By Yogi Schulz
Here’s the link to my IT blog at IT World Canada
Engineers at engineering, procurement and construction companies (EPCs) continually face pressure to design, build and commission their products better, faster, and cheaper. This pressure doesn’t just apply to smaller, more straightforward, high-volume products. It also applies to huge, multi-million-dollar oil and natural gas facilities that are traditionally viewed as requiring custom designs and builds.
Cathy Farina, Co-Founder and Vice President of Operations at DyCat Solutions Inc. discussed the many remaining opportunities for engineers to productize large facilities at the Project Production Institute’s Annual Technical Conference.
Productization is hardly a new concept. However, Ms. Farina presented a persuasive case that productization in many industries, including oil and natural gas, can be much more:
- Widely applied than is the case.
- Extensively applied to designs at companies that believe they’ve fully implemented productization.
Industrial productization defined
While productization can apply to a wide range of products and services, this article focuses on large, complex, expensive facilities frequently built in the oil and natural gas industry. These facilities require considerable engineering effort. Industrial productization:
- Designs and builds manufacturing facilities with the intent to replicate the initial facility with little change at other locations.
- Applies sustainable concepts to design standardized modular units.
- Applies lean fabrication and assembly concepts to build standardized modular units.
“The definition of productization is about standard modules for which the design can be replicated with minimal engineering and procurement effort,” says Cathy Farina. “The list of modules and standards does not vary from one facility to the next one in a series.”
Productization examples
Productization of oil and natural gas facilities can improve performance for all EPCs and owners. These examples focus on extensive, complex facilities where the benefits of productization are substantial.
Continuous manufacturing examples:
- Crude oil and natural gas production, transportation, refining and distribution.
- LNG export and import terminals, renewable methane plants.
- Small-scale nuclear electricity generation plants.
- Consumer liquids such as soda, milk or beer.
- Electricity production based on either fossil fuels or renewables.
Discrete manufacturing examples, often involving assembly lines, for:
- Appliances, automobiles, or trucks.
- Virtually all consumer products.
- Industrial products such as airplanes, compressors, pumps, and controls.
- Electronic products such as chips, circuit boards and related components.
Infrastructure examples:
- Fibre cables and switching facilities for telecommunications.
- Data centres for computing infrastructure.
- Distribution and fulfillment centers for brick-and-mortar and online retailers.
- Railways, roads, ships, airports, bridges and tunnels for transportation.
- Warehouses, ports and terminals for supply chain management.
- Electricity generation, transmission and distribution.
Productization benefits
Productization benefits for oil and natural gas facility EPC projects include:
- Reduced project management, engineering and procurement costs.
- Reduced engineering and procurement schedule.
- Increased fabrication labour productivity and quality due to building modules inside.
- Reduced fabrication rework leading to reduced cost.
- Reduced number of requested change orders, leading to better scope control and reduced cost.
- A shorter project construction schedule that achieves earlier time to market.
- Reduced project risks that improve cost and schedule projections.
- More reliable project cost and schedule projections that minimize the risk of cost surprises.
- Reduced requirement for experienced engineers who design the initial modules, not the entire facility. Less experienced staff can develop the module copies.
- Reduced commissioning and startup learning due to consistent design.
Productization benefits for oil and natural gas facility operation include:
- Reduced facility capital costs that increase project attractiveness to investors.
- Higher facility ESG performance that leads to better social acceptance through reduced resource consumption and emissions.
- Improved facility safety performance reduces injuries and unscheduled outages.
- Reduced facility lifecycle costs improve return on investment.
- Higher quality facilities improve product quality and reduce maintenance costs.
These many productization benefits are offset by higher upfront engineering costs to establish the initial module designs and related standards.
“Ideally, productization benefits increase over time through continuous improvement of the standard design,” says Cathy Farina. “Engineers should develop the next generation design to incorporate lessons learned such as optimizations, advancing technology, and regulatory changes.”
Productization strategies
Productization strategies maximize the use of standard components and repeatable design, build, test, install and commission processes. When engineers review their company’s productization strategies, they will find additional opportunities to expand productization. For example:
- Design standardized modules with as many common components as possible.
- Follow defined fabrication and assembly processes as much as possible.
- Build modules that contain as much production equipment, HVAC, piping, instrumentation, electrical wiring and controls as possible.
- Maximize fabrication and assembly in a controlled environment to maximize labour productivity and achieve consistent quality.
- Minimize onsite construction work to minimize labour costs and the impact of weather risks.
“A productization strategy that has a huge influence is the selection and operation of the module fabrication plant,” says Cathy Farina. “Well-defined fabrication and assembly processes operating in the context of a comprehensive quality control program ensure productization is a success.”
Productization areas
Productization can be applied in all areas of a facility as follows:
- Purchased equipment.
- Components.
- Packages.
- Modules.
The productization benefits engineers can achieve in each area will vary depending on the type and size of the facility and the number of replications required.
Estimating the value of productization
To quantify the value of productization for a given series of oil and natural gas facilities, engineers will compare the estimate for the traditional custom design and build to the estimate for the productized version. The primary cost categories where productization is lower will include:
- Onsite labour. Productization requires significantly lower onsite labour hours.
- Engineering design effort. Productization requires more detailed design effort for the initial modules and less for the replications. The traditional custom design approach requires more total effort.
- Productization achieves lower costs due to a smaller facility footprint and standard designs.
- Fabrication and assembly. Productization achieves lower costs by moving onsite labour offsite to a more controlled environment.
- Costs associated with project schedule duration. Productization tends to require less schedule that, in turn, lowers cost.
- Program management. Productization achieves lower costs by shortening the schedule duration.
The primary cost categories where traditional custom design and build and productization are similar will include:
- Site preparation.
- Onsite utilities.
Impediments to productization
Initiatives to implement more productization in the oil and natural gas industry will encounter impediments and skepticism. For example:
- Lack of engineers with productization subject matter expertise.
- Some engineers believe they can design each facility better through custom designs.
- Some engineers feel their design creativity is being constrained by productization.
- Successful project teams using traditional custom design and build methods will be adverse to change.
- Some organizations will challenge the benefits case for productization as exaggerated.
- Some engineers will misunderstand how to execute a productized design and build properly and reject the concept.
- Some organizations will not be willing to accept that some productized facilities may be slightly over-designed and some may be somewhat under-designed due to differences in local conditions.
“Owners have to accept that some of the facilities may be over-designed, and some may be slightly under-designed,” says Cathy Farina. “That’s a small price to pay for the significant benefits of productization.”
Oil and natural gas industry owners and EPCs continue to migrate from traditional custom design and build to productization for the benefits described. They far outweigh the cost of introducing the change to productization.
About Yogi Schulz
Yogi Schulz is an information technology consultant who works extensively in the petroleum industry to select and implement administrative, operations, and geotechnical systems. He writes regular articles about developments in the energy industry and technology.
You can contact Yogi Schulz through his LinkedIn profile at this link.
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