It is something of a fool’s errand to make general statements projecting global oil and gas CAPEX and OPEX spending. Between periods of great exuberance and despondency planning and available finance fluctuate. GlobalData estimated global oil and gas CAPEX passed one trillion dollars ($1037Bn) for the first time in 2012 (EY gave it as $541Bn in 2012 for their selected 75 companies) and is projected variously to drop to $571Bn in 2015, down 17% from the 2014 level (from Cowen and Co’s study of 476 companies) or to $660Bn in 2015, down 9% from 2014 (from Frost and Sullivan’s study of 1000 companies). Global OPEX estimates are even broader.
Instead of attempting to project (debatably useful) global estimates of spending it might be wiser to consider how strategic spending or strategic divestments can make company assets yield more cash flow or higher profits. There are a number of actionable strategies available to organisations. The new ISO 55000 Asset Management System standard is one and can be advocated for upstream, oil and gas sector business improvement. Dubán can contribute advice and leadership in this regard.
Asset Management
Asset management is defined by ISO 55000 as the coordinated activity of an organisation to realise value from assets. At the simplest level this means that an organisation is making the best decisions it might about its assets based on a clear understanding of its longterm objectives and purpose. Asset management is the discipline that seeks to achieve this.
Traditionally, asset decisions were bound to the life cycle of the asset in question, from its initial creation, through its working life to its eventual disposal. These are not straightforward decisions. How do you build cost effective maintenance into the initial design? How do you measure the criticality of an asset to the rest of the company asset portfolio? How can one be sure that the asset is even needed to begin with?
Too often these kinds of decisions can be made in isolation from the rest of the business. With integrated asset management, the plans that are made for each asset are always part of a bigger system. This sounds trivial, but in our complex, sometimes chaotic organisational settings it behoves a clear, overall approach to be in firm place. Plans for each asset must be considered as part of a bigger system which is aligned to the company organisational business strategy.
ISO 55000 Asset Management System
Asset management contains many aspects; the new international ISO 55000 Asset Management Standard can help provide a common language among the various disciplines (costs, production targets, remaining lifetime of assets, compliance, safety, risks). ISO 55000 favours a complete and integrated approach for assets in an organisation in which clear communication exists between all parties, it coordinates between the life cycles of the assets and strives for deliberate decisions. Employees are aware of and involved in the asset management processes. It brings an improved structure in which thinking and working is done in a similar way at all levels. With ISO 55000 working properly a company will be able to use the asset management and asset management information for development of policy, strategy, objectives, plans and implementation yielding business improvements. Steady growth leads to prosperity, money is balanced for optimised functioning of all assets, grounded decisions, sustainable growth and organisation-wide involvement.
The ISO 55000 suite of documents is composed of three documents
- ISO 55000:2014 – Asset Management – Overview, principles and terminology
- ISO 55001:2014 – Asset Management – Management Systems – Requirements
- ISO 55002:2014 – Asset Management – Management Systems – Guidelines for the application of ISO 55001
The standard sits alongside other ISO management standards such as ISO 9000 for quality management, ISO 14000 for environmental management and so on.
ISO 55001 is the specification document for the ISO 55000 standard containing the statements-of-requirement for those organisations wishing to comply with or certify against it. ISO 55001 provides guidelines on good practice in the context of asset management and groups the requirements under a series of headings. It can be visualised in the four-stage workflow
Plan-Do-Evaluate-Correct
The workflow is necessarily driven by leadership and supported by measures recommended by the standard to ensure that these processes are done well.
Asset Management in Practice
Alignment of plans for individual assets and categories of assets with a company organisational business strategy must reach down to the people doing the day-to-day work employing the assets themselves (including outsourced contractors).
Asset management decisions are all part of a learning cycle that constantly monitors and reviews performance based on past decisions and stays abreast of the evolving landscape of risks and opportunities that inform future decisions. Such decisions typically involve balancing cost, risks and the performance of an asset or assets over a particular timescale. The asset management discipline has amassed an array of tools and techniques that allow each factor to be understood, measured and traded with the other factors giving senior management a menu of options from which to choose from.
Decisions are only as good as the information that they are based on. An asset managing organisation needs to treat its data as a core asset in its own right. There needs to be a simple process for agreeing what information is needed, capturing it and storing it in one place so that there is only one version of the truth.
Decisions are only as good as the people making them. This isn’t just a matter of capability, at its heart asset management is about collaborating across disciplines to make the best decisions using all the information and insights available.
