‘Tsunami’ of oilsands turnarounds on the way as deferred work gets caught up

‘Tsunami’ of oilsands turnarounds on the way as deferred work gets caught up

By Deborah Jaremko

Jan. 24, 2017, 7:40 a.m.



Major capital projects in the oilsands are not the only investments that have taken a hit in the low oil price environment.

While there is no evidence that producers have deferred production outages required for regulatory inspections, a significant amount of maintenance has been delayed over the last two years, resulting in accumulated work that Asset Performance Networks Canada managing director Mike O’Kane describes as an oncoming tsunami.

This could become challenging in a market where turnaround costs are already high.

“Everybody is constrained in terms of what they can spend, so the sites are all looking for opportunities to defer this work. What they do is reduce the scope of a turnaround; work gets deferred and it accumulates and sooner or later you have to do it, so you end up with a much more complex, much more difficult event to successfully execute,” O’Kane says.

The majority of oilsands turnarounds require over one million labour hours, and some are in the multi-million labour hours, he says. AP-Canada data shows that “trying to do an event of that size successfully, where you have a reasonable budget and a reasonable schedule is very, very difficult to do,” he says.

AP-Canada found in a turnaround cost performance study in 2014 that oilsands maintenance outages can be as much as 80 percent more expensive than major facility turnarounds on the U.S. Gulf Coast.

“About 30 percent of what we call mega or high complexity turnarounds are what we would call a trainwreck, meaning that they missed their budget or their schedule by at least 30 percent. You’re an outlier if you are able to do them successfully.”

Because of all the deferred work, “We see that more and more of these are going to be happening,” O’Kane says.

For the foreseeable future, many oilsands operators “will have at least one major turnaround every year and in some cases they’ll have more than one, just because this work has built up and accumulated and they’ve got to get it done.”

AP-Canada is working on its second oilsands turnaround costs performance benchmarking study to gather information on the impacts of the downturn, and to identify best practices to get better cost outcomes.

For example, O’Kane says that oilsands producers and other process industry operators in Alberta are increasingly considering the constraints put on them to execute turnarounds by their own capacity.

“There is a site capability threshold on how much turnaround your site can manage and do,” he says.

“There’s a limit to how many cars you can park at a site, there’s a limit to how many headcount you can get on a site and manage effectively, and the site itself has limited resources… It’s like anything in life, if you’re not very well prepared for it, you’re not going to get a very good outcome.”

He adds that AP-Canada would also like to determine the impact of increased labour availably on recent or planned oilsands turnarounds.

“A lot of the project work has been deferred or cancelled. In many areas turnarounds and capital projects share craft availability, some of the same skill and craft types so it’s possible that the reduced capital project activity may have benefits for the turnaround world.”




About prosperitysaskatchewan

Consultant on Saskatchewan's natural resources.

Posted on January 24, 2017, in economic impact, oil, political. Bookmark the permalink. Leave a comment.

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