The deep offshore is a major focus of our exploration strategy. In light of the cost cutting implemented in recent years, strict budget discipline is required for us to achieve our ambitions. That is what led us to launch the Total Exploration Standardization (T-ExS) program, which is designed to expand the use of a standardized architecture for deep offshore wells. With this approach based on pooling and optimizing resources, we are considerably improving our performance in this area.
In addition to requiring different installation procedures, custom-designed deep offshore wells are often a source of technical incompatibilities, extra procurement costs and surplus inventory. Yet a single well architecture suffices for 80% of our deep offshore prospects. We came to this indisputable conclusion after numerous internal studies and understood that we needed to completely rethink our operating models and adopt a new mindset.
Teams from Drilling, Procurement and Exploration worked closely together to develop the T-ExS program, which was launched in early 2017. This innovative approach offers numerous advantages and has already proved to be a success. Its three key features are:
- A standardized architecture. We wanted to promote and implement a single deep offshore well model for exploration to shorten procurement lead times, optimize equipment inventories and complete our studies faster without compromising safety or environmental protection. Internal reorganization facilitated the approach, which led to the definition of a “fit for purpose” design based on an analysis of well architectures used over the past five years and a review of future prospects in the exploration portfolio.
- The negotiation of global frame agreements. Total Global Procurement teams obtained very advantageous price and delivery terms from their suppliers for long lead items (LLIs). Three global frame agreements are now in effect for a period of five years, ensuring best prices and shortened order-to-delivery times. In addition to offering flexibility, these contracts locked in prices when the market had reached its bottom.
- Multi-métier, cross-functional governance. Each month, the schedule for projects in progress and new projects is reviewed so that contract strategy can be adapted appropriately for LLI procurement and recycling within Total. This provides an opportunity to use affiliates’ surplus inventories and unlock additional synergies, always in line with the various budget forecasts.
In less than two years, this innovative approach has already proved to be a success, generating savings of more than $15 million for just three wells. The solution has been used by our Exploration affiliates in Mauritania, Senegal, Papua New Guinea and Namibia and will be deployed this year in Malaysia, Cyprus and Lebanon. This comes as no surprise, given the numerous advantages:
- Well architecture costs are now a third of what they were in 2014. As a result, the cost of a T-ExS exploration well is 10% lower than a conventional well on average, with a significantly shorter lead time.
- The revamped procurement system simplifies, accelerates and secures processes, with the deployment of more agile supply chains, lists of standard equipment and other improvements.
- Standardization reduces the number of pieces of equipment that need to be ordered, as well as unused inventory after drilling is completed. This optimizes both inventory and maintenance costs.
- By sharing a standardized relief well architecture, affiliates have access to a pooled inventory of drilling equipment at a very low cost, without having to worry about procurement or transportation expenses. A pooled safety stock inventory has already been created and is managed at optimal cost by suppliers themselves in Batam, Indonesia, and Nusajaya, Malaysia.
- Because the equipment used on projects is interchangeable, surplus inventories can be quickly recycled after drilling is completed. This optimizes both equipment use and the related supply chain, maintenance, inspection, transportation and other costs.
- Reducing inventories to the strict minimum and optimizing supply chain flows frees up more capital.
- As concerns operations, standardization simplifies contracts, audits and equipment tracking, improves response times, enhances quality assurance and quality control, and helps team members familiarize themselves with the equipment more quickly.
- Standardization also reduces a project’s transportation-related environmental footprint and safety risks.
T-ExS is expected to generate savings of $105 million for our exploration program by 2023. What’s more, the solution could soon be extended to other product lines, as it has already been tested during shallow offshore exploration drilling in Myanmar, as well as to other equipment and services for exploration programs.
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