The requirements for an asset management system set out in ISO 55000 are considered under a number of headings
- Organisational context. The organisation needs to understand the context within which the asset management is going to be performed. The business strategy and the strategic asset management plan need to be aligned. Shareholders and their needs and expectations or roles within and relating to the organisation need to be understood. The organisation needs to ensure the asset management system is properly set out in documented form. From all of this the scope and definition of the asset management system can be set out, that is to say which assets the management system applies to. All assets of an organisation need not be included in the management system (Section 4)
- Leadership. Senior management must demonstrate a commitment to the asset management system. The organisation must have an asset management policy. The organisation must develop a strategic asset management plan indicating how the asset management objectives will be made align with the overall strategic objectives of the organisation. Requirements for clarity in respect of roles, responsibilities and authorities relating to the asset management system (Section 5)
- Planning. Requirements relating to plans for the asset management system (for managing and improving the asset management system itself). Requirements relating to asset planning (plans relating to the assets themselves, acquisition, hold life plans, operation and maintenance of the assets, disposal, etc). Also requirements relating to planning for asset objectives (Section 6)
- Support. Requirements considering availability of resources, competence, awareness, communications, information and documentation (Section 7)
- Operations. Requirement for ensuring that proper operational planning and control is in place. Requirements relating to management-of-change and processes managing change. And requirement relating to outsourcing / contractor management (Section 8)
- Performance evaluation. Requirements relating to appropriate methods for monitoring and measuring the system and its performance. Requirements relating to management tools for evaluation and control of performance. Requirements considering internal audits and requirements relating to periodic management review of the asset management system (Section 9)
- Improvement. Requirements relating to non-conformity and corrective actions and requirements for preventive action (Section 10)
Four Concepts
Four concepts forming the basis of an ISO 55000-compliant Asset Management System are stated in Section 2.4.2 of the standard. The concepts, when properly understood and implemented, enable an organisation to release value from their assets, during the assets lifecycle, and guard against an organisation becoming a servant of their own assets, forced to employ time and resources managing unproductive or inappropriate assets. The four concepts are
- Value. Assets exist to provide value to the organisation and its stakeholders. Asset management does not focus on the asset itself, but on the value that the asset can provide to the organisation. The value (which can be tangible or intangible, financial or non-financial) will be determined by the organisation and its stakeholders, in accordance with the organisational objectives
- Alignment. Asset management translates the organisational objectives into technical and financial decisions, plans and activities. Asset management decisions (technical, financial and operational) collectively enable the achievement of the organisational objectives
- Leadership. Leadership and workplace culture are determinants of realisation of value. Leadership and commitment from all managerial levels is essential for successfully establishing, operating and improving asset management within the organisation
- Assurance. Asset management gives assurance that assets will fulfil their required purpose. The need for assurance arises from the need to effectively govern an organisation. Assurance applies to assets, asset management and the asset management system
ISO/IEC Directives Part 1 and Consolidated Supplement Annex SL Appendix 2
The past decade has seen a great increase in the number and types of management systems available to organisations. There are management systems relating to quality management, environmental management, safety and occupational management, asset management, risk management and a great many others.
The somewhat frighteningly named ISO/IEC Directives Part 1 and Consolidated Supplement is a document which defines the basic procedures to be followed in the development of any international standard. Annex SL of ISO/IEC Directives Part 1 and Consolidated Supplement (so named because it comes between Annex SK and Annex SM) specifies how proposals for development of a management system are to be realised/brought-into-implementable-form. Appendix 2 of Annex SL sets out explicit-senior management involvement requirements for certification against the ISO management system standards.
Certification of organisations against two or more ISO management systems can potential represent a challenge. Incompletely or imperfectly implemented systems may be found to be in conflict with one another. Such conflict will itself be a barrier to development of the goal of a single, consolidated business management system. In theory, if the leadership requirements for one system (say, ISO 9000) are met they will be similarly met for another (say, ISO 14000). Annex SL and its appendices are designed to alleviate any potential this risk of a shortcoming in this regard.
Annex SL Appendix 2 can now be considered the foundation for all of an organisation’s management system standards. The appendix provides a clear set of guidelines for senior management to lead and organise their ISO-compliant management systems. And ensure their optimised use for better business improvement. Simpler systems should allow multi-scheme organisations to realise significant efficiencies in terms of their system design. Beyond this they will require less maintenance and audit resource. They are more easily controlled and can be changed more readily to meet evolving business needs. Organisational leaders will easily appreciate these opportunities for improving their management systems.