There’s a limit to how much we can convince you of the value of assurance without first pointing out all of the elephants in the room. So we’ll look at each of them individually in this guide, and we’ll debunk the myths that have given rise to assurance in its worst forms.
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But first, let’s tell you a story.
An oil company was offered an opportunity: to buy into a block next door to one it was already developing. It seemed to fit right into the company’s growth strategy, as any development of the new block could be tied into the company’s current development.
Naturally, there was excitement among the leadership at the prospect of:
- increasing the barrels per dollar of capital spent
- increasing the company’s reserves
- increasing the company’s value through increased production.
The strategic and monetary value of the deal was obvious and significant.
Everything looked good. The company and the government could see the potential of the deal, and the senior management was excited. This was fed back to the technical teams, who were given the job of finalising the deal driven by the senior leadership team.
At this point the company faced a choice.
It could have pushed ahead with the deal. Instead, the leadership decided to enter a period of due diligence and assurance.
An assurance team came alongside the subsurface team, asking questions as to what data they’d used, how they’d built the technical case and what range of potential outcomes they’d considered.
An interesting picture emerged. On the one hand, the subsurface team had used all the data and built an impressive subsurface description and technical case for the new block’s development.
But on the other hand, the enthusiasm of the senior management was interpreted by the subsurface team as a kind of pressure to justify the deal. As a result, the team had not felt they had permission to present any potential outcome except an extreme upside.
The subsurface team knew that the technical case they had built was an unlikely outcome, but hadn’t felt that the management wanted to hear anything else.
The assurance team let the senior leadership team know that the subsurface team had done some high quality work and understood the potential off the new block. But they also helped voice the subsurface team’s concerns, describing the pressure the subsurface team was under and how they hadn’t been able to consider a true valuation.
The deal did not go ahead
The expected value of the new block simply didn’t exist, and the assurance step stopped a poor investment happening.
But assurance didn’t do this just by looking at the subsurface team’s data, techniques and product. This was all checked, but the real finding this: the process the company had followed, and the pressures the subsurface team were under, almost created a situation where an upside outcome was about to be banked as the expected outcome.
This could have felt like a negative outcome, but it wasn’t. During the assurance process, the subsurface team felt supported by the assurance step and, crucially, it gave their private concerns a voice with the senior team.
Meanwhile the company was grateful that they had avoided a poor investment, and the senior leadership team could reflect on the unintended consequences of putting teams under pressure to deliver a deal.
Assurance need not be confrontational, a check-box exercise or divorced from the business. In this case, assurance was seen as a positive step to check the technical case, support the subsurface team and protect the business. And the new block is still for sale.
Inventing a model from scratch:
The three types of assurance
Before we unpick the myths surrounding assurance, it’s worth noting how little the industry was working with just a few years back.
Around that time, one member of Rockflow was tasked with reworking assurance within a supermajor. There wasn’t much literature available then in O&G on the subject of assurance. Nor were the seminal texts really adequate for the task.
So instead of referring simply to O&G models, he researched how other industries approached assurance, such as medicine and aerospace. He also drew on decades of experience to parse out what the upstream oil and gas industry needed.
He realised assurance simply had too many permutations and purposes – are you trying to assure a product, a process or a decision? The supermajor he was working for was attempting to assure all of them at once. But assurance has several forms, and he saw each form needed to be approached differently.
These are the three types of assurance he defined:
1. Technical validation
The first type of assurance tests whether a tool or piece of work is fit-for-purpose. Examples include the assessment of:
- A simulation model
- A seismic depth conversion
- A fluids description
- A well log analysis
This needs the discerning eye of someone with deep technical experience, focused on a model or measurement to assess how accurate it is. It’s often tested by a second opinion with an expert, a data deep dive or by comparing the product with a discipline-specific company or industry standard.
The advantage of this type of assurance is it ensures the quality of a specific item and a consistency of approach.
