Skip to main content

Oil & Gas

For Oil & Gas Companies, Asset Lifecycle Management Will Shape a Critical Decade

In an industry that has weathered storms for large parts of the past decade, the past twelve months have heralded a new chapter for Oil & Gas.  

Fueled by strong global demand and energy security concerns across the globe, the industry is witnessing a surge in upstream investments, with capital expenditure expected to hit $151 billion in 2023. The volume of oil pipelines under development has similarly surged by 30% increase over last year. 

Why is this significant, and what key variables will determine the success of these new projects? To explore the depth and implications of this change, we sat down with two industry experts, Dr. Komal Pawar and Thijs Kleijngeld. 

Building for a century: understanding the unique lifecycle of Oil & Gas assets 

Beyond dollar values, these investments will matter because of the lifespan and unique features of the assets being built. Oil & Gas assets are high-value investments, often perched in remote or offshore locations, and are typically designed for at least 50 years. 

In addition, Oil & Gas is an industry marked by stringent regulations and the need for managing intricate supply chains, intertwined with various partners and suppliers. This industry's dynamics necessitate a particular focus on asset lifecycle management, Thijs Kleijngeld, a Senior Industry Consultant at Hexagon Asset Lifecycle Intelligence, explains. 

"Initial greenfield investments are only a small part of the story. From the moment an asset is acquired until its retirement, managing its lifecycle becomes the bedrock of the Oil & Gas industry. It is an absolute imperative for this sector." 

This imperative extends all the way to the decommissioning of these assets, which can entail massive costs and complexity: "With time, these assets, built to last decades, will inevitably degrade, necessitating constant maintenance. Their ownership may shift between different corporations. And when the time for decommissioning finally arrives, the disassembling of an oil rig could be a project worth hundreds of millions of dollars," Industry consultant Dr Komal Pawar notes. In California, the cost of decommissioning platform Holly could thus reach $350 million. 

Upstream, midstream and downstream face distinct challenges with four strong commonalities 

Distinct Challenges Along the Value Chain 

Some of the challenges presented by asset lifecycle management differ across the value chain. 

  • Upstream Operations primarily grapple with issues such as well integrity and production optimization. The equipment here undergoes significant wear and tear, placing an enhanced focus on failure data and mean time to repair (MTTR) metrics. 

  • Meanwhile, Midstream Operations revolve around managing pipeline and storage infrastructure. Key focus areas include asset integrity—particularly pipeline integrity—and optimizing logistics and fleet management. 

  • Lastly, Downstream Operations deal with networks of equipment tasked with refining and distributing petroleum products. 

Unified by Common Challenges 

Despite the distinct challenges that each operational phase presents, there are four unifying threads woven through the entire Oil & Gas value chain.

Navigating Planning & Operations 

Oil & Gas markets experience constant volatility due to international market trends, geopolitical factors, and local consumption patterns that simultaneously drive and respond to changes in the production, availability, and pricing of Oil & Gas products. These factors change rapidly and companies struggle to adapt: their constraints in cost, lead time, and service levels are further complicated by the often suboptimal utilization of resources, leading the industry to continually seek more efficient and effective operational strategies. 

Tackling Asset Management 

Inadequate capex planning can lead to inefficient allocation of resources. High downtime and unexpected shutdowns further strain resources and disrupt operations. In addition, Oil & Gas companies operate under multiple, changing regulatory environments which tend to impose stricter HSEQ (Health, safety, environment, and quality) and compliance requirements. 

Addressing Workforce Management 

Improving employee productivity also remains a pressing issue that the sector continues to grapple with. To make matters worse, the industry has lost a number of professionals to more attractive sectors, such as renewables or hydrogen, in the past decade, and struggles to attract qualified professionals 

Harnessing Innovation & Insights 

Because of the long lifespan of its assets and frequently extreme operating conditions, as well as cultural hurdles, the industry has long struggled to harness and leverage data for smarter decision-making. Despite the promise held by technologies that underpin Industry 4.0 and Maintenance 4.0 —like the Internet of Things (IoT), cloud computing, artificial intelligence, and analytics— their adoption has been slow and fraught with challenges. Disconnected solutions and technologies further compound the issue, creating barriers to integration and efficiency. 

The central role of risk management 

What is common across these challenges and across all operations is the ubiquity of risk management.  

Addressing the unique challenges entails rigorous safety protocols, advanced monitoring and control systems. Frequent risk assessments form a crucial component of these operations. "These assessments not only identify potential risks but also guide the formation of robust risk mitigation strategies," explains Thijs Kleijngeld. “Supplier and contractor management, maintenance strategies, and compliance management are integral to effective risk management.”  

New technologies and data-driven approaches redefine maintenance strategies 

To reduce critical risks such as unscheduled downtime and accidents, maintenance strategies, are being overhauled as part of a move toward more data-driven approaches. 

“Maintenance in the Oil & Gas industry has traditionally focused on preventing failures through regular upkeep. However, the rise of predictive maintenance—using data to anticipate when maintenance is required—has introduced a more proactive approach. Reliability-centered maintenance, or RCM, a data-driven strategy that optimizes maintenance schedules for critical equipment, is particularly central to optimizing the asset lifecycle and achieving performance improvements" states Dr. Komal. 

These strategies depend heavily on harnessing data to enhance equipment reliability throughout the entire asset lifecycle. A tailored maintenance strategy should be built around the criticality of each asset and its specific operating conditions, and include preventive maintenance plans. There's also growing potential for integrating predictive maintenance opportunities using technologies such as IoT, AI, and machine learning. 

The Importance of Organizational Culture and Integration 

And, beyond technology adoption, there's a need for alignment with organizational goals, fostering a culture of continuous improvement, and embracing innovation. 

"Asset lifecycle management and asset investment planning need to be ongoing processes, well-integrated within the broader organizational context," emphasizes Thijs Kleijngeld. Keeping an eye on KPIs and maintaining a focus on continuous improvement can ensure that asset lifecycle management aligns with the organization's wider objectives. 

Collaboration is also key to successful asset lifecycle management. Functions such as finance and supply chain should be closely involved through collaboration, regular communication, and cross-functional teams - a needed change in an industry where transformation and technology adoption are all too often siloed. But teamwork, as they say, makes the dream work.