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Case Study

Strategic planning to reduce OPEX and CAPEX

hydrocarbons, SAGD

The client, a major oil sands based producer was in need of an organization-wide effort to reduce operating costs and optimize capital spend

The Situation

The client also wanted to align the effort towards its strategic objectives, mobilize the organization and drive accountability in the execution to deliver results. Improving the reliability of production facilities to achieve production targets was outside of the scope of this project.

Approach

Advisian was engaged to channel the existing cost reduction effort towards a formalized strategic planning process that had a top-down view with the bottom-up analytical justification on the business case and align the organization towards strategic objectives. Advisian engaged with the client in the following areas:

  • Detailed internal cost and operational performance benchmarking across the business including mining, extraction, tailing, conversion, hydro-processing and support services but accounting for management changes, increase in business complexity and decline in productivity over time
  • Evaluation of the maintenance planning and scheduling, operations and productivity levels, contracting and procurement processes, energy management, benchmarking of central and support services
  • Analysis of capital projects across four key levers to optimize capital and accelerate the return on spend. Four levers included scope management, designing for purpose, development of the engineering strategy and managing to cost and schedule
  • Cross functional workshops across the business to integrate ideas generated bottom-up with top-down themes
  • External benchmarking of support functions within the industry and across-industries along with a macro view of organizational effectiveness

Results

The strategic planning process implemented enabled a detailed analysis of the business, uncovering opportunities to reduce OPEX of $5/bbl to $7/bbl or $500 million to $700 million annually and impact capital expenditure by ~$1.6 billion in CAPEX and $0.5B in DEVEX over a five-year period. In addition, strategic priorities were defined with key initiatives to be executed to achieve milestones and metrics. Finally, the emphasis on getting buy-in from the client organization-wide generated significant support and endorsement from the executive team.

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