Cost Effectiveness in Mahakam: A Necessity to StayHealthy in the Late Life of a Mature Field

Abstract

A mature field typically encounters a dilemmatic situation in which the production is declining, while the hydrocarbon resources required to overcome the decline is commonly limited. The situation becomes even more challenging as the operational cost tends to elevate following the aging of production facilities and equipment. The high volatility of oil price observed in the past few years has added another layer of complexity for a mature field to maintain its sustainability. This paper will discuss the actions taken in Mahakam to respond to those challenges.

To cope with the challenges as a mature asset, a cost effectiveness program was initiated in mid-2019 with the ultimate goal to ensure the production and operations sustainability in Mahakam. At the early stage of the program, a socialization from top management was held to cascade the background and provide vision on the expected outcome of the program. A cost breakdown analysis was then performed to identify the main cost drivers in each of operational activity, and followed by multiple workshops to discuss cost effectiveness improvement ideas particularly in the identified main cost drivers. An online platform was developed which allows the staff to contribute ideas in the most convenient way. Lastly, a digital media is regularly published to all staff to communicate early successes which is important to maintain the staff’s engagement throughout the program.

According to the nature of work, all the efforts to improve cost effectiveness in Mahakam come down to these key areas; Budget accuracy, technical standardization & innovation, change of working philosophy, operations optimization, supply chain  optimization & renegotiation, cooperation with other companies, and organizational right-sizing. The program has succeeded to reduce the operational cost by ~20% in 2019 and 2020, and will be sustained for the years to come without any compromise on safety aspect.

The practice of cost effectiveness improvement in Mahakam has the potential to be implemented in other mature fields. Even though the challenges facing mature fields have relatively similar roots, some adjustments would certainly be needed to adapt with the specific characteristics of each individual field. Countrywide application of cost effectiveness can potentially become a key enabler in securing national energy supply in Indonesia.