Compressing Drilling Permit Cycle Time
Oil & Gas Industry
Anyone who has spent time in the Oil and Gas business knows that although there are annual drilling targets to achieve, we don’t actually have a whole year to achieve them. For example, in Alaska and parts of Canada, success or failure is determined during the winter months, which is the only time when surface conditions permit heavy equipment movement. In many states, hunting poses a very real problem: Rig personnel wouldn’t want to be caught out in the open on certain ranches at these times! So what starts as a 12-month year, is in actual fact probably only nine or ten months long for drilling purposes.
This shortened drilling year has profound implications for those taking care of drilling permitting, especially in places where the permitting process is not straightforward. Take Colorado, for instance. All drilling permits must be approved by the Colorado Oil and Gas Conservation Commission (COGCC), which requires operators to submit detailed drilling permit applications that can take the state anywhere from 30 to 60 days to process and approve (assuming that there are no problems with the application, which could cause process time to increase indefinitely).
Southern Colorado operators have only nine or ten good drilling months, and it can take anywhere from 60 to 150 days to progress a well from being a location on a map to a permitted drill site (if you add the processing time for the state with the operator’s internal processing time). In short, if you don’t start the drilling season with a backlog of permits, you may quickly find yourself with idle rigs (and disappearing well targets).
One production company found itself in danger of suffering just this fate when its Rocky Mountain Division was tasked with adding 10 percent more drilling activity onto an already packed drilling program. The man losing the most sleep over this dilemma was the divisional head of operations, who realized that something had to be done quickly, and that without outside help, his people were unlikely to be able to succeed.
The company scouted around for potential partners to aid in their quest to keep in front of the rigs, but initially the choices seemed limited. Should they engage a technical consultancy or one of the “Big Four”? They had worked with a Big-Four firm before, but were disappointed with the results. Although the firm provided strategic insights and some great reports complete with action items, there was no support for the people who had to make things happen.
After an extensive search, MTG was selected to conduct a three-week assessment into the possibility of improving the permit approval process. Although MTG was something of an unknown quantity, it was clear from the outset that the MTG team had an excellent grasp of the relevant issues and an approach that suited the situation.
Key Findings
MTG started their assessment of the “location selection to release-to-drill” process in July. The goal was to better understand what could be done to minimize both the number of hold-ups and cycle time associated with each permit.
Key findings were as follows:
- On average, the permitting process was taking 136 days and yielding 25 per month
- Approximately 60 of those 136 days were tied up in COGCC approval time
- The 76 in-house processing days contained only about 3.5 days’ worth of work content
- Almost 25 percent of locations did not make it all the way through the process
- There were no triggers to help staff understand when items were due to be completed
- No metrics were in place to help management understand what was being held up, where, and why
- Communication between team members was done almost exclusively through e-mail
- Almost all staff were blaming the Land Department for the delays in processing
Given this situation, MTG submitted a proposal to completely redesign the “location selection to release-to-drill” process.
The project’s goals were as follows:
- Increase the number of permits generated by 28 to 36 percent per month
- Increase drilling rig utilization by 13 to 22 percent per month
- Design and install a new locations selection/release-to-drill process
- Design and install a performance management system to ensure the continued success of the new process
- Design and hand over a mechanism to ensure the sustainability of all the changes made
The project was given a green light and began in August with the goal of completion the following February. Three teams were created in order to achieve the project’s goals:
- A Process Enhancement Team to redesign the process and install new working practices
- A Work Center Management SystemSM Team to design and install a set of control mechanisms and metrics for managing the new process
- A Project Oversight Team to manage the progress of the entire organization toward these new goals
The Results
By the end of February, the average number of wells release had risen by 32 percent on a four-month rolling average basis. At the same time, drilling rig utilization rose by 28 percent, hovering at the 100 percent mark (excluding weather-related events). This was possible due to the large backlog of permits built up in front of the drilling rigs—large enough in fact, that the company decided it could afford to release one of their contract rigs, cutting drilling costs significantly. This action alone paid for the cost of the project.
During the project, MTG was able to engender a profound shift in attitude and behavior that continues to be practiced. The sustained behavioral change was made possible through a sustainability audit tool that we left behind, along with a trained internal team that regularly provides feedback to the management team regarding behaviors, system usage, and process performance. All personnel connected with the new process understand exactly what their part in the process is, how to measure their own success, and what the consequences of failure are, both for themselves and others. Everyone now looks at metrics on a daily and weekly basis, enabling them to understand just what needs to be done at any given time in order to reach corporate goals.
In their own words:
“We don’t get excuses any more; we get answers.”
