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Supply Chain Management, SCM, SCRC Supply Chain Resource Cooperative, Poole College of Management, North Carolina State University

Tackling real-world supply chain management challenges by applying research, experience and knowledge.

SCRC Article Library: Collaboration in the Energy Industry: A Case Study of Suncor Energy

Collaboration in the Energy Industry: A Case Study of Suncor Energy

Published on: Nov, 04, 2004

by: Rob Handfield

SCRC

A successful exploration and development drilling program requires strong performance from a multi-disciplinary team as well as active participation and support from many suppliers and contractors. The Suncor Foothills Drilling-Asset Team, a team focused on drilling in the foothills of the Canadian Rocky Mountains, is just such a team and is the focus of this description. In working with Suncor Energy, Kevin McCormack (a recent addition to the NC State SCRC team) and I have learned a great deal about the true meaning of collaboration.

The drilling business is traditionally very cyclic and somewhat secretive with most of the actual drilling being outsourced to groups of specialized service suppliers. The on again off again nature of the work can damage service quality and expertise significantly. Often the staffing of a drilling effort is determined by who is available not by who is the best fit. The secretive nature of the business amplifies the difficulties of the service suppliers by the lack of information available for planning, forecasting and workload leveling. To drill a well, materials and services are required from approximately 20 different suppliers. Often the information used by the service supplier is subject to change and can often times be incorrect. Changes in timing or design can impact each of these suppliers significantly.

In addition to the coordination issues listed above the technical issues related to drilling deep sour gas wells are also highly significant. Suncor has drilled wells as deep as 6400m with horizontal sections close to 2000m in length. In the last 5 years the Foothills Team has drilled approximately 50 wells throughout the Alberta Foothills. In mountainous regions, expertise and extensive area experience go hand in hand with drilling wells successfully. Drilling techniques down hole have to be adapted to very challenging mountainous type conditions. Poor drilling execution can result in safety concerns, increased costs and lower capitol returns. Even when drilling techniques are well executed, the foothills challenges can result in significant timing fluctuations which can affect the entire Supply Chain Network.

In order to overcome these challenges, a total integration of objectives was initiated to create greater influence on the factors affecting drilling performance. In essence a greater team concept was created with one common center and full alignment. Team integration between the drilling group and foothills asset team has extended further than previously documented for the industry. This integration has also been extended to a number of contractor services. The greater team concept has created a high trust environment which allows for accelerated learning and has enhanced integrated expertise. As a result, the key service suppliers and the different groups from Suncor work together as though they were one company with one set of objectives.

Several members of the drilling-asset team had worked together on other projects before joining the Suncor Foothills Team. They had experienced the performance and excitement that can result from collaborative teams that cross departmental and company boundaries. They had also seen failure where inter-departmental issues could stagnate performance. They believed, with their experience and passion, that high performance teams could be developed to create positive results. Their first step was to create a positive environment in their drilling teams at the well site. They did this by developing, communicating and implementing some guiding principles. These were:

  1. Create a continuous work environment to stimulate operational excellence.
  2. Become the preferred customer through efficiency and high trust.
  3. Target the best people and empower the decision making.
  4. Recognize what is important to the service companies and their people.
  5. Negotiate rather than bid. Work with the service companies as equals with an equal voice.
  1. Totally share business plans, scheduling and problems.

Create a shared influence environment to help create group ownership, interest and motivation.

The implementation of this unified philosophy into all phases of the lifecycle, as well as the creation of an environment of openness, trust and mutual success has resulted in substantial improvements. Based on a 2003 cost study, the team has achieved the following: 1) drilling costs reduced by 18% ($1.4 million/well), 2) planning times reduced by 42% (5 months), and 3) drilling times reduced by 20% on average (20 days). These results have been accomplished against a backdrop of 5% inflation. The Suncor Foothills Drilling Team has become one of the preferred employers from the service supplier perspective within its operating region. This position continues to strengthen.

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