Recently, when gasoline was available in some places in the United States for less than $2 per gallon, most people were enjoying the extra money in the economy, and the petroleum industry didn't capture very many headlines. Now that gasoline is headed back toward $5 per gallon in some places, such as California, the industry is once again in the news, and it's usually not in a favorable light.
Several things have led to the recent spate of news reports about the industry. First of all is the strike that has affected production. Then there was the California refinery accident that reduced refining capacity for the state and is affecting the West. Finally, there have been transportation issues and accidents that really don’t affect prices much but certainly don’t help the industry's image with the public. The petroleum industry needs to take a step back and focus on Asset Performance Management (APM) not only to address its operational issues but also to buoy its public image. Below, I'll discuss why APM is a critical tool.
APM, Performed Well, Reduces Accidents Across the Supply Chain
Whether at the well-head or the refinery or along any part of the transportation train, failures that result in any kind of accident also result in economic impact and reputation damage. This is particularly true of incidents with Environment, Health & Safety (EHS) implications. APM is one of the most recognized tools to reduce Operational Risk Management (ORM) from accidents. Healthy assets are the foundation of a healthy business, and worn-out and improperly maintained equipment ranks right next to human error as a leading cause of accidents.
Dan Miklovic is principal analyst with LNS Research (www.lnsresearch.com), and is the author of the LNS Research APM Best Practices Guide. His primary focus is research and development in the asset and energy management practices. Dan has more than 40 years of experience in manufacturing IT, R&D, engineering, and sales across several industries, as well as more than 20 years of industry experience at companies such as Emerson Electric, Mallinckrodt Chemical, Weyerhaeuser, and Scott Products, as well as several consulting companies and software provider Aspen Technology.
A simple analogy any motorist can relate to: If you don’t maintain the brakes on your car, eventually you won’t be able to stop when you need to, and an accident is bound to occur. The same is true on a crude train or finished-goods tanker. And whether the petroleum company owns the transportation asset or not, the fact is that the public still sees the industry as the offending party, and its reputation still suffers with every accident.
When it comes to wells, either on land or offshore, the damage from accidents is directly linked to the producer, and likewise at the refinery. In both transportation and production cases the loss of production volume still impacts the bottom line. With reduced capacity, prices invariably increase and this further erodes the public's trust in the petroleum industry. Every accident that APM could have prevented results in a two- to three-fold impact on the company's bottom line. With those stakes, APM seems like a pretty good investment.
APM and Operational Excellence
Right now one of the major factors affecting oil production and supply, and supposedly increasing prices as well, is capacity restriction because of labor situations across the United States. Regardless of whether you consider a particular labor action right or wrong, there is a link to APM and production capacity. A well-maintained facility is much easier to operate and more likely to maintain production volumes, even if short-staffed. Also, if the production facility is kept at top operating efficiency and condition at all times, forced maintenance delays that might occur during a labor dispute, or even other potential situations like supply-chain disruptions caused by natural events (e.g., weather) allow for longer sustained peak-level performance than a facility that is always on the verge of failure.
In this scenario, APM plays a role that enhances a company's ability to keep its assets performing at or near peak levels. Over the past several decades, APM has grown significantly in scope through new standards, software technologies, strategies, and integrations with other key business areas. Today, it is an essential component of achieving eperational excellence. Through the use of enhanced sensing, broader data collection, and better data analytics, an operator simply better understands the plants condition and, more importantly, if applying reliability centered maintenance (RCM), the ORM implications of his or her maintenance activities. Even when RCM is not utilized, just the better overall condition resulting from better and timelier maintenance yields significant payback.
So while supply and demand and crude prices may be swinging widely these days, the smart producers not only are applying APM to their own operations, but also they're insisting that their transportation partners do so. These are the companies that don't make the news, which is good for all involved.