In Focus: Fit for the future
Upstream works relentlessly to operate assets more safely, reliably and cost effectively, to make the business more competitive, resilient and fit for the future.
Low oil prices and our acquisition of BG have been significant catalysts for change in our business. In response, we developed a continuous improvement programme called ‘Fit for the future’.
The programme has helped reduce upstream operating expenses by more than 20% since 2015, while the combined Shell and BG upstream businesses increased production by 20%.
The programme challenges every Shell organisation to define its maximum potential and develop relentless improvement plans to approach that potential. In weekly meetings, teams rigorously review improvement initiatives and achievements, focusing on areas where progress has fallen short of expectations.
More than 7,000 initiatives
Since we started the programme, more than 7,000 improvement initiatives have been or are being actioned.
Increases in production can also be achieved by reducing the impact of planned maintenance. For example, by increasing the intervals between planned maintenance shutdowns, we have already saved about $200 million (gross) in costs and gained around 20 million barrels of production, without impacting asset integrity. This is a sustainable and structural change that significantly reduces safety risks, costs and production losses – now and in the future.
We also focus on optimising production through improved well, reservoir and facility management. Interventions made in 2017 have the potential to unlock up to 74 thousand boe/d (Shell share before royalties) by the end of 2018, for an investment of around $60 million.
Other than operational excellence, we also work on making our new projects more resilient. We have fundamentally changed the way we conceptualise and execute projects; break-even price has now priority over engineering achievements or maximising net present value. Also see P&T in Focus.
Why reinvent when you can replicate?
We focus on the competitive scope of our designs, effective execution, and leveraging our supply chains.
We standardise our platform designs so they can be replicated. By doing so, we expect to develop our SK408 project in Malaysia for 30% less cost than what is now best in class in the industry.
By simplifying the concept for our Vito project in the Gulf of Mexico, we reduced the cost by around 70% compared to what we initially estimated.
By opting for a modular construction of a tight-oil processing plant in Canada, we have kept the project five months ahead of schedule while keeping costs around 30% below those for competitors' plants.
Our work to reduce costs, improve operational efficiency and upgrade our portfolio is starting to show in our financial results.