Lean focuses on identifying and eliminating the seven hidden wastes common to both manufacturing and service industries: • Motion. • Overprocessing. • Transportation. • Overproduction. • Waiting. • Defects and reworking. • Inventory. Lean tools commonly used to eliminate these seven wastes include the following: • Value-stream analysis. • Error-proofing or “poka-yoke.” • “Takt time” or pull-scheduling based on customer demand. • Kaizen-blitz. Fig. 1—Six Sigma process capability definition. • Visual control. • Five Ss (sort, set-in-order, shine, standardize, and sustain). • Standardized work. • Measurement system analysis (MSA). • Kanbans—“just-in-time” (JIT) delivery. • Design of experiments (DOE). • One-piece flow. • Lean tools. • Quick changeover. As a disciplined methodology, Six Sigma projects typically use • Total productive maintenance. the five steps of the define-measure-analyze-improve-control • Overall equipment effectiveness (OEE). (DMAIC) project-execution process.8–10 An alternative (but simi- • Six Sigma. lar) four-step model, prioritize-characterize-optimize-realize is OEE is commonly used to measure process leanness, and is also used.11 defined in Eq. 4: Companies such as General Electric, Allied Signal, and Polar- oid have embraced Six Sigma as strategy, philosophy, and vision. OEE = Availability ⳯ Efficiency ⳯ Quality. . . . . . . . . . . . . (4) Within these companies and many others, business results and career advancement are strongly linked to the use of Six Sigma.8,9 Here, availability ⳱ run time vs. net operating time, efficiency A specialized branch of Six Sigma is “Design for Six Sigma” ⳱ actual output vs. target output, and quality ⳱ good output vs. (DFSS), which is used to create a new process for products or actual output. services that are aligned with customer requirements and deliver a This OEE model can be applied in the oil field. An example is Six Sigma performance from the outset. Six Sigma can be thought given in Table 2 for a rod-pumped oil well. of as a disciplined methodology for improving an existing process. When the concept of OEE is used, the value chain, life-cycle DFSS is a disciplined methodology for designing a new product costs, or total cost of ownership is optimized for an entire process. or service.13 Lean does not optimize a singular aspect of a process, but it im- proves the overall process value delivery. Lean Lean has its origins in the automotive industry. It is also known ISO 9001:2000 by the terms “lean enterprise,” “lean manufacturing,” and The ISO has a quality-management system that is defined in ISO “lean production.” The Japanese auto industry began creating Lean 9001:2000. The adoption of ISO 9001:2000 and API Q1 is already in the 1950s on the foundation created by Henry Ford and well-established in the petroleum industry service and supply sec- Alfred Sloan.14 tor, as documented in the API Composite List.17 Additional refer- Lean is a process-improvement methodology that focuses on ences in this paper will be made to the ISO 9001 systems only. It removing nonvalue-added activity and aligning production with should be understood that ISO 9001:2000 and API Q1 are very customer requirements.14–16 Simply put, Lean streamlines and op- similar; however, ISO 9001:2000 and API Q1 are not identical. timizes process efficiency. Lean has successfully spread to other API Q1 is fully compliant with ISO 9001:1994, but not with ISO manufacturing and service industries, but has seen limited appli- 9001:2000.18 API registers companies to both quality standards; cation in the oil field. many manufacturers carry dual registration.17
202 November 2004 SPE Production & Facilities
The ISO 9001 quality management system provides a founda- Lean Six Sigma facilitates process improvements by working tion on which to apply Lean and Six Sigma principles. Oilfield both dimensions of Table 1, with Lean primarily focused on re- processes commonly have levels between zero and 1.5. Occasion- moving steps and Six Sigma primarily focused on increasing ally, oilfield processes will have negative levels; that is, the pro- the level. cess mean is outside the specification limits. See Table 3, which is The examples provided later in the paper are the result of using based on the case histories and projects referenced in this work. Lean Six Sigma with the selected application of ISO systems. Processes with low level values will have a large standard deviation, indicating large variations or noise within the process, Lean Six Sigma Deployment Design often due to a lack of standard operating procedures (SOPs). It It is important to understand why previous quality systems have should be understood that Lean Six Sigma projects have made not been sustained in most organizations. Quality initiatives not significant improvements in some of the levels. The process-based yielding clear, bottom-line benefits, and unable to strategically design of ISO 9001:2000 enables continuous improvement and align with business objectives, will be the first things cut in a low reduction of process variation through the following: oil- and gas-price environment. • Record and document management. Key factors in deployment design that deliver results and • Control of operating procedures. achieve strategic business objectives are given in Fig. 2.21–23 • Elimination of process-nonconformance through corrective Some pitfalls should be specifically avoided: and preventative action. • Starting in the middle of the organization or forcing it up • A structured approach to assess process effectiveness. from the bottom. • Discounting the importance of linking Lean Six Sigma or fusion-management objectives to business strategy. Combining Lean, Six Sigma, and ISO 9001:2000 • Training without accountability for producing results. Historically, the Lean continuous-improvement advocates recog- • Skipping the time-consuming data-collection phase. nized Six Sigma as a tool that supported Lean, and the