In brief:
- Nexen’s Long Lake Oil Sands Division in remote Canada plans turnarounds 12 to 18 months ahead. The remoteness of the location makes it difficult to bring material into the plant, so staging is done early to avoid potential physical problems, transportation troubles in winter months, customs, damaged goods and other delivery challenges.
- Significant, capital and critical parts are detail-planned and purchased to arrive about 60 days before the turnaround, so there’s time to bag, tag and stage them, including inspection and return damaged goods for a replacement.
- The facility uses a material availability report by functional location and work order as a performance indicator. It also has a material compliance report for tracking details on lead times, requirement dates, delivery dates, actual deliveries, purchase order detail and material status.
Mario Abella is project control consultant at Nexen (www.nexeninc.com) and a certified management accountant with more than 20 years of oil and gas industry experience. He’s held various positions including construction project manager, project controls specialist, senior business analyst and management consultant. For the past seven years, Mario has focused on the plan-to-pay business processes and how they impact project managers and maintenance planners in operations and maintenance, engineering and construction. He will present Turnaround Management: Planning & Execution of Materials at SAP’s Best Practices for Oil & Gas conference, Oct. 23-26 in New Orleans. Learn more or register at www.sap-oil-and-gas.com.
PS: How often do turnarounds typically take place at Nexen facilities? What does the planning cycle look like for a typical event, and how long does it last?
MA: My perspective is limited to our Long Lake Oil Sands Division. This is a relatively new industry. Building a large, complex oil sands facility requires patience, persistence and vision. The story of Long Lake began in the mid-1990s, a time when steam-assisted gravity drainage (SAGD) technology was first being commercialized. Years of planning along with favorable oil prices led us to it.
Our pilot plant commenced in the spring of 2003, for our Long Lake oil sands operation at Fort McMurray, Alberta, and then we built the commercial-scale plant based on the pilot plant success. Initial production of premium synthetic crude (PSC) oil from the upgrader began in January 2009. We had our first turnaround in the fall of 2009, and the next major one is scheduled for 2012. We also conduct about 12 outages - mini-turnarounds - each year. These are scheduled for the summer months when the weather is in our favor.
Long Lake is designed to produce 60,000 bbls/day of premium synthetic crude. Production at Long Lake is currently averaging 28,300 bbls/day, as of May 19.
We plan turnarounds 12 to 18 months ahead. We’re in a remote location, so it’s difficult to bring material into the plant. Transportation is an issue. We try to stage what we need for a turnaround extra early because of potential physical problems, transportation in winter months, customs, damaged goods and other delivery challenges.
PS: When planning a plant turnaround at Nexen, how do you avoid focusing on non-value-added activities? What about avoiding common pitfalls associated with long lead procurement of materials?
MA: Some materials are difficult to manage — consumables, for example. We have suppliers bring fully stocked trailers to the site during the turnaround, and we use a free issue system that is tracked outside SAP. We pay as we go based on the work order and free issue records, so we don’t have to do any detail planning in SAP for those materials.
Purchase of the significant, capital and critical parts is detail-planned in SAP. They arrive about 60 days before the turnaround, so we have time to bag and tag, stage them, including inspection and return damaged goods for a replacement. For example, if an item has a six-month lead time, we add the six months to the 60 days for ordering purposes.
PS: Often, capital project work is planned for execution concurrently with a turnaround. And sometimes external resources are contracted for turnaround work. How do you accurately define the scope of the turnaround and integrate considerations such as these into the plan, especially when the scope can change once the turnaround execution begins and equipment is inspected?
MA: We do some of our cost and financial accounting after the fact, post-project accounting and base it on the work orders and their functional location to determine accounting treatment — capital versus expense. The capital projects and the turnaround are treated as one big package and interdependencies are identified. We have about 500 employees and use maybe 500 subcontractors on-site on any given day for capital projects and operations. Some of these are embedded subcontractors, who have access to the same documents as the regular employees in order to streamline processes.
The oil sands industry generally has a high employee turnover, as high as 150% per year, so planning is difficult and, therefore, we must rely on contractors for fulfillment. We have a unique and young plant, less than three years in commercial operation and many days in sub-zero conditions, therefore, material procurement and handling, including transportation, is challenging.
How we define scope of work is a good question. It’s a hot topic here, but I’m not involved in scope management. We use SAP revision codes on our work orders and expectations to manage those dates and materials accurately and timely. We prioritize work orders after determining which hardware needs to be replaced. We hold a lot of meetings to discuss which work orders need to take place in which sequence. We try to manage the scope within the functional area. We pretty much know what needs to be done, but we need to determine the order to be done. Right now, we’re identifying what needs to be replaced. There probably will be work that will be pushed out after the turnaround. The next turnaround is some time next spring, and we’re doing the planning now.
PS: How does the change in scope typically impact materials, and what does your inventory management and supply chain look like to allow you to manage project materials, along with your operational materials?
MA: Our supply chain representatives sit at the same table. We have two warehouses, one for production materials and the other for turnaround materials. Each has its own logistics team and buyers. This makes it almost like a separate company.
The turnaround materials are staged and kitted by functional location and work order. In the past, we purchased long lead direct to a work order — when received, it’s assumed to be installed. This negatively impacted our SAP reporting on material availability. It was assumed to be withdrawn. This problem is compounded when requirement dates are changing frequently during the planning phases.
SAP Project Stock functionality helps us solve this problem. It tracks the status of a material through the turnaround project lifecycle. The data we get is more granular and we can tell what’s been ordered, staged, inspected and installed. We track the full lifecycle of procurement, something that’s not typically required for everyday operations, but advantageous for turnarounds.
PS: What are some of the key performance indicators you use at Nexen, and can you explain how they might be used to track the progress of the turnaround or perhaps determine when to begin decreasing resources for maximum efficiency?
MA: The performance indicators we use are a material availability report by functional location and work order. As well, we have a material compliance report. The latter is for tracking details on lead times, requirement dates, delivery dates, actual deliveries, purchase order detail and material status. This is sometimes called expediting information.
We use SAP to track all our material lifecycle information as we progress through the planning phase of the turnaround. Having all materials staged 60 days prior to turnaround, we expect the steps in SAP to issue materials will be a simple mechanical step of issuing from project stock to the relevant work order. During the execution of the two-week turnaround, the process will be well-defined and understood.