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SPE-187332-MS
Change Culture, Compete On Costs & Deliver: A Success Story On Adapting
A Worldwide International Oil Company Organization To A Challenging Low
Oil Price Environment
Stéphane Saintpere, Kevin Hannaford, Simona Ludosan, Adoulaye Ndiaye, Edouard Baldy, and Frank Cousin,
Total
Copyright 2017, Society of Petroleum Engineers
This paper was prepared for presentation at the SPE Annual Technical Conference and Exhibition held in San Antonio, Texas, USA, 9-11 October 2017.
This paper was selected for presentation by an SPE program committee following review of information contained in an abstract submitted by the author(s). Contents
of the paper have not been reviewed by the Society of Petroleum Engineers and are subject to correction by the author(s). The material does not necessarily reflect
any position of the Society of Petroleum Engineers, its officers, or members. Electronic reproduction, distribution, or storage of any part of this paper without the written
consent of the Society of Petroleum Engineers is prohibited. Permission to reproduce in print is restricted to an abstract of not more than 300 words; illustrations may
not be copied. The abstract must contain conspicuous acknowledgment of SPE copyright.
Abstract
In March 2014, when the oil price was still above 100 dollars per barrel, the management of TOTAL
recognized that the profitability and return on investment were too low and decided to launch an E&P cost
culture initiative in response to a decade of excessive cost inflation experienced within the industry. The
objective was to embed a cost culture at each level of the organization, designed to reduce significantly
operating costsand projects development costs.
The E&P branch named its program "4C&Deliver: Change Culture, Compete on Costs and
Deliver" (4C&D), with two key objectives:
– Deploy a strong cost and performance culture within the E&P organization
– Sustainably reduce costs in order to be able to sanction new projects.
All affiliates and head office divisions were requested to contribute to a 3-year cost reduction plan,
addressing all manageable costs (Opex, Capex and Exploration Costs) with quantified savings targets.
This was supported by a change management plan in order to lastingly shift the cost culture, while keeping
the HSE performance at its highest, considering that improving the operating mode and efficiency would
improve control over the day-to-day on-site works.
During the early phases of deployment of this program, one of the main drivers was to generate the cost
optimization initiatives from the employees themselves everywhere in the world, aiming at rethinking the
working methods from inside (bottom up approach).
The dissemination of good practices, the integration of the continuous improvement philosophy (LEAN)
combined with digital transformation and innovations were keys to success.
The program, that was animated at headquarter level relied on a strong network deployed in affiliates,
led to outstanding results as OPEX saving targets were exceeded both in 2015 & 2016, making the Total
group one of the best performing IOC's.
This paper will describe:
– the main aspects of the methodology, and in particular the "bottom-up" approach in the initial
deployment that generated a strong adhesion in the program by the employees,
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– the governance and animation, based on more than 200 program correspondents worldwide
and a small central team,
– the main initiative types and associated costs savings, illustrated by concrete examples from
various entities (logistics, drilling, production, maintenance, support,…),
– the transition to a continuous improvement process towards operational excellence.
With 2,300 costs reductions initiatives at the end of 2016, more than 4 billion dollars cumulated savings
on operating costs anticipated over 3 years, and highly committed teams, the operating costs have already
been reduced by 40 % from an average 10 dollars per barrel in 2014 to 6 dollars per barrel in 2016. This cost
optimization program was a first step in the empowerment of all levels in the company towards sustainable
value creation.
Genesis and implementation of the 4C&D Program
Case for Change
Early in 2014, the profitability of the "business model" of Total as an O&G operator wasdiagnosed by the
management to bethreatened by cost inflation in an environment of stable oil price circa 100$/bbl: after
a decade of continuous increase, OPEX culminated at a worldwide average of 9.9 $/bbl in 2014 for Total
(Figure 1).
Figure 1—Evolution of Operating Costs showing a peak in 2014
This tendencywas not only a concern for Total but also for all other Majors:OPEX increase at an annual
rate of 10% was no longer deemed sustainable, although Total was still the IOC with the lowest operating
costs amongst its peers (Figure 1).In this particular context, Christophe de Margerie, the former CEO of
Total deceased in a dramatic airplane crash in Moscow in October 2014, decided to launcha massive, multi
branch cost saving exercise in order to embed, at all levels of the organization, the cost culture as a value
of the company.