The disadvantage is that your second expert’s opinion is not guaranteed to be better, so choosing the right expert becomes critical for this to work.
Also, the result might be disconnected with the purpose of the work. For example, assuring a seismic depth conversion will result in greater confidence in a seismic volume by eradicating errors and better use of the seismic. But if the subsurface risk is due to poor well planning, then the ultimate risk will not be better managed despite an assured seismic product.
2. Standards compliance
The second type of assurance is an assessment on whether you’ve followed a standard or practice. Examples include:
- Reserves review
- Due diligence review
The reserves standard serves as a well-known example in this context. Assurance steps to determine whether the reserves standard is met, usually comprise measures against a checklist or defined product – identifying any hitches in the current booking or spotting opportunities for further bookings. This type of assurance can also be delivered through an integrated review at or near the point of delivery, potentially as part of training.
The advantage of this type of assurance is that it can test integrated, not just individual, products, and it ensures that best practices are followed and defined standards are met.
The disadvantage is that it does not test the whole system or the decision and purpose behind the work. Since it’s often introduced late in the process, this type of assurance can also fail to catch critical issues early – potentially resulting in a failed project.
3. Strategic alignment
The third type of assurance tests if a technical team’s focus aligns with the business decision or purpose behind the project. It’s best reserved for one type of situation:
- A major investment decision
This kind of assurance is sadly often overlooked until it’s too late, especially by small-to-medium sized companies. That’s not because it’s inaccessible. It can be undertaken through coaching and early check-ins prior to final review, though it may involve other types of reviews – technical validation and standards compliance – if more depth is required.
The advantage of this kind of assurance is that it’s integrated into the decision-making process from the start, providing early warning of business risks and ensuring the project team’s efforts are well spent.
The disadvantage is that if done without thought it can be overbearing for smaller investments.
The six myths surrounding technical assurance
Through Rockflow’s collective decades of work in O&G, and our research into other sectors, we’ve identified six core myths that are stopping the upstream oil and gas industry from taking full advantage of assurance as it should be.
Myth 01: Assurance is a costly investment
We’ll preface this by acknowledging this: assurance, as it’s often approached, is a costly investment. However, this is not the end of the story. Assurance as it could be, and assurance as we’ve learned to undertake it at Rockflow, is not only a catalyst for sound projects and a preventer of loss-leading projects and waste – it’s also affordable.
The idea that assurance is too costly is one we’ve come across time and again, particularly when we’ve spoken with teams from independent oil and gas companies.
In some ways, cost is the starting point and the end point of all myths about assurance. The many other myths about assurance (which we will go on to detail) all result in companies engaging with its most expensive and egregious form. And at the same time, this expense casts a shadow that stops smaller, independent companies from engaging with assurance and exploring how it could be affordable.
The cost myth is based on true tales, but those tales are not representative of all forms of assurance. It’s like hearing stories of killer whales and imagining all whales are just as perilous. We’ve swum in dangerous waters as an industry – but not all seas are so bad to swim in.
Assurance is worth the cost
Hiring assurance experts can at first glance appear to be an expensive option, perhaps costing tens of thousands of pounds over the course of an oil & gas project.
However, set against a total development cost that can range from hundreds of million to billions of dollars, and where the assurance may identify significant risks or opportunities to the project, the cost of quality assurance will always be a wise investment.
It shouldn’t be as costly as you might be used to
The real cost-centre when it comes to assurance is not the price of external reviewers but the price of implementing the recommendations if they arrive suddenly at the final review stage.
At that point, the stakes are too high. Everyone is on edge. And no one wants to face the financial, operational and mental cost of undoing their team’s hard work – especially on the recommendation of someone who might be perceived to be an outsider.
Let’s look closer at the next myth, which usually gets in the way of this happening.
