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May 2007

The Use of Lean Six Sigma in the Oil IndustryM.A. Sally Ulman, President, VRI

All time high demands for petroleum have driven the industry to embrace more efficientmeans of operations. Constant pressure exists to increase production and improvereliability while reducing costs in a safe operation. Improved business results can beachieved by managing quality data statistically through sound engineering principles.Variance Reduction International, Inc. (VRI) is currently providing a competitiveadvantage to upstream oil operations through the deployment of Lean Six Sigma (LSS).The LSS methodology and tools make processes Safer, Better, Faster, and Lower Cost.VRI encompasses the longest standing relationship deploying LSS in the upstream oilindustry. Since 1998, providing services for Chevron, Texaco, Aera Energy,BakerPetroilite and Halliburton. Proven results in upstream oil companies have produced

many completed LSS projects, demonstrating an average of $1.1 million in return oninvestment (ROI).

Combining Lean tools with Six Sigma

Six Sigma companies embrace the fundamentals of statistical thinking: all outcomes areproduced through a series of interconnected processes and all processes vary. The key tosuccess is to understand and reduce variance. Six Sigma teaches people to look atvariance, not just averages. Through a structured roadmap, Define, Measure, Analyze,Improve, and Control (DMAIC), profound process knowledge can be achieved, and

focused improvements can be made.

Lean is a process improvement methodology that focuses on removing non-value addedactivities at the pull of customer requirements. Value stream mapping points to non-value added steps and allows for streamlining processes. Cycle times go down, costs godown. More can be done with less.

Simply put, Lean simplifies the process where Six Sigma perfects the process.


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VRI Core Offerings

At VRI, our goal is to revolutionize the communication of comprehensible statistics, bypioneering new teaching techniques. We encourage Knowledge Based Management anddemonstrate methods for transforming data into knowledge for useful decision-makingstrategies. We teach using the KISSING approach: Keep It Simple Statistically,Incorporating Numerous Graphs. VRI offers the following courses in Lean Six Sigmatraining:

Executive Overview - used to introduce the concepts of Six Sigma to theLeadership Team and to provide a top-level understanding

Champions Program provides Leaders, Managers and Agents of Changewith the tools to provide infrastructural support, inspire an internal sharedvision and take on the role of mentor for all Lean Six Sigma trainedemployees

LSS White Belt Training a hands-on workshop where participants leavethe course with the necessary skills to immediately implement anunderstanding of the steps to improve a process as well as apply quality toolsand simple statistics to improve process performance and increase cash flow

LSS Green Belt Training designed for members of an organization wholead process improvement teams where they will learn tools to produceproducts and services better, faster and at lower cost. Completion of the

Green Belt program requires the completion of a project exhibiting costsavings of at least $100,000

LSS Black Belt Training provides the same skills and tools of Green BeltTraining with an additional week of Design of Experiments (DOE) training.DOE is simply a structured means of experimenting, ultimately resulting in amathematical model of a process, relating inputs to outputs which can thenbe used to select optimum project solutions. Completion of the Black Beltprogram typically requires project realization of cost savings amounting to atleast $500,000

Mentoring and Project Deployment provide support to Green Belts andBlack Belts in executing their projects. Proper use of the tools, use of the

DMAIC roadmap, and proper facilitation of teams is all discussed inmentoring sessions.

Data Mining: this course focuses on the use of statistical models for datamining with large or small data bases. Better decisions can be made by asound understanding of the data.


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Lean and Six Sigma Specific Software used in Program Implementation

With many LSS training courses, VRI uses a software program called SPC XL.Developed by SigmaZone, users have the ability to create Control Charts, Histograms,Paretos, Summary Statistics, Scatter Plots, Gage Capability Analysis, FMEA, and muchmore. All charts and statistics that SPC XL creates are in a normal Excel workbook,therefore creating ease in sharing results with all Excel users.The software is robust onnon-computer experts. Students can start drawing professional-looking control charts,histograms, and other critical charts and diagrams in a matter of minutes. SPC XLensures that minimal data acquisition will result in proper management and reliabilitythrough the use of tools with effortless data entry into an Excel spreadsheet.

Please see examples of SPC XL chart capabilities in the following illustrations:

Control Chart Cpk Analysis

Box Plot Histogram


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The Upstream Oil Specialization of VRI

M.A. Sally Ulman, President of VRI - a certified Women Owned Business, completed

a 16 year career as a corrosion engineer with Chevron where she began to use the LSStools with a difficult water treatment process in Lost Hills, CA. Completing the first LSSproject in upstream oil worldwide in 1999 gave Sally the idea that others in the industrycould benefit by these tools. Sally has taken extreme care to hire consultants not only inthe top of their field, but have extensive knowledge relating to oil and gas operations.VRI has built long standing relationships in the upstream oil industry including petroleumindustry giant, Chevron. VRI has mentored projects such as improving oil production,equipment reliability, fluid measurement systems, inventory management, workprocesses cycle time reduction, resource allocation of parts and people, implementationof new technologies as well as improving existing ones additionally, branching out intotrans-service related entities such as health, environment & safety, procurement and

human resources has been undertaken. Definitive evidence in upstream oil accomplishedprojects can be seen in SPE Article No. 84434, co-authored by R.S. Buell, SPE and S.P.Turnipseed of ChevronTexaco and entitled Application of Lean Six Sigma in OilfieldOperations. Overwhelming verification of process improvements in the areas of health,environment and safety can be seen in SPE Article No. 98564, authored by R.S. Buell,SPE, Chevron Corp., entitled Creating a Culture To Deliver Sustainable HSEPerformance. A typical upstream oil project, as proven through our training at Chevron,Aera Energy and Halliburton, has realized a return on investment of $1.1MM in only 4-8months. These staggering numbers prove the efficiencies that result from VRIs easy-to-learn tools of Lean Six Sigma training in oil and gas operations.

Conclusions

Lean Six Sigma adaptations from other industries have been proven to synergisticallycombine, improving business results in oilfield operations. Financial benefits aredelivered through our training courses and mentoring for project deployment. Whencourse objectives are followed to fruition, they can provide a broadly embedded qualityand statistical thinking through routine engineering and non-engineering problem solving,process simplification, process improvement and optimization ultimately leading toprocess perfecting.

For more information:

Variance Reduction International, Inc.P.O. Box 10237, Bakersfield, CA. 93389(909) 702-8546e-mail: [email protected]
mailto:[email protected]:[email protected]://www.variancereduction.com/http://www.variancereduction.com/http://www.variancereduction.com/mailto:[email protected]


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