Operational transformation

The transformation of the operations management system (OMS) is a key programme to improve efficiency and achieve the goals set out in our