Myth 02: Assurance is a one-time event that happens near the end of a project
Examining a field plan just before a project gets the green light, and summoning independent reviewers towards the end of the planning stage, does hold some merit. This is often how technical validation and standards compliance is approached. However, there’s a tendency to overemphasise it. We’ve found that it’s a rather constrained form of review unless it’s complemented by other forms of assurance. Namely, strategic alignment.
Subsurface teams tend to have a degree of influence that’s inversely proportional to the money already expended on a project. In the early stages, their insights can steer the organisational ship away from impending obstacles. However, as the project matures, so diminishes the time in which to turn and the decision-making team’s willingness to touch the rudder.
Ultimately, if the first review of a project is bolted onto the end of the project, it’s usually too late and it can result in a late alteration or postponement to a business decision. Not only can this incur significant costs, it can also tarnish a company’s reputation and diminish the overall value of a project.
Assurance is a service you’re far better off bringing in while a decision is still forming and the work is still maturing. Unfortunately, at Rockflow, our services aren’t usually enlisted when businesses are on the cusp of making pivotal decisions. Instead, we tend to receive the call when a facet of the plan – the flow assurance, the well design, the fracking process – has already stumbled. Regrettably, at this stage, once we’re parachuted in to scrutinise the situation, it’s often our role to be bearers of expensive-sounding news.
You can counteract cost-inflation with regular check-ins
When you use reviewers more regularly, and for strategic alignment, it actually makes the entire review process less expensive. It gives your team a chance to challenge their own assumptions from the beginning, addressing weaknesses and lowering the risk of investing resources in unattainable options.
Consider the benefit of bringing an assurance team in at three key junctures in a project cycle: once at the inception during workflow planning, second for a mid-project check-in, and thirdly for a close-out review meeting. You would mitigate the risk of sudden large and expensive surprises at the final review stage.
When reviewers are participating throughout the process, the quality of feedback experiences a substantial boost. Insights can be tested in the early stages, aiding teams in planning the exploration of complex opportunities, ensuring the right skill sets are in place, and fostering meaningful dialogue between reviewers and the in-house team. All of this contributes to making quality assurance more consistently reliable and effective.
Myth 03: Assurance is about checking you have the right answers
When assurance exists only to assess and judge the quality of work, it’s often counterproductive and costly – and this is part of the reason assurance gets a unfair reputation.
Really, assurance – even technical validation – shouldn’t primarily be about checking you have the right answers. It’s about being business focused and reducing risk.
Assurance shouldn’t feel like an added layer of management, and at Rockflow we don’t like to play the role of exam invigilator. Instead we make it a collaborative process, focusing on questions rather than answers: Why did you opt for this standard? What decision are you trying to make? What rationale led to that particular choice?
Assurance works best when it’s offering collaborative space to challenge thinking, test alternatives and raise key questions to support decision making.
It’s about asking the right questions at the right time
The assurance process should largely be about asking questions rather than additional oversight.
There’s not often room for broadest questions in the traditional assurance review format, in which a formal presentation is led by the project team. In this scenario, questions tend to be restricted in focus, tied to the narrative that the project team presents.
At Rockflow, we’ve found more fruitful review meetings usually take the form of interactive Q&A discussions which are orchestrated by the review team.
For technical validation, one-on-one technical dialogues, conducted right at the workstation, can also be very effective. In this form, assurance may imperceptibly blend into coaching, enhancing the experience and capability of the project team.
The advantage of a questions-over-corrections approach is that its effects last longer than a one-time assurance event. It broadens the perspective and expertise of your team for the long term. They’re not only less likely to get entangled by their biases in their current project, they’re also likely to ask different questions in future projects too.
What kind of questions?
So what kind of questions should we be asking, and at what stage in the product life cycle?
In the beginning of a project lifecycle, assurance questions should largely focus on the scope and purpose of the work. For instance, when deciding on the concept for developing a field, is it in-scope to explore the possibility of selling the opportunity to another firm, either wholly or partially, to gain more value?