Six Sigma A North American oilfield example plan covering key deploy- advocates recognized Lean as a tool for reducing cycle time and ment factors is given in Table 4; the case histories discussed later inventories, but the two approaches were also viewed as competing in this paper were managed within this deployment schedule. At with each other. In the last few years, the synergies between the approximately 1 year from initiation, verifiable financial benefits two methods have been recognized and merged into a single pro- began to accrue. cess-improvement methodology: Lean Six Sigma.19,20 The most A typical Lean Six Sigma project is completed in 4 to 8 months, recent developments are referred to as “fusion management,” with the project’s complexity and scope driving the project dura- which combines Lean Six Sigma with ISO systems, and the work tion. All projects follow the DMAIC project-execution process. of Baldridge, Deming, Juran, and others. Fusion management is a Table 5 maps the DMAIC process to typical tools used in Lean Six unified quality approach that brings together multiple systems. Sigma or fusion management. DOE is one of the most powerful As seen in Table 1, there are two ways to improve quality in tools in the Lean Six Sigma toolbox. It is used to optimize non- a process: linear or complex-interaction process responses.24,25 DOE has • Increasing the level. been applied successfully in the oil field to complex-chemical • Reducing the number of process steps. treating, thermal, and reservoir-simulation problems.
Fig. 2—Lean Six Sigma deployment input/process/out-
put diagram.
November 2004 SPE Production & Facilities 203
Typical roles, terminology, and training used in Lean Six • Strong, facilitative leadership skills. Sigma are defined in Table 6. • Respect within the organization by peers, supervisors, The Black Belts receive 3 to 4 weeks of training. There is a 3- and subordinates. to 5-week break between each week of training, during which they • Results-focused. work on projects with their team. They are responsible for man- • Excellent communication skills. aging the project and leading the project team. Because Black • Willingness to lead change and learn new skills. Belts are critical to the success of a project and, ultimately, a Lean • Creative- and critical-thinking abilities. Six Sigma deployment, it important to understand desired Black • Capable of coaching and supporting others. Belt attributes. Those attributes include the following: • Seeks win-win solutions.
204 November 2004 SPE Production & Facilities
It should be noted that it is not required for a Black Belt to have • Establish clear objectives and agreements through proj- a statistical or quality background—they will receive it in the ect contracts. training. Most importantly, the Black Belt must be able to lead a • Commit the resources—particularly the time and the training. team (well enough after the Black Belt moves on to another proj- • Design the project team to engage key stakeholders to en- ect) such that the project results are owned by key stakeholders. To sure sustainability. remain consistent with Lean principles, the concept of JIT training, What follows is a sample of projects successfully completed or the approach of “no project/no training,” is used for all project and financially verified in Asia and North America. team members. Effective knowledge transfer requires participants Case History: Well Testing to immediately begin using the tools they have learned. A large, light-crude oil field in Southeast Asia uses a well-testing A deployment should have an organizational transition plan process consisting of a portable mass-flow/density meter mounted associated with it. Achieving the significant financial impact seen on the back of a flatbed truck. The truck parks next to the wells and in other industries is not possible when using Lean Six Sigma or connects to a manifold, which allows diversion of the fluid through fusion management as simple statistical measures or tools, but by the meter. affecting a cultural change that is aligned with the organization’s Relative to the oil-sales meters, the well-testing process had strategy and vision.9,11,22,23 While it may be the objective to historically overpredicted oil production by approximately 30%. A change the culture and strategy of the company, an evolution must Lean Six Sigma improvement team identified that the manually first take place. Success in initiating a cultural change begins with input water density for each well was the largest factor influencing completed projects that have documented and verified the financial the process. Existing water densities were found to have shifted impact for the organization. over time because of waterflood activities. New data were col- Judicious selection of projects at the outset of the deployment lected that resulted in a 22% improvement in accuracy. The result is critical to building a foundation of credibility and success. While was improved response time (by the production engineer) to wells it is certainly acceptable to take on difficult and persistent prob- with significant changes in measured production. lems, the project portfolio should be balanced so that the majority During the same time period, the team looked for ways to of projects are successful and completed efficiently. Some key increase the frequency of well tests, up to the customer specifica- factors for project selection and design are as follows: tion of one test, per well, per week. By applying Lean tools over • Align projects with business objectives. two improvement cycles, the number of well tests increased 50%. • Prioritize projects on the basis of effort, impact, risk, and Because the fixed cost of the nine trucks and crews remained the scalability to other areas. same, the cost per test decreased in direct proportion without im- • Establish management support for and involvement in projects. pacting quality.
