WPC: Ziff Energy's field studies show operators respond to economic drivers

A 7-year analysis of operating expenses indicates that companies are responding to the strong influence of economic drivers that call for achieving operating excellence.

By an OGJ correspondent

HOUSTON, Sept. 6 -- A 7-year analysis of operating expenses among 100 exploration and production firms in nearly 3,000 fields indicates "companies are responding to [the] strong influence of economic drivers that call for achieving operating excellence," said executives of Ziff Energy Group, Calgary, at the 17th World Petroleum Congress in Rio de Janeiro.

The purpose of that study, focusing on some $7 billion of field operating costs and including most of the top 20 US, Canadian, and South American producers, is to determine best practices and develop benchmarking techniques in order to optimize the economics of new discoveries and existing production.

The in-depth, field-by-field evaluations performed by the Ziff group compares operations among various producers in the same or similar fields and provides a diagnostic tool to identify controllable operating costs and effective solutions.

Based on their studies of operating costs in four oil regions, Ziff officials said they see little variation in operating costs between North America and South America. Capital outlays that have the most impact on total operating costs, they said, are concentrated in a few key areas, including purchased energy, labor and field supervision, well servicing, and surface research and maintenance.

After analyzing operating expenses in the oil fields of Western Canada, Ziff officials concluded that "contrary to what the majority believes, the surprise is that younger fields do not always present lower operating costs. Practices make a difference."

A basic principle of quality management is the variation in performance that provides opportunities for improvement among companies, said Paul H. Ziff, CEO. Benchmarking identifies such opportunities and points to the best practices for each situation, he said.

Luis Bacigalupo, vice-president of the Ziff Group, said corporate managers must implement three basics to face up to the challenge. He identified these as people efficiency; cost efficiency, and operating practices plus production maximization.

"Although much emphasis has been placed on cutting costs, this is not a measure of success. Cost and practices go hand in hand," said Bacigalupo.

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