This project was launched just before the impressive oil price drop initiated in September 2014 (Figure 3).
For the E&P branch, the cost saving exercise was named "4C&Deliver: Change Culture, Compete on
Costs and Deliver"(4C&D)and was defined as a3-year cost reduction plan (2015-2017) with quantified
saving targets, mainly focused on OPEX, but extended to CAPEX and Exploration expenditures as well,
with the ultimate objective to do more with less. CAPEX and Exploration savings are very sensitive to the
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strategic decision of budget allocation: they were reduced significantly in 2015 and 2016 for Total similarly
to the rest of the O&G industry. These two categories of savings will not be presented further in the course of
this paper, even though they are of utmost importance for the future of the company. However, the approach
described for OPEX was also applied to CAPEX and Exploration, the ambitious ultimate target for Total
being to cut the new projects costs by half.
The ambition of 4C&D was expressed in two key objectives in line with the E&P strategy (Figure 2):
– Deploy a strong Cost Culture within the E&P organization
– Sustainably reduce the costs, based on the 2013 realization (2013 baseline), by a change management
plan to durably shift the Cost Culture.
Figure 2—4C&D Program clearly defined as a transition phase
towards a sustainable continuous improvement type organization
Deployment
From the beginning, the deployment of the program followed two firm basic principles:
- Everybody was to be involved with no specific targets assigned in the first phase. This principle was
defined to ensure that all E&P affiliates and all HQ functions were mobilized thanksto a very visible Top
Management Commitment. No one was exempted from the effort of challenging costs and organization.In
parallel, it was the only way to ensure that a bottom-up approach would really take place afterwards without
any reluctance.
As a consequence of this strongly established bottom up approach strategy, a corollary was that job
reductions would be minimized. The participation and later commitment of the teams to generate cost
optimization ideas couldonly be achieved if employees were reassured on their future. It would have proved
very difficult to ask for cost optimization initiatives if staff had the feeling that the next step could be
endangering their own position!
However, this affirmation did not mean that organizations could not be challenged. It was in reality the
opposite: a freezing of recruitment was decided worldwide and an optimization of the organizations was
requested, taking advantage of the favorablepyramid of age (retirements). Concurrently, managers were
asked to impose an increased selectivity to downsize the number of positionsheld byexpatriated consultants.
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This was the opportunity to deploy continuous improvement actions, using the LEAN methodology, which
was selected as the method at E&P level, to tackle the challenge of individual, as well as collective,
productivity improvement. Many LEAN projects launched in the affiliates had the objective to improve
processes and organizations so that more could be done with less bysmaller teams of highly motivated staff.
It was also the opportunity to accelerate the replacement of expatriates by local well trained employees
exposed to greater responsibilities earlier than initially planned.
- The objective was long term and not short term. The whole strategy was to challengeworking
habits and deploy a strong cost culture in order to prepare sustainable changes that would last whatever the
economical environment: all efforts made in a challenging price environment would also prove beneficial in
a favorablemarket. The strategy was to shift to a continuous improvement management type of organization
in a second phase.
The program was deployed according to the following steps illustrated in Figure 3: 4C&D Program
OPEX Objective revisions in a durable low oil price environment.
– A central HQ piloting team was mobilized to ensure consolidationof affiliate plans and their
coherence. This team was supported by a group of consultants from the Boston Consultant Group
(BCG), who had in depth experience in managing such large scale cost efficiency programs.
– Aprogram leader was nominated in every affiliate and more than 100 persons started working on
the generation and quantification of ideas.
– A first bottom-up phase was launched in all affiliates in order to define ambitions 3 months after
the official launch of the program.Consultants were deployed in the major affiliates to animate
workshops aiming at gathering cost optimization ideas from the teams. Ideas were classified, ranked
and prioritized. This bottom-up part of the exercise was at the heart of the success of the project. An
efficient commando type approach was adopted to quickly mobilize the staff and shake the whole
organization! The assistance of a team of consultants proved helpful in the early phaseto rapidly
implement and deploy the program.
– In headquarters, each operational unit started analyzing its HQ structure costs as well; in parallel,
they triggered the animation of the technical network in affiliates in order to generate more transverse
ideas.