Fig. 3—Southeast Asian light-oil well-test accuracy.
November 2004 SPE Production & Facilities 205
monitored monthly to verify the predicted long-term improve- ments in pump run life. Fig. 5 shows another rod-pump repair example from Asia, in which run life was improved by initiating an ISO 9001-quality system and Lean improvements in the pump repair shop.
Case History: Water Treating
In this fluid-treating example, a high-water-cut oil field produces approximately 6 million BWPD. Small concentrations of oil are carried over from the separation tanks to the waterflood injection wells. An improvement team identified that the oil-skimming pro- cedure, the reliability of the chemical-treating pumps, and the dis- tribution of fluid between the parallel trains of tanks were the major factors influencing system performance. Business partners participated in a measurement-system analy- sis, which reduced the variability in the oil-content measurement Fig. 4—North American heavy-oil rod-pump run life. process. Two sample hypothesis tests provided insight into sam- pling methods. To improve acceptance, plant operator representa- tives participated in the development of process-flow diagrams and The data in Fig. 3 show how improved quality can be accom- the SOPs. Following the execution of the new procedures in the plished simultaneously with reductions in cycle time and cost. field, average oil carry-over was cut in half and the variability Morale within the testing group improved dramatically with reduced significantly. these achievements. In a followup measure, a structured DOE was conducted to quantify and model the impact of tank design, flow rate, and Case History: Rod-Pump Repair chemical concentration on oil/water separation. The results A large steamdrive oil field in North America has more than 8,500 showed that all three factors were statistically significant, with active rod-pumped wells. The pumps are the heart of the artificial- chemical concentration being the most significant. The analysis lift system. A Lean Six Sigma project team used a number of the identified the optimal chemical-treating levels. statistical and cycle-time tools to improve the rod-pump design, The improvement project produced a significant annual in- pump repair, and handling process. An intensive two-day Lean- crease in revenue from oil recovery, which was sustained, action workout was undertaken to redesign the storage facility, as shown in Fig. 6. Intangible benefits were also realized in incorporating first-in/first-out inventory flow, visual controls, and process knowledge, improved communication, and acceptance of improvements in safety design. new procedures. Improvements included the following: • Number of pump designs reduced from 36 to 14. Case History: Oil Treating • Inventory dropped from 320 to 65 pumps. A North American heavy-crude oil field uses horizontal heater • Pump storage locations reduced from nine to a single cen- treaters as the primary oil-dehydration technique, but produces an tralized facility. unacceptably high level of untreatable “slop” oil. A Lean Six • New dedicated-pump delivery service reduced rig stand- Sigma project team studied the process and identified that the key by time. input factors included flow surges, excessively high treating tem- • More insert-pump designs reduced rig time to pull pumps, peratures, and selection of the oil-treating chemical. improved lifting efficiency, and, on a historical basis, should in- After the new procedures were implemented, the amount of crease pump run life, as in Fig. 4. slop oil was cut in half without increasing treating cost, as shown • An audited ISO 9001-quality system improved the rating of in Fig. 7. This resulted in an increase of revenue and a reduction the pump repair shops. in the cost of disposing of the waste product. • Optimal setting of the internal pump clearance to maximize pump run life was identified. Case History: Production-Well Stimulation Financial benefit was immediately realized with the reduction A Southeast Asian steamdrive oil field had conducted more than of rig standby time and consumption of excess inventory. Control 200 acid jobs to stimulate oil-production wells. A Lean Six Sigma plans are in place to sustain the gain, and the metrics are being project, using historical statistical data analysis, revealed that the
Fig. 5—Run life of Asian rod-pumped wells.
206 November 2004 SPE Production & Facilities
Fig. 7—Oil skim rates.
Fig. 6—Oil carryover in water effluent.
