Seven Pillars in Cost Effectiveness for Sustaining the Life of Mature Fields: an Example from Mahakam Block

Abstract

Maintaining mature fields provides major challenges in which production and resources are decreasing, while the operations complexity is increasing. This condition leads to increasing project risk, rising cost, and eventually decreasing company’s profit. New development projects may become sensitive to cost. Low oil price environment has made the situation even more challenging. This paper will discuss the strategy being implemented in Mahakam to overcome the challenges as a mature asset. Having produced for more than 40 years, Mahakam fits perfectly in the category of mature, thus fundamental changes are needed for ensuring its sustainability. One of the main focus areas is cost effectiveness. Cost structure was investigated in order to identify the main cost drivers. Then, multiple workshops were held to discuss any possible solutions to improve the cost effectiveness. For capturing ideas from bigger audience, an online platform was created where employees can submit ideas. Lastly, a communication media is regularly distributed to maintain employee’s engagement to the program. Seven pillars in cost effectiveness have been identified for Mahakam to respond to the current situation; Budget accuracy, technical standardization and innovation, change of working philosophy, operations optimization, supply chain optimization and renegotiation, cooperation with other companies, and organizational right-sizing. Several initiatives under those pillars have been successfully implemented resulting in 20% reduction of operational cost in 2019 and will be sustained for the years to come without compromising safety. As the challenge facing mature fields is typically similar, the aforementioned approach will likely not only be applicable in Mahakam but also in other mature fields. Some adaptations might be needed to adjust with the specific characteristic of each individual field. Cost effectiveness will generate capability to continue future investment for sustaining the life of mature fields which is one of the key elements for securing energy supply in Indonesia.