May 2007

The Use of Lean Six Sigma in the Oil Industry

M.A. Sally Ulman, President, VRI

All time high demands for petroleum have driven the industry to embrace more efficient means of operations. Constant pressure exists to increase production and improve reliability while reducing costs in a safe operation. Improved business results can be achieved by managing quality data statistically through sound engineering principles. Variance Reduction International, Inc. (VRI) is currently providing a competitive advantage to upstream oil operations through the deployment of Lean Six Sigma (LSS). The LSS methodology and tools make processes Safer, Better, Faster, and Lower Cost. VRI encompasses the longest standing relationship deploying LSS in the upstream oil industry. Since 1998, providing services for Chevron, Texaco, Aera Energy, BakerPetroilite and Halliburton. Proven results in upstream oil companies have produced many completed LSS projects, demonstrating an average of $1.1 million in return on investment (ROI).

Combining Lean tools with Six Sigma

Six Sigma companies embrace the fundamentals of statistical thinking: all outcomes are produced through a series of interconnected processes and all processes vary. The key to success is to understand and reduce variance. Six Sigma teaches people to look at variance, not just averages. Through a structured roadmap, Define, Measure, Analyze, Improve, and Control (DMAIC), profound process knowledge can be achieved, and focused improvements can be made. Lean is a process improvement methodology that focuses on removing non-value added activities at the pull of customer requirements. Value stream mapping points to nonvalue added steps and allows for streamlining processes. Cycle times go down, costs go down. More can be done with less. Simply put, Lean simplifies the process where Six Sigma perfects the process.

VRI Core Offerings

At VRI, our goal is to revolutionize the communication of comprehensible statistics, by pioneering new teaching techniques. We encourage Knowledge Based Management and demonstrate methods for transforming data into knowledge for useful decision-making strategies. We teach using the KISSING approach: Keep It Simple Statistically, Incorporating Numerous Graphs. VRI offers the following courses in Lean Six Sigma training: Executive Overview - used to introduce the concepts of Six Sigma to the Leadership Team and to provide a top-level understanding Champions Program provides Leaders, Managers and Agents of Change with the tools to provide infrastructural support, inspire an internal shared vision and take on the role of mentor for all Lean Six Sigma trained employees LSS White Belt Training a hands-on workshop where participants leave the course with the necessary skills to immediately implement an understanding of the steps to improve a process as well as apply quality tools and simple statistics to improve process performance and increase cash flow LSS Green Belt Training designed for members of an organization who lead process improvement teams where they will learn tools to produce products and services better, faster and at lower cost. Completion of the Green Belt program requires the completion of a project exhibiting cost savings of at least $100,000 LSS Black Belt Training provides the same skills and tools of Green Belt Training with an additional week of Design of Experiments (DOE) training. DOE is simply a structured means of experimenting, ultimately resulting in a mathematical model of a process, relating inputs to outputs which can then be used to select optimum project solutions. Completion of the Black Belt program typically requires project realization of cost savings amounting to at least $500,000 Mentoring and Project Deployment provide support to Green Belts and Black Belts in executing their projects. Proper use of the tools, use of the DMAIC roadmap, and proper facilitation of teams is all discussed in mentoring sessions. Data Mining: this course focuses on the use of statistical models for data mining with large or small data bases. Better decisions can be made by a sound understanding of the data.

Lean and Six Sigma Specific Software used in Program Implementation

With many LSS training courses, VRI uses a software program called SPC XL. Developed by SigmaZone, users have the ability to create Control Charts, Histograms, Paretos, Summary Statistics, Scatter Plots, Gage Capability Analysis, FMEA, and much more. All charts and statistics that SPC XL creates are in a normal Excel workbook, therefore creating ease in sharing results with all Excel users. The software is robust on non-computer experts. Students can start drawing professional-looking control charts, histograms, and other critical charts and diagrams in a matter of minutes. SPC XL ensures that minimal data acquisition will result in proper management and reliability through the use of tools with effortless data entry into an Excel spreadsheet. Please see examples of SPC XL chart capabilities in the following illustrations:

Control Chart

Cpk Analysis

Box Plot

Histogram

The Upstream Oil Specialization of VRI

M.A. Sally Ulman, President of VRI - a certified Women Owned Business, completed a 16 year career as a corrosion engineer with Chevron where she began to use the LSS tools with a difficult water treatment process in Lost Hills, CA. Completing the first LSS project in upstream oil worldwide in 1999 gave Sally the idea that others in the industry could benefit by these tools. Sally has taken extreme care to hire consultants not only in the top of their field, but have extensive knowledge relating to oil and gas operations. VRI has built long standing relationships in the upstream oil industry including petroleum industry giant, Chevron. VRI has mentored projects such as improving oil production, equipment reliability, fluid measurement systems, inventory management, work processes cycle time reduction, resource allocation of parts and people, implementation of new technologies as well as improving existing ones additionally, branching out into trans-service related entities such as health, environment & safety, procurement and human resources has been undertaken. Definitive evidence in upstream oil accomplished projects can be seen in SPE Article No. 84434, co-authored by R.S. Buell, SPE and S.P. Turnipseed of ChevronTexaco and entitled Application of Lean Six Sigma in Oilfield Operations. Overwhelming verification of process improvements in the areas of health, environment and safety can be seen in SPE Article No. 98564, authored by R.S. Buell, SPE, Chevron Corp., entitled Creating a Culture To Deliver Sustainable HSE Performance. A typical upstream oil project, as proven through our training at Chevron, Aera Energy and Halliburton, has realized a return on investment of $1.1MM in only 4-8 months. These staggering numbers prove the efficiencies that result from VRIs easy-tolearn tools of Lean Six Sigma training in oil and gas operations.

Conclusions
Lean Six Sigma adaptations from other industries have been proven to synergistically combine, improving business results in oilfield operations. Financial benefits are delivered through our training courses and mentoring for project deployment. When course objectives are followed to fruition, they can provide a broadly embedded quality and statistical thinking through routine engineering and non-engineering problem solving, process simplification, process improvement and optimization ultimately leading to process perfecting. For more information: Variance Reduction International, Inc. P.O. Box 10237, Bakersfield, CA. 93389 (909) 702-8546 e-mail: VRISixSigma@aol.com www.VarianceReduction.com