Surveys are used to make changes to the downhole assemblies controlling steam splits. A Lean Six Sigma team evaluated the logging process with an MSA and found it to have an unacceptably process did increase oil production and, on an overall basis, met high variance. The process was immediately discontinued pending economic hurdles. However, because of high process variability, a additional evaluation. Unless a fix could be found, the measure- large percentage of wells did not produce an economic response ment process would have to be abandoned. that met economic hurdles. A review of various procedures for log interpretation found that Use of hypothesis tests revealed that there were statistically switching from a manual interpretation to a computer process dra- significant differences in post-job oil gain because of the follow- matically reduced the variability. The process was retested and ing factors: found to produce acceptable results, as shown in Fig. 9. • Field area. The level improved, from 0.4 to 2.2, after the change. Because • Stimulated production interval. this practice was determined to be the best, it was immediately • Well temperature. deployed to all fields that use the method. A substantial financial • Oil production before stimulation. benefit was realized in improved well-work decisions. • Acid-application method. The analysis also helped to overcome a paradigm that the acid Summary of Benefits volume used and controlled post-job oil gain. The acid volume was Eleven Lean Six Sigma projects were completed in North Ameri- not found to produce statistically significant differences in oil gain. can oil fields in 2002–2003. These projects yielded a net benefit Changing the method of acid application resulted in a statistically of U.S. $500,000 per project. On the basis of the success of the significant increase in oil production, as shown in Fig. 8. completed projects, 14 new projects are currently active. A decrease in both required well downtime for well stimulation In Southeast Asian oil fields, 16 projects were completed dur- and the amount of acid used yielded improved economics for this ing 2001–2003. These projects yielded a net benefit of U.S. type of intervention. $1,000,000 each. On the basis of the success of the completed By creating a detailed process-flow diagram for screening, the projects, 15 new projects are approaching completion. stimulation prospects can better predict unprofitable jobs. Reduc- The benefits of projects are determined on the basis of statis- tion in the number of acid-stimulation jobs lowered costs and freed tically significant changes from baseline preimprovement project resources while improving the economics for the overall process. work. All project benefits are financially audited and verified by Fewer acid jobs reduced the generation of low-pH fluid, which in accounting or financial professionals not involved in the improve- turn reduced the number of upsets in the oil-treating process and, ment project. thus, reduced disposal costs. Conclusions Case History: Production Logging 1. Lean Six Sigma, adapted from other industries, and ISO-system Routine logging of steam-injection wells is performed to deter- concepts can be synergistically combined to improve business mine the downhole split of steam into multiple production zones. results in oilfield operations.
Fig. 8—Comparison of acid-placement methods.
November 2004 SPE Production & Facilities 207
6. “Quality Management Systems—Requirements, ISO 9001:2000,” third edition, Intl. Organization for Standardization, New York City (De- cember 2000). 7. “Specification for Quality Programs for the Petroleum and Natural Gas Industry,” sixth edition, API Specification Q1, Washington, DC (March 1999). 8. Peter, P.S., Neuman, R.P., and Cavanagh, R.R.: The Six Sigma Way: How GE, Motorola, and Other Top Companies Are Honing Their Per- formance, McGraw-Hill, New York City (2003). 9. Harry, M. and Schroeder, R.: Six Sigma: The Breakthrough Strategy Revolutionizing the World’s Top Corporations, Currency, New York City (2000). 10. Pande, P. and Holpp, L.: What is Six Sigma?, McGraw-Hill, New York City (2002). 11. Schmidt, S.R., Kiemele, M.J., and Berdine, R.J.: Knowledge Based Management—Unleashing the Power of Quality Improvement, Air Fig. 9—Tracer-log-survey results. Academy Press, Colorado Springs, Colorado (1996). 12. Kiemele, M.J., Schmidt, S.R., and Berdine, R.J.: Basic Statistics: Tools 2. Systematic application of Lean Six Sigma and ISO systems for Continuous Improvement, Air Academy Press, Colorado Springs, provides a disciplined structure for gaining knowledge of the Colorado (1997). processes and delivering business results safer, faster, better, 13. Chowdhury, S.: Design for Six Sigma, Dearborn Trade Publishing, and with lower costs. Process improvements have resulted in Chicago (2002). increased level values. 