– Once the ambition was set and agreed by theE&P Board of Directors, the program continued
towards the autumn 2014 with the detailed engineering and approval of the cost reduction plan in each
of the affiliates and at HQ (definition of actions, planningand quantification). The initial ambition
was formally set for OPEX reduction, focusing initially on the operated assets, as:
◦
◦
◦
8% OPEX Reduction for 2015 vs. 2013 Baseline
11% OPEX Reduction for 2016 vs. 2013 Baseline
15% OPEX Reduction for 2017vs. 2013 Baseline
In the course of the first year of the program, i.e. 2015, the forecasted savings generated by the
program were seen to clearly exceed the initial ambition and a first top-down revision of the objective was
communicated in mid-2015 to increase the 2015 ambition from – 8% to – 11% on OPEX (-13% in 2016 and
-20% in 2017). This was the price of success! The mobilization of the E&P teams worldwide had already
exceeded expectations.
Since then, the ambition has been regularly updated as shown in Figure 3. The program has been fed from
both parts: on the one hand, the bottom-up approach generating cost optimization initiatives with expected
gains exceeding objectives; on the other hand, the management setting stretchedtargets so as to mobilize
the teams further.
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Figure 3—4C&D Program OPEX Objective revisions in a durable low oil price environment.
Safety and Integrity First
After a decade of continuous improvement of HSE indicators as shown by theLost Time Injury Frequency
and Total Recordable Injury Rate displayed in Figure 4, an HSE culture appeared embedded within the E&P
teams andsafety had become a core value of Total.
Figure 4—Evolution of the TotalE&P HSE lagging indicators over the last decade
Therefore, there was no compromise on Safety or Environment: committing to a better cost efficiency
could not be detrimental to the HSE performance and wasdeemed totally compatible with a continuous
improvement of HSE standards and operational performance
The experience of the Refinery & Chemicals branch, which had launched a similar cost savings plan
in2012, had shown that, the safest sites were also the most cost effective and best performers.By the end
of 2016, this assumptionalso proved to be true for E&P as the availability of the production installations
increased significantly worldwide and the TRIR still continued to decrease as shown on Figure 5.
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Figure 5—"when more efficient means safer"
A better control of the planning and realization of site interventions, associated to a campaign mode type
organization, areconsidered main parameters to also improve both safety and performance. The approach
limits simultaneous operations in duration and reduces interferencesenabling a better control of the working
teams on sites.
4C&D Program Methodology
Using an adapted piloting tool
Structuring and following cost optimization initiatives at a worldwide level requires a properly adapted tool.
It cannot be done in an efficient manner using a spreadsheet as usually done for smaller scale projects. This
tool was provided by the Boston Consulting Group: when consultants were deployed worldwide to initiate
the project, they installed a web-based interface software, called BCG Roadmapping™ Tool.
This shared internet accessible tool provides the methodology support and the interface so that cost
optimization initiatives can be gathered, compiled and compared at a worldwide level by a central team.It
is a piloting tool to help adapt strategy and ambitions based on tangible and reliable plans initiated by the
operational teams themselves.
All the saving initiatives are entered as Roadmaps in the tool and split into Milestones to follow-up the
progress.Monthly reports are automatically generated but the software also enables customized reports to
be issued easily at affiliate's level by customers or initiative's owners.
From the beginning of the project, the idea was to have a structured way to follow the initiatives without
being too rigid. That is the reason why, the system requires only one approval level above the initiative
owner when entering a new initiative: the owner of an initiative is responsible for its follow-up. When in
doubt, he refers to his local 4C&D Leader or to the supporting HQ team.
Splitting cost optimization initiatives into planned milestones
In reality, a cost optimization initiative, called a roadmap in the terminology of the 4C&D program, is a
cost optimization mini-project split into various steps by milestones with specific deadlineswhich, when
completed,realizes forecasted savings. The milestones are of different types:
– Qualitative milestones:they consist in important steps necessary for theinitiativeto continue as
planned. They are generally studies, risk assessment, request for exemption from the referential,
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contractual strategy approval, information meetings, communications, etc. Some initiatives are
straight forward and do not require extensive studies; they are classified as "Just do it" actions and can
be implemented without delay or qualitative milestones, always with the same objective of keeping
the system easy and agile.