It’s also important to ask: Are we involving the right people at each stage so decision makers are confident in our results? If you leave a key person out of the process it’s easy for the project to need serious rework or lose momentum when they finally arrive and throw everyone into indecision.
Once you’ve scoped the project, the questions should be about exploring options before narrowing focus. For instance, have we selected a concept too soon? Have we created and evaluated good alternatives to inform trade-offs?
Once a concept has been selected, it’s important to unearth any overlooked assumptions or flaws in the calculations and thinking. Crucially, you want to ask how dependencies factor in so you don’t miscalculate the risk.
All of this is a vital part of ensuring strategic alignment.
Myth 04: Assurance is about examining calculations and details
Well, assurance can be about calculations and details, at least when it comes to technical validation. However, this is only one element of assurance and it’s not necessarily the most vital part.
Effective assurance has to consider the broader perspective, even if you believe the issue at hand is a technical one. At Rockflow, we know that if we have an understanding of the field development plan, the value drivers and the timing of business decisions, we’ll have a much better vantage point from which to provide insight. That’s because great assurance starts with the question ‘are we considering the right things?’
Information shouldn’t just be reliable, it needs to be meaningful too
The strength of this Decision Quality link isn’t determined by the amount of information but by meaningful and reliable information. A quick learning cycle, in which you determine which uncertainties most impact value and risk, will help to clarify the full hierarchy of decision criteria so you can focus on what really matters.
The aim is to avoid squandering time and resources on inconsequential investigation or trying to reduce uncertainty that’s inherently irreducible. There will always be residual uncertainties, so the goal isn’t to eliminate them but reduce those uncertainties to an acceptable level.
For example, you might want assurance for a seismic depth conversion, but you first want a process in place to explore why this matters. How does it impact the value of the project? How does depth conversion compare to other risks? Accurate calculations that don’t answer the most important questions will be of limited value.
Assurance is primarily a way of helping project teams and decision makers to see beyond their own field of view. Tight focus is fine, so long as it’s intentional – assurance makes sure it is.
Myth 05: Assurance is bureaucratic and negates the hard work that’s already been done
In a number of independent companies, assurance is perceived to be cumbersome and complex. It’s seen as an optional juncture in the decision-making process that has the potential to thrust everyone back to the drawing board, causing unwarranted delays in pivotal and potentially time-sensitive ventures.
Why would you wish that upon your team? And should you trust an external reviewers’ second opinion over that of your own experts? Wouldn’t it be better simply to press ahead?
Certainly, bringing external reviewers in for a single, final review at the last hurdle can seem bureaucratic and impractical. However, assurance shouldn’t be about reviewers second guessing the subsurface team,
Assurance is about knowing when good is good enough
Part of effective assurance is knowing when assurance’s work is done.
So where do you draw the line? How much assurance do you need? And when is “good” good enough?
For reasons we’ve already explored, our own gut feeling is rarely a reliable guide. As is always the case with the subsurface, your team might be happy with the uncertainties they have identified and quantified, but it’s quite possible to misjudge the level of uncertainty due to factors out of view. In short, we don’t know what we don’t know.
At the same time though, we can’t afford to explore uncertainties and probe hidden possibilities for ever, otherwise we’ll end up following the trajectory of this graph:
So how do we know once we have reached sufficient certainty or precision to make a decision? Ultimately, there is no framework alone that can help you to know – you need deep expertise.
At a certain point, you have to rely on the experience of your team and the experience of your reviewers. The more experienced they are, the more likely they are to anticipate and identify risks, and the more likely they’ll be able to identify when a risk is irreducible or not worth investigating further.
How frameworks help
Alongside experience, you can be systematic in your analysis by using a toolkit or high-level framework that helps to cover all the most vital bases. The advantage is that once these areas have been probed by a person of sufficient experience, you can consider that good is now good enough.