14. Womack, J.P., Jones, D.T., and Roos, D.: The Machine That Changed 3. Lean Six Sigma does not offer any special shortcuts to yield the World, Harper Perennial, New York City (1991). financial benefits. Leaders must continue to inspire employees 15. Womack, J.P. and Jones, D.T.: Lean Thinking: Banish Waste and Cre- to change. The financial benefits are delivered through leader- ate Wealth in Your Corporation, Simon and Schuster, New York City ship, vision, sustained commitment, hard work, and the system- (1996). atic application of quality and statistical tools. 16. Henderson, B.A. and Larco, J.L.: Lean Transformation: How to 4. Most of the tools and concepts used in Lean Six Sigma are not Change Your Business into a Lean Enterprise, Oaklea Press, Rich- new to the oil field. Lean Six Sigma is not claiming to be mond, Virginia (1999). superior to any other improvement methodologies on an indi- 17. API Composite List, API, updated weekly online. vidual project or problem-solving basis. In fact, sound engineer- 18. Your Guide to API Specification Q1, sixth edition, API, Washington, ing, coupled with quality and statistical thinking on individual DC (1999). projects, can yield results similar to those achieved by using 19. George, M.L.: Lean Six Sigma, McGraw-Hill, New York City (2002). Lean Six Sigma. However, it is the authors’ experience that the 20. Smith, B.: “Lean and Six Sigma—A One-Two Punch,” Quality Prog- effective application of quality and statistical tools, combined ress (April 2003) 36, No. 4, 37. with engineering principles on an organizational level, is not 21. Goldstein, M.D.: “Six Sigma Program Success Factors,” Six Sigma routine in most upstream operations. The discipline of Lean Six Forum Magazine (November 2001) 1, No. 1, 36. Sigma and the DMAIC framework can begin consistently yield- 22. Breyfogle, F.W., Cupello, J.M., and Meadows, B.: Managing Six ing business results on an organizational level in oilfield opera- Sigma: A Practical Guide to Understanding, Assessing, and Imple- tions within 1 year. This is accomplished by broadly embedding menting the Strategy That Yields Bottom-Line Success, Quality Press, quality and statistical thinking in routine engineering and non- Milwaukee, Wisconsin (2001). engineering process improvements and problem solving. 23. Snee, R.D. and Hoerl, R.W.: Leading Six Sigma, Prentice-Hall, New Jersey (2003). Nomenclature 24. Schmidt, S.R. and Launsby, R.G.: Understanding Industrial Designed Cp ⳱ process capability potential, dimensionless Experiments, Air Academy Press, Colorado Springs, Colorado (2000). 25. Del Vecchio, R.J.: Understanding Design of Experiments, Hanser Pub- Cpk ⳱ process capability, dimensionless lishers, Munich (1997). xbar ⳱ process sample average ⳱ population standard deviation Scot Buell has worked the last 23 years in various reservoir, level ⳱ minimum of [(USL–xbar)/ or (xbar–LSL)/] production, drilling, and operations engineering positions in North America, Africa, and Asia. e-mail: rsbuell@yahoo.com. Acknowledgments He is a registered engineer. For the last 5 years, he has been practicing and deploying the Lean Six Sigma methodology. He The authors thank Gary Luquette, Warner Williams, Bob Gal- has authored or coauthored 10 SPE papers on artificial lift, well braith, and Chris Prattini of ChevronTexaco management for their stimulation, profile modification, economic forecasting, and vision, support, and leadership of Lean Six Sigma. The authors reservoir modeling. Buell holds BS and MS degrees in petroleum also acknowledge Ron Berdine and Sally Ulman of Air Academy engineering, and an MS degree in mineral economics, all from Assn. as a source of advice and inspiration for this work. the Colorado School of Mines. He is currently a technical editor for SPE and has served as Cochairman for both the SPE Ap- References plied Technology Workshop on Production Enhancement and the SPE Forum on Fast Track Production. Stephen Turnipseed 1. Shewhart, W.A.: Statistical Method from the Viewpoint of Quality Con- has 22 years of experience in numerous upstream roles in fa- trol, Dover Publications, New York City (1939). cilities, production, and technical support in North America 2. Ishikawa, K.: What is Total Quality Control?, Prentice-Hall, Engel- and Indonesia. e-mail: spturnip@chevrontexaco.com. He has wood Cliffs, New Jersey (1985). also provided technical service both to major offshore devel- 3. “Criteria for Performance Excellence,” Baldridge Natl. Quality Pro- opments and to onshore operations in the U.K., Middle East, gram, Natl. Inst. of Standards and Technology, U.S. DOC, Washington, and West Africa. Turnipseed has authored or coauthored nu- DC (2003). merous NACE papers on corrosion control. He became a fa- cilitator of Lean Sigma in January 2000 and is certified as a 4. Deming, W.E.: Out of the Crisis, MIT Press, Cambridge, Massachu- trainer. He is currently the Process Adviser for the deployment setts (1986). of Lean Sigma in the San Joaquin Valley Business Unit. Turnip- 5. Juran, J.M. and Godfrey, A.B.: Juran’s Quality Handbook, McGraw- seed holds a BS degree in chemical engineering from the U. Hill, New York City (1999). of Mississippi.