Replication: Tightening The Oilsands Construction Supply Chain

The first half of 2015 has seen oilsands operators announce a flurry of initiatives aimed at streamlining construction of new projects to drive down construction costs.

The new buzzword is “replication.”

The idea is to use a template or “design-one-build-many” approach — and make no mistake, keeping to schedule is paramount, Craig McInnis, manager of the field development program at Cenovus Energy, told the Oilsands Review Speaker Series entitled Project Delivery: The New Normal.

Cenovus is building its in situ oilsands projects by duplicating its design using a template.

Within nine months of starting Christina Lake Phase G, a copy of Phase F, Cenovus had already ordered 100 per cent of its materials and 80 per cent of its equipment, and it was driving piles, pouring concrete and delivering modules to the site.

The whole concept in templating is to shrink each stage of a project, said McInnis.

“There are a lot of things you don’t have to redo and to overlap each stage of the project with very little risk because you have all the information you need to proceed: cost, schedule, scope, you name it.

“We’re issuing drawings, we’re fabricating equipment, we’re assembling modules. We’re really doing the physical stuff that we have to do to deliver a project. We’re not doing studies, we’re not doing estimates, we’re not doing that front-end work that is absolutely, critically important the first time, but it is absolutely a waste of time and effort the second and third time you’re trying to build that facility.”

Supplier efficiency is another consideration. Suppliers talk about shop utilization of between 40 and 60 per cent and to McInnis, this is “absolutely scary.”

“When you think about all the infrastructure that’s required in a shop, all of the people they have available to do work and they’re simply not able to put that infrastructure and those people to work effectively because they have all of their drawings either tied up in engineering houses, in drawing reviews, revisions and resubmissions, and rework in their own engineering shops, making changes, readjusting their bills and materials, trying to source material — you name it.”

A key aspect of the company’s philosophy is don’t change what the fabricators have done.

“Allow the fabricators to optimally fit the fabrication of your equipment into their work cycle, and if that means waiting two months to have your equipment fabricated, wait two months to have your equipment fabricated,” McInnis said. “Just make sure you have those discussions up front and make sure that’s built into your integrated schedule from the beginning to the end.”

Right-sizing equipment is also key to cutting costs, said McInnis. When Cenovus decided to tackle its sustaining costs and redesign its modules, the company consulted its best production and reservoir engineers on what they truly need to operate SAGD wells on a daily basis and then ran analytics on that input.

“With them getting on board with this whole idea of only installing what we needed, we were able to massively attack the scope that we were installing on our modules.”

The company then addressed its manufacturing of modules by poring over its 10-year production data with a view to sizing criteria for the next five to 10 years.

“It’s funny, but you get into a position over time on projects where you do things for certain reasons that are usually the right decisions at the time but what we found when we actually plotted that production data against our current module sizing is that we were off the average production curve,” he said. “We were to the right of the average production curve in terms of our capacity and we were designing our modules to handle, sort of initial start-up, peak production from some very good pads, and that created excess, so we went through an exercise to resize everything on our modules.”

The company created a design basis memorandum that fitted what it needed and that it could use at Christina Lake, Foster Creek and Narrows Lake.

Drilling, completions, operations and maintenance personnel were consulted to create what the company called a “zero-based module,” or ZBM. Zero-based design requires beginning from scratch, without preconceptions or existing models as guides, beginning with a goal in mind.

The outcome of the company’s ZBM was a 59 per cent reduction in piles, 56 per cent reduction in piping, 79 per cent reduction in bolt ups, 50 per cent reduction in insulation, 83 per cent reduction in valves, 58 per cent reduction in instruments and it has virtually eliminated field welding, said McInnis.

The modules are light, easy to fabricate and shippable within Alberta, he added.

Cenovus had a target to reduce the cost of its modules by 60–70 per cent. Estimates are that it currently is at 50 per cent reduction and that’s before fabrication has begun, he said.

Suncor Energy is rolling out a long-term, phased strategy this year to replicate future oilsands projects, the company said at its annual general meeting.

“The reason we’re calling it a replication strategy is we’re trying to come up with exactly the same design plan so we’ve been looking for pockets of resource where we can have identical plants to drive down the cost,” Mark Little, executive vice-president upstream, told the meeting. “The resource is there; we’re trying to figure out how to bring it to market in a less-costly manner.”

Suncor has identified nine “pockets” believed to contain between 400 million and 600 million barrels in Alberta’s Meadow Creek and Lewis areas, near Firebag, where it has been drilling for the past few years to define the resource quality, said Little.

The company is now in the process of designing the accompanying facilities.

Suncor is also investigating which technologies will be most cost efficient for the SAGD projects, including direct-contact steam generators and non-water based ones such as heated solvents and radio waves, Little added.

Imperial Oil is also using a replication strategy at its Kearl mine. Much of the design of Kearl, Imperial Oil Limited’s 110,000 bbl-per-day oilsands mine, was duplicated for its second phase, said Bill Cheek, senior project manager for the expansion, which will add capacity of another 110,000 bbls per day.

The cost of the Kearl initial development was $12.9 billion while the expansion cost, which used the concept of “design-one-build-many,” is pegged at just $8.9 billion.

“We went right back — same engineer, took the same drawings, changed the title block on them and re-issued them to the same construction contractors,” said Cheek.

The original engineering documents cost about 36 man-hours per document whereas each design-one-build-many document cost less than one hour, he said.

Contractors were then able to take those documents and after the initial development, re-sequence the work to make money, said Cheek. As a result, Imperial negotiated similar lump-sum values as for the Kearl initial development and was able to shorten the schedule, he said.

“Whenever you get on a project and they say, ‘Don’t talk about being schedule driven,’ that’s not true, especially on remote jobs because on remote jobs, schedule is everything,” said Cheek. “It was costing us over $30 million a month to support the direct work on the Kearl site. So think about if you miss your schedule by six months — what’s that going to cost you.

“Driving schedule is everything and design-one-build-many and having the contractors familiar with the work to go back in and duplicate the work … was very valuable.”

To learn more about technological innovation in the oilpatch, plan to attend the Canadian Energy Technology Forum (CETF), a unique industry event that explores the technological and operational foundation of the digital oilfield. The forum features innovation leaders who have increased revenue, improved operating margins and enhanced asset efficiencies by leveraging digital oilfield technology. CETF takes place October 27 at the BMO Centre in Calgary. Visit energytechforum.ca for more information.

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