This won’t function quite like a checklist – oil and gas exploration is far too diverse and difficult to standardise completely. It just needs to allow the reviewer to consistently explore the most relevant components in sufficient detail, so the full breadth of possibilities can be held up to the light and examined.
At Rockflow we use high-level frameworks like this, even though all the members of our team have upwards of 20 years’ experience. We know that a structured approach will help to provide objectivity and clarity of conclusions.
Our frameworks are standardised enough to be systematic but dynamic enough to enable us to ask questions about the most relevant factors impacting the value of a project, setting out the key business questions and unearthing what might have an impact on those decisions.
Myth 06: Bringing in external reviewers suggests the project team is untrustworthy
As we’ve said, assurance shouldn’t feel like you’re bringing in people to mark the quality of your team’s work and adjudicate on their ability. Your team, undoubtedly, should take pride in their work-to-date.
Yet, companies must always approach the hard work anyone has undertaken with a certain caveat: major decisions involving the subsurface are simply too complex to conduct without external input.
Most professionals will only contribute to five or six major decisions in exploration and development projects throughout a 30-year career. Alone, there’s simply not enough time for anyone to become experienced enough to ensure they’re asking the right questions and covering all angles.
Not only that, the longer a team invests in a project, the more likely it is that their judgement may be clouded. It’s simply part of human nature to be influenced by the depth of one’s involvement.
Devoting effort into a single model or study can obstruct our ability to see a broader spectrum of possible outcomes. Consider an analyst who has meticulously crafted a brilliant piece of technical work; the prospect of duplicating the same process for three distinct outcomes may not be met with enthusiasm. Similarly, a reservoir engineer, having meticulously outlined a technical description of a reservoir, might be hesitant to acknowledge the existence of a diverse range of equally valid descriptions.
Bringing in a reviewer is not to suggest that your team in particular is untrustworthy. It’s to acknowledge that anyone, no matter how brilliant, is fallible.
Assurance should be a process that gives your teams a voice.
When assurance is brought into the process early enough, and reviewers adopt a strategy that emphasises questions over corrections, assurance can become a stage for your team to articulate thoughts on topics they might have hesitated to address in prior discussions. Members of your team will often recognise gaps, but they don’t always have the opportunity for open dialogue about them.
An assurance team may also have a greater ability to speak truth to power. This might give them greater influence with key decision makers to affect the course of a project, based on the dialogue they’ve had with project team members.
Assurance can be a form of learning instead of a technical assessment
A review can add value to your future projects, not only the one before you.
When assurance takes a questions-over-corrections approach, it can facilitate the transfer of wisdom from one professional to another and from team to team. It can prompt the consideration of new workflows and ways of handling uncertainty, for instance, which the team might be able to consider in years and project cycles to come.
Assurance is a way to raise the water level of our collective wisdom. It’s not only a way to insource expertise, it’s also a way to introduce perspectives and a facilitation of discussion that may enable quieter members of your own team to be more vocal with their insights – stopping project teams from deferring to the loudest voice in the room.
A final word on assurance – and the role Rockflow can fulfil
It’s vital for all companies to find a way to not only feel confident when they greenlight a project, but to see the results they expect too. And while we’d love to claim that the solution is to use Rockflow’s services, we can only ever be a part of the answer.
Sometimes the greatest need isn’t an external review, but an assurance process that enables subsurface teams and decision makers to do things differently. This isn’t necessarily the mountainous undertaking it might initially sound like. It can simply start by thinking deeply about how you make decisions as an organisation and talking through some of the barriers to speaking up or stopping a project when it’s the right thing to do.
External reviews can also play a vital part in creating a culture of quality decisions supported by assurance, making it easier to manage value and safety over time. For that, you may well wish to call upon Rockflow.
Rockflow’s multi-disciplinary team are trusted advisors to upstream oil and gas companies around the world, with a proven track record of delivering critical technical assurance to the industry. If you’d like to learn more, don’t hesitate to talk to us.