– Quantitative milestones: when a cost optimization initiative is mature enough and certain qualitative
milestones are achieved, the associated saving is calculated and entered as a planned value with an
expected date. The value can regularly be updated by changing the actual value until the finalised
saving value is confirmed at the due date. Savings associated to an initiative are split depending on
their impact, whether OPEX, CAPEX and/or Explo. A category of savings was also generated for
OPEX cost optimization initiatives in assets operated by others (OBO) where Total has a working
interest. Although the initial focus was on Operated Assets, it was clear that in order to meet the
overall ambition of OPEX reduction in Group Share, an effort had to be implemented to gather
elements of cost optimization programs launched by partners operating the OBO assets. It was also the
opportunity to play an active role as shareholder and influence the operator to launch cost optimization
programs if not already started.
Categorizing cost optimization initiatives
All of the cost optimization initiatives are classified into 14 technical disciplines and 13 levers as described
on Figure 6. The categorization enables a specific data analysis and mapping of the savings for every
affiliate. Gaps to the average are analysed and areas of further effort for a specific discipline and/or levercan
be identified.
Figure 6—All the costs optimization initiatives are classified against a technical discipline and a lever
Governance and animation of the 4C&D Program
Organization and Governance
The project was organized as follows:
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– An E&P 4C&D sponsor, member of the E&P board of Directors was nominated in orderto help
define the program ambition, objectives and to communicate on the importance of such a project
within the organisation.
– A central4C&Dsupporting team (6 members) led by a project director and employees from various
backgrounds (finance, operational, project, contracts and procurements, communication). The task
of the central team was to supervise and follow-up the deployment of the program by consultants in
the subsidiariesas well as in the HQ divisions. It was also in charge of controlling the quality of the
initiatives both in terms of reliability and evaluation of savings as well as providing best practices
for others to follow
– 4C&D Correspondents in HQ Technical Divisions were nominatedto launch actions in very
specific domains of competence, like Drilling, Logistics, Production, Contracts &Procurement,
Human Resources and Construction & Projects
– At affiliate level, a similar approach was implemented with the appointment of a 4C&D Local
Sponsor, member of the board of directors in the subsidiary, and a Local 4C&D Leader.In particular,
the local Leader's role is to set up a local network and to work closely with the technical entities to
help them in formalizing their cost saving initiatives before being entered into theRoadmapping tool.
Animation
After the initial phase of deployment, the consultants were demobilized and the project became an in-house
managed program. The 4C&Dcentral team established the following working relationship with the affiliates
in order to maintain program momentum:
- Reporting: a monthly consolidated report and dashboard were issued from the data gathered from the
Roadmapping Tool. It is a simple and straight forward report with the main charts showing the evolution
of the expected savings over the past 4 month. The dashboard can be generated at affiliate, regional zone
and E&P levels.
- Monthly interactive Web sessions called "Monthly Lync": every month, two formal web
presentations are organized the same day to cover all time zones. The agenda is always the same:Safety
Moment - 4C&D Key Messages -4C&D Savings Statusshowing roadmap savings compared to objectives Topic of the Month to be shared (e.g. C&P status, Logistics focus, Drilling NPT) – Best Practices Sharing.
With an average 40 participant per session, mainly 4C&D leaders from affiliates, this "Monthly Lync"
is very collaborative. All participants can submit written questions, answered straight away orally by the
central team or other participants. This is a very efficient way to address the same message to a worldwide
audience and boost the motivation of the operational teams. It is also important to give regular feedback
on the program to ensure that the overall objectives for the year are met as well as provide key messages
from E&P top management.
- Annual Cost Performance Indicators (CPI's): 48 CPIs were initially selected. They covered all
technical disciplineswith theobjective to provide an internal benchmarkingfor the affiliates. These CPI's
became one of the main toolsfortheaffiliatesto identify areas of improvement as illustrated by Figure 7.
- Collaborative Affiliate Reviews: every year, a detailed review of every affiliate is performed. These
reviewsare done during a visit (2-4 days depending on the size of the affiliate) or in visio-conference
over 2 weeks. These reviews should not be considered as audits but rather small interactive working
sessions (1.5 hour maximum) with the various disciplines, Logistics, Drilling & Wells, Contracts &
Procurement, Production, Maintenance, Inspections, Works & Construction, Finance, Human Resources,
General Services, IT.
