Operations and maintenance performance in oil and gas production assets : theoretical architecture and capital value theory in perspective
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Oil & gas exploration and production by far is known to be an economically and technologically intensive business. In addition, its social and ecological sensitivity is much discussed and debated lately. The dynamic, uncertain, and complex business environment appear to have redefined what truly matters for commercial success in oil and gas business. Asset operations and maintenance process is receiving an increasing attention in this environment. At the current pace of advancement, both in engineering and business management disciplines, performance management of asset operations and maintenance process has gained considerable momentum particularly in high risk and capital intensive industries. Petroleum industry in particular is much keen in general on the application of performance assessment systems to better manage oil and gas production assets. Not only oil and gas producers but also regulatory authorities (e.g. Norwegian Petroleum Directorate, Minerals Management Service (USA), etc.) have taken compelling initiatives in this endeavor. The demand for better insights into critical asset processes in relation to business objectives, coupled with growing criticisms on reliance on pure financial assessments, seems to have contributed much to ongoing attempts to redefine business impact of operations and maintenance performance. In response to growing demands from the Norwegian oil & gas industry, a joint industry project on the development and implementation of operations and maintenance performance indicators for the petroleum industry was initiated by the Center for Asset & Maintenance Management of Stavanger University College, Norway, in 1999. The project consortium composed of BP, Shell, Philips, Statoil, NorskHydro, Norwegian Petroleum Directorate, PricewaterhouseCoopers, Andersen Consulting, DNV, Industrial and Financial Systems (IFS), ADB Systems AS, DNV, RC Consultants and Tieto Enator. While the project was managed effectively to serve the expectations of member organizations, its boundaries were predefined by various conditions within organizational environments leaving a substantial space unexplored. Hence, the width and the breadth of operations and maintenance performance captured by the project were largely limited. This called for an independent research study to explore the phenomenon with a more broader or holistic perspective. Notably thus, while the project was devoted to a down-to-earth component of the exercise, i.e. to develop performance indicators, the exploratory research study was launched alongside to bring a theoretical or a philosophical insight. The study was conducted during 2000-2002 with collaboration of 14 organizations within the Norwegian continental shelf. The population included oil and gas producers (BP, ConocoPhilips, ExxonMobil, Norsk Hydro, Shell, Statoil), regulatory and verification bodies (Norwegian Petroleum Directorate, DNV), and third parties (ABB, Aker Offshore Partner, Kvaener Oil and Gas, PricewaterhouseCoopers, RC-Consultants, SDV). The study identified the bulk of problems that the entire problem domain constitute of within operations and maintenance performance. They were classified into some theoretical forms, and the study concentrated on, what I term, technical alienation, i.e. lack of descriptive performance models to guide meaningful assessment and management of operations and maintenance performance. The choice to shed some light in this endeavor was based on the relevance to SDV project, emerging managerial interest to visualize how operations and maintenance performance makes good business sense, and more balanced information and knowledge requirements to support decisions settings. The thesis emphasizes that despite there is a popular demand on this issue, subject matter has not fully been explored within the oil and gas business environment, and even the few of more recent contributions have not adequately addressed the issue. The underlying challenges in this regard are attributed in this thesis to socio-technical complexity and causal ambiguity of operations and maintenance performance within organizational settings. And it furthermore emphasizes that the degree of such complexity and ambiguity are defined by the extent of information and knowledge asymmetries on performance. To address the issue of technical alienation of operations and maintenance performance in oil and gas business terms, the thesis attempt to generate a link between oil and gas business, oil and gas production assets, and operations and maintenance performance. The underlying assertion is that, oil and gas production portfolio of any organization bears a specific role-play in respect of what matters for commercial success of the business, and that role-play in turn is the basis to redefine the mission for operations and maintenance. And also, this mission remains the point of departure for systematic development of operations and maintenance performance architecture. The theoretical architecture that is brought into perspective in this thesis, addresses both the socio-technical complexity by dimensioning operations and maintenance performance into its constituent components, and causal ambiguity simultaneously by incorporating a logic to this dimensioning process. Equally importantly, during this effort, it also pays attention to institute relevance, completeness, and flexibility of the architecture as necessary. Moving further, the thesis elaborates on how this theoretical architecture can be extended so that it can be framed within the popular Balanced scorecard concept. Moreover based on this theoretical architecture, a formal theory termed Capital value theory was brought into perspective, resorting to relevant scholarly work where necessary, that contribute to further our understanding that operations and maintenance is a value-added process to oil and gas business in the emerging business environment. The thesis stress that the emerging oil and gas business environment is quite opportunistic to portray how operations and maintenance performance makes good business sense. The underlying assertion is that there are economical, institutional, and social legitimacy bases to better explain operations and maintenance performance in relation to sustainable O&G business. Yet the degree of success with which it can be realized is largely contingent on the nature of value proposition by individual oil and gas organizations and value perception by the bulk of stakeholders of oil and gas business activity.