
22.3. Asset Performance Management and Integrity
22.4. LOPC: Analogy Between an Aircraft and a Process Plant
22.5. Asset Integrity and Process Safety Management
22.6. Application of Asset Performance Management
22.7. Maintenance
22.8. Inspection
22.9. Asset Performance Management Software
22.10. Energy Management
22.11. Reviews and Benchmarking
22.12. System Maturity
22.13. Suggested KPIs
22.14. Summary

Chapter 23. Turnarounds

23.1. Introduction
23.2. Definition
23.3. Why Effective Turnaround Management Is Critical
23.4. Basic Requirements for Optimization of the Turnaround
23.5. Turnaround Risk Profile
23.6. Innovative Ideas for Reduction in Turnaround Duration
23.7. Strategic Planning and Run Length Determination
23.8. Turnarounds and Profit Relationship
23.9. Turnaround Critical Success Factors and Key Performance Indicators
23.10. Summary

Part 6. Benchmarking

Introduction

Overview

Chapter 24. The Benchmarking Process and Consultant Selection

24.1. Introduction
24.2. Integration Into the Business
24.3. Why Benchmark?
24.4. Generic Process
24.5. Benchmarking Categories
24.6. Benchmarking Consultant Selection
24.7. Peer Groups
24.8. Process Categories for Benchmarking
24.9. Definition of Pacesetter
24.10. Project Benchmarking
24.11. Turnaround (TA) Benchmarking
24.12. Benchmarking Code of Conduct
24.13. Business Improvement Program (BIP) Categories for Operational Benchmarking
24.14. Benefits of Benchmarking
24.15. Summary

Chapter 25. Common Denominators and Indices Used in Benchmarking

25.1. Introduction
25.2. Primary Common Denominators
25.3. Consultants’ Proprietary Common Denominators
25.4. Common Denominator Relationships
25.5. Proprietary Indices
25.6. Summary

Chapter 26. Benchmarking Data Verification

26.1. Introduction
26.2. Monthly Performance Modeling
26.3. Benchmarking Data Input Tables
26.4. Benchmarking Model
26.5. Benchmarking Consultant Audit
26.6. Assessment
26.7. Summary

Chapter 27. Using Benchmarking Results

27.1. Introduction
27.2. Benchmarking Envelopes
27.3. Output Formats
27.4. Where to Apply the Benchmarking Results
27.5. Competitiveness, Efficiency, and Effectiveness
27.6. Benchmarking Top Indicators
27.7. Summary

Part 7. Assessment, Strategies, and Reporting

Introduction

Overview

Chapter 28. Assessment Overview

28.1. Introduction
28.2. Assessment Objective
28.3. Assessment Groups and Generic Process
28.4. Business Risks and Opportunities and Performance Assessment
28.5. Categorization
28.6. Performance Focus
28.7. Evaluation and Prioritization
28.8. Quick Assessments
28.9. Summary

Chapter 29. Identification, Analysis, and Evaluation of Gaps

29.1. Introduction
29.2. Focus Areas
29.3. Approach
29.4. Assessment Methods
29.5. Preparation for Workshops
29.6. Benchmarking Gap Troubleshooting Workshops
29.7. Best Practice Scorecards
29.8. Mapping Using the 80:20 Rule
29.9. Performance Assessment Timeline
29.10. Assessment by Consultants
29.11. Summary

Chapter 30. Strategies and Actions

30.1. Introduction
30.2. Questions to Assess Action Based on Competitive Position
30.3. Target Setting
30.4. Strategies: Plans and Actions
30.5. Mechanical Availability Drill-Down
30.6. Change Management
30.7. Visualization of Targets
30.8. Summary

Chapter 31. Reporting

31.1. Introduction
31.2. Reporting for Optimal Decision-Making by Decision-Makers
31.3. Common Reports
31.4. The Use of Graphic Displays
31.5. Intranet-Based Reporting
31.6. BP&Bs and Performance Reports
31.7. Affiliate Performance Reports for the Shareholder
31.8. Business Performance Software
31.9. Summary

Part 8. Business Oversight

Introduction

Overview

Chapter 32. Business Relationships

32.1. Introduction
32.2. The Value of Partnerships
32.3. Types of Companies
32.4. Agreement Documentation
32.5. Policy, Regulation, and Operation Related to a National Oil Company
32.6. Summary

Chapter 33. The Opportunity Lifecycle

33.1. Introduction
33.2. Portfolio Management
33.3. The Investment Cycle
33.4. Investment Risk Assessment
33.5. Project Risk Mitigation
33.6. Investment Framework and Policy
33.7. Approval Package
33.8. Investment Decisions
33.9. Sustainable Development Projects
33.10. Integration With the Business Planning Cycle
33.11. Partnering
33.12. Exit/Divestment or Termination/Decommissioning Decision-Making
33.13. Summary

Chapter 34. Roles and Responsibilities

34.1. Introduction
34.2. Value Chain Oversight and the Changing Risk Profile
34.3. Roles and Responsibilities Rollup
34.4. Roles and Responsibilities Related to Type of Agreement
34.5. Affiliate Roles and Responsibilities—Details
34.6. Potential Conflicts Between Roles
34.7. The Value of Secondees
34.8. Shareholder Oversight Focus Areas
34.9. Summary

Chapter 35. Management Review

35.1. Introduction
35.2. Selling a Strategic Issue
35.3. Levels of Review
35.4. Review Meeting Evolution
35.5. Management Review Responsibilities
35.6. Shareholder Review
35.7. Independent Review: R/P Ratio
35.8. Summary

Part 9. Oil and Gas Issues

Introduction

Overview

Chapter 36. Hydrocarbon Accounting

36.1. Introduction
36.2. Mass Balance
36.3. Measurement System Classification
36.4. Measurement System Details
36.5. Identifying Inputs and Outputs
36.6. The Measurement, Reconciliation, and Allocation Process
36.7. Models
36.8. Balancing Problems
36.9. The Value of Using Models
36.10. The Limits of Using Models
36.11. Summary

Chapter 37. Fuel Oil Refineries

37.1. Introduction
37.2. Refinery-Specific Performance Issues Covered in Previous Chapters
37.3. Refinery Performance Initiatives
37.4. Refinery Profitability
37.5. Refinery Top Key Performance Indicators
37.6. Summary

Chapter 38. Gas Plants

38.1. Introduction
38.2. Gas Plant–Specific Performance Issues Covered in Previous Chapters
38.3. Gas Plant Performance Initiatives
38.4. The Process Safety Program
38.5. Gas-to-Liquid Process
38.6. Gas Plant Top Key Performance Indicators
38.7. Summary

Part 10. Conclusion

Introduction

Overview

Chapter 39. Alignment to Achieve Recognition for Excellence

39.1. Introduction
39.2. Excellence Definitions and Criteria
39.3. OE Awards
39.4. Self-assessment
39.5. Excellence and Certification Standards
39.6. Alignment and Continuous Improvement
39.7. The Learning Organization
39.8. Sustainability
39.9. Summary

Appendix A. Glossary of Terms

Appendix B. KPIs

Appendix C. Oil and Gas Rules of Thumb

Appendix D. Operational Performance Health Checker Example

Life Sciences

Physical Sciences & Engineering

Social Sciences & Humanities

Health

Performance Management for the Oil, Gas, and Process Industries

A Systems Approach

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Robert Bruce Hey