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Figure 7—Example of some of the 48 existing CPI's and their use for internal benchmark of an affiliate
The purpose is to review the status of existing actions, exchange about the best practices identified in
other subsidiaries and launch new actions.
A follow up session in visio-conference is organized, 3 month after the review, in order to evaluate the
progress on the agreed actions. These collaborative reviews have become a very special moment in the life
of the project at affiliate level. This is the opportunity for the HQ team to evaluate what is missing in the
animation, understand the expectations, measure the fatigue, evaluate the potential for additional savings
and of course keep motivating staff. Best practices are also captured, which can subsequently be shared
with other subsidiaries.
The way the animation is performed by the 4C&D central team is illustrated by Figure 8.
For the year 2016, this virtuous circle established between the 4C&D central team and the worldwide
4C&D network enabledalmost 700 new cost optimization initiatives to be generatedensuring that the overall
E&P OPEX saving targetwas exceeded.
- Communication. An important and visible aspect is the regular communication on the program. Some
actions are presented below:
•
•
•
•
•
•
•
Messages showing involvement from top managementwere regularly published whether
interviews, video, letters, etc.
Regular Surveys at affiliate and HQ level were performed: when staff are requested to give their
opinion, they feel valorised; it is a crucial aspect in the process to change the culture. Furthermore,
it is a good way to adapt constantly the project and answer expectations.
Intranet sites providing relevant information and toolkits (make as much updated information
accessible as possible)
Development of an internal 4C&D network community
Regular communication of program advancement both internal and external
Return of Experience: "Best Practice Cartoons" and posters.
Fun communication themes such as Mannequins' video challenge between affiliates on cost
optimization initiatives.
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Figure 8—4C&D virtuous circle
Achievements of the 4C&D Program after 2 years
Savings achieved after 2 years
After one year, the 2015 OPEX Saving (Group Share) reported by the E&P financial division was 1 billion
US$, well above the original projections of the 4C&D program.
At the end of 2016, the financial saving was almost 1.8 billion USD which was in line with the original
target for the end of the program in 2017: the ambition was achieved one year in advance. TheseE&P results
(Upstream) along with those achieved within the other branches has allowed even higher Group objectives
to be set for 2017 and 2018 – see Figure 9.
Figure 9—Group OPEX Reduction
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It is clear that not all of the savings come solely from the 4C&D program and no attempt should be made
to reconciliate the savings recorded in the Roadmapping tool and those reported in the financial statements.
The purpose of the Roadmapping is to promote, plan and follow up on initiatives proposed by the teams.
A structured program with clearly defined objectives, identified and planned cost optimisation initiatives
with a mobilised workforce is however key in achieving and exceeding cost reduction targets.
After 2 years of the cost optimization program, the average E&P OPEX (ASC 932) costs have been
reduced to 5.9 $/boe as shown in Figure 10 with a clear objective of bringing the OPEX back to an average
5 $/boe in 2018, i.e. a decrease by half in 4 years.
Figure 10—Reduction of Total E&P OPEX ($/boe)
Analysis of Cost Optimization Initiatives
Thanks to the classification of the 2230 initiatives launched worldwide and reported in the Roadmapping™
tool at the end of 2016, the OPEX savings could be grouped into 3 main categories of equivalent contribution
(Figure 11):
Figure 11—Cost Optimization Initiatives grouped in 3 main types
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A package of 140 "Best Practices" was selected and widely distributed to be applied in all affiliates in a
systematic manner. Posters were also designed based on some of the best practices to be displayed on all
E&P sites (Figures 13 to 20). Some of these best practices are described briefly in the following paragraphs.
Figure 12—a few examples of cost optimization initiatives and their range of annual savings
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Figure 13—"Repair vs. Replace" Poster
Figure 14—"Operational Efficiency" Poster
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Figure 15—"Implement CBM" Poster
Figure 16—"Optimize Marine Support" Poster
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Figure 17—"Optimize Chemicals Injection" Poster
Figure 18—"Challenge the Referential" Poster
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Figure 19—"Fit for Purpose" Poster even in HQ
Figure 20—"Challenge the Referential" Poster
Technical Costs Optimizations
This category groups all the initiatives implemented by the technical teams involved in production. The
main domains are:
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Maintenance & Inspections. The initiatives cover a large spectrum.
•
•
•
•
•
•
•
•
Challenge the referential and the frequency of preventive maintenance tasks and inspections
Increase period between full field shutdowns.
Repair versus Replace.
Use of visual management to organize efficient interventions.
Challenge the technical requirements of the General Maintenance & Operations Contracts
Develop the use of drones or autonomous underwater vessel (AUV) for inspection.
Develop Condition Based Maintenance (CBM) in order to perform maintenance only when need
arises. This maintenance is performed after one or more indicators show that equipment is going
to fail or that equipment performance is deteriorating.Ideally CBM will allow the maintenance
personnel to do only the right things, minimizing spare parts cost, equipmentdowntime and time
spent on maintenance.
Develop Risk Based Inspection (RBI):identifies, assesses and maps industrial risks which can
compromise equipment integrity in both pressurized equipment and structural elements. Failure
probability and consequence are used to optimize inspection intervals based on site-acceptable risk
levels and operating limits, while mitigating risks as appropriate.
Operations. A lot of process optimizations and interface improvements wereachieved in this discipline.
It is the perfect playground to apply the LEAN methodology.
•
•
•
•
•
•
•
•
•
•
Operate only the necessary equipments, for instance preserving a storage tank if not necessary
anymore on a production declining field.
Optimize the quantity of chemicals injected to assist the production (anti-corrosion, anti-foam, etc).
Qualify alternate cheaper chemicals.
Use of Integrated Operations Planning for prioritization of activities with more value creation
Optimize the Permit to Work System and reporting to maximize the tool-time on site.
Better control teams productivity through a work campaign approach.
Re-consider the operating mode to reduce the number of people on site. This was the main source of
durable savings as illustrated in Angola with the re-organization of 4 FPSO's and implementation
of collaborative smart rooms. Optimizing the POB, from an average 210 pax down to 130 pax had
a snowballing effect on support and logisticswhich were not fully evaluated initially.
Reduce the number of necessary process control systems in particular gas & fire detectors to reduce
maintenance and loss of production due to defaults.
Optimize production transportation coststhrough revision of the contractual extra capacity or by
sub-letting the capacity when operating the pipelines network.
Optimize Well Servicing interventions to balance benefits versus costs.
Use of digital technology. For example LIDAR (Laser Imaging, Detection and Ranging) used from
an aircraft to perform topographical surveys in remote places allowing in a few days instead of
several months, an area, ten times wider, to be surveyed.
Logistics.
•
•
Adapt the marine support with less and cheaper vessels.
Monitor closely fuel consumption and adapt speed to reduce consumption.
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•
•
•
•
Reduce number of helicopter flights. Replace helicopters by boats or land transportation for crew
change where applicable.
Improve planning to increase seats and deck space occupancy. Implement Key Performance
Indicators to track and monitor progress.
Optimize stock to reduce acreage and associated costs.
Buy containers or iso-tanks instead of renting them.
Supply Chain Costs Optimizations (Contracts & Procurement)
•
•
•
•
•
•
Systematic contracts renegotiation with the support of HQ Category Managers. The purpose was
not only to obtain discounts but also to review the technical scopes in order to eliminate costly
contingencies seldomly used during the life of the contracts.
Centralized negotiations per segment.
Globalization of procurement with a very ambitious project to merge purchasing at the group level
for all branches (E&P, Supply & Marketing, Refinery &Chemistry).
Grouping call for tenders between subsidiaries or with other operators such as for seismic
campaigns common to various operators with neighboring exploration blocks.
Maximize the use of stock spare parts, even if overdesigned, to reduce purchasing requirements.
Review all the automatic re-ordering of spare parts with the maintenance teams.
Structure Costs Optimizations
•
•
•
•
•
Review and negotiate insurance premiums.
Review travel policy (No business Class for travel below 4 hours)
Review travel needs (use of visioconference, regional trainings, etc.)
Review of each contracted staff position (scope, value, limited timeline)
Office running small initiatives. Several small cost optimization initiatives such as reviewing the
office housekeeping contract, the consumption of printer paper, the installation of shared printers
or optimization of parking places or storage areas, enabled huge savings when cumulated. Such
initiatives are very important because they are visible by the entire staff. They must be handled
with care in order to avoid a misperception: cost optimization initiatives do not necessarily mean
cutting costs! It is more about questioning and investigating to make sure that the cost is the right
one and eventually adapt a service so that the cost/benefit balance is acceptable. A very emblematic
example is the installation of water savers on all taps in the offices in a Middle East country where
water resources are scarce: the water consumption bill was reduced by tens of thousands of dollars
without affecting adversely the service provided. In this example, costs optimization also means
doing better for the environment.
Lessons Learned
After two years, the 4C&D program has created a positive dynamic and delivered outstanding results. A
first set of lessons learnt can be drafted.
What worked well was:
•
•
the bottom-up and systematic approach
the animation of the program through the developed network
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•
•
•
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the top management commitment
the BCG kick start and Roadmapping™ Tool
the systematic analysis through levers
the exchange of best practices
Of course, some other areas can be improved; they are mainly:
•
•
•
•
•
the perimeter of reporting. The baseline in 2013 made it difficult to evaluate correctly the savings
to a perimeter which can have changed since the beginning of the program
the integration and the focus on the OBO's since the beginning as they represent a large part of the
OPEX to present a global view in GS
the reporting was decided to be made at affiliates' level hiding the diversity of assets in a given
country. Obviously, reporting savings at assets level could allow a better management of the assets
the lack of disruptive actions in a first place. Re-thinking completely the operating mode will
hopefully happen ina second phase and be the root of continuous improvement.
The focus was initially on cost optimization and probably not enough on profitable barrels.
Conclusion
The success of such a cost optimization project at worldwide level relied on many factors such as:
- Visible Commitment of the Top Management and strong leadership: the initiative originated at
the COMEX level and was then organized at the branch level (E&P, Refinery & Chemistry, Marketing
& Supply). For the E&P, the senior vice-president designated a member of the E&P Board of Directors
to be a sponsor for the 4C&D Project, in charge of piloting the project with a dedicated HQ team.
Every quarter, a status of progress was given to the E&P Board of Directors. It is also of utmost
importance to have all company managers aligned with the same vision to guide the organization at
their level and engage their employees and contractors.
- Initial Deployment Phase time scale: a commando type approach must be adopted to quickly
mobilize the staff and shake the whole organization! That it is the reason why the assistance of
a team of consultants is helpful in the early phase. The bottom up approach was performed via
consultations and workshops where cost reduction initiatives were gathered, selected and prioritized.
This phase was animated by well trained consultants in the majority of the operated affiliates; their
competenciesare specific andcomplimentary to those of IOC staff profiles which tend to be more
technical and operational. An external view is also recommended to come over the internal resistance
that such an ambitious program can face.
- Ownership of the initiativesbycommitted personnel: the initial bottom up phase provided the
perfect background for employees to feel embarked and later be responsible for the cost reduction
initiatives that they had generated. Staffs need to be fully aware of their role in the organization and
how their daily tasks impact the performance of the organization. They must feel committed so that
they relentlessly strive for improvement.
- Animation and sharing of the initiatives:Keeping people motivated to change their behavior in
the long term was a challenge. The adopted attitude was to quickly re-integrate the animation of the
program in-house by the dedicated HQ central team from various backgrounds: they were legitimate
and the easier peer-to-peer type contacts with operational staff in affiliatesenabled free talk oriented
to efficiency and sharing of initiatives.
20
SPE-187332-MS
- No blame culture: the future is the immediate horizon for a cost optimization program. Therefore,
debating why things were done in anon optimized manner in the past is of no immediate interest,
the danger being that staff could lose their energy trying to justify the "why" instead of "diving"
into actions. One positive effect of the immediate action is to prepare mentally staff to question their
working habits immediately afterwards;this is part of the change management.
- Effective Communication:do not underestimate the importance of regular communication through
top management messages, regular update meetings, promotion of best practices, relevant and
updated internet site. Wherever possible try to introduce fun communication themes.
It can be said that, after a decade where the increase of production was a strong driver, Total E&P activities
were not optimized in many ways, similar to many other IOC's. Optimizing operations on sites was with
a different philosophy:to increase volumes produced whilst minimizing unplanned shutdowns and loss of
production. In this context, redundancy of functional equipments and,to some extent, maintenance teams,
over-inspection or testing of devices, was not unusual.This led to an implicit increase of costs which became
unsustainable, especially when the oil price started to drop dramatically.
Until recently, Total E&Pwas perceived as a very inward looking and competition adverse organization.
There was a lack of benchmark culture,both internally and externally. This has changed: the use of internal
Cost Performance Indicators, external benchmarking, as well as increased cooperation with suppliers and
partners,arenow considered key levers for sustainable cost efficiency.
The entire E&P industry must also investigate for future gains of productivity at a more global level:
mutualisation between operators and common standards constitute a huge potential of costs optimization
both forOPEX and CAPEX. The E&P industry is moving slowly towards sharing and alignment between
operators, as illustrated by the JIP 33 initiated by IOGP, but it is far from the alignment and standardization
that the car manufacturing industry has reached during the last 30 years.
More than just a cost cutting exercise, a cultural change has taken place within Total to achieve a
sustainable reduction in the level of spending. Doing more with less, streamlining processes, designing "Fit
for Purpose" developments without compromising safety standardswillbe, more than ever,requirements to
achieve profitable growth, in an even more challenging energy world.
Acknowledgements
The authors thankall the staff who participate in the 4C&D program both in HQ and affiliates in particular
the predecessors in the HQ Supporting team, Mike Sangster, Christophe Sassolas, Jérome Woirin, Vincent
Colson, Olivier Cassassoles, Caroline Flaissier, Brigitte Goudet, Stephen Rozier, Jur Duyn, Samir Oumer,
Yves Rousseau, Xavier Lagneau, Christian Longis. They also thank the Boston Consulting Group for the
support provided during the early phase of this project in particular the consultants who spent time in the
affiliates and HQ, Eric Oudenot, Michel Fredeau, Emmanuel Nazarenko, Raphael Desi, Adham Abouzied,
Thibaut Huvelin.
References
1.
2.
3.
http://www.total.com for official 2016 Results and Outlook in particular Figure 1: Evolution
of Operating Costs showing a peak in 2014Figure 4: Evolution of the TotalE&P HSE lagging
indicators over the last decade Figure 5: "when more efficient means safer"Figure 10: Reduction
of Total E&P OPEX ($/boe) and the ambiton of Total
SPE 179480 – Cutting Cost, Not Corners in HSE Organizational Capability – Venessa
Rosenborough and Ashley Drinkwater, Chevron – Presented at the SPE International Conference
on HSE & Social Responsibility held in Stavanger, Norway, 11-13 April 2016
Doing Better in Bad Times by Stephen Rassenfos, JPT, January 2016
SPE-187332-MS
21
If Cost Cuts Will Last by Stephen Rassenfos, JPT, February 2017
SPE 185246 – Less with Less – Transforming the HSE Function for a Cost Constrained World –
Dr Tom Woollard & Dr Don Lloyd, ERM – Presented at the Asia PacificHASE Conference held
in Kuala Lumpur, Malaysia, 4-6 April 2017
6. SPE 179206 – Cost Cuttingand Improving Safety at the Same Time. Possible? – Jan Reier,
Lloyd's Register Consulting – Energy AS – Presented at the SPE International Conference on
HSE & Social Responsibility held in Stavanger, Norway, 11-13 April 2016
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Brown-Field Marginal Infill Reservoir – Shashank Shukla, Total – Presented at the OTC held in
Houston, Texas USA, 2-5 May 2016
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Improvement Achievable? - Saintpere Stephane, Touboul Nicolas, Hidayat Ramadhan – Total –
Presented at SPE ATCE 2016 held in San Antonio, Texas, USA – 24-27 September 2006
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vs. Deliverability on the Peciko Gas Field-Indonesia – S. Saintpere, JB. Faget, N. Payer, C.
Baranthol, D. Vergnot - Presented at SPE ATCE 2016 held in Dallas, Texas, USA – 9-12 October
2005
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11. Implementing Beyond Budgeting – Unlocking The Performance Potential – Bjarte Bogsnes –
Copyright © 2009 by John Wiley & Sons, Inc. All Rights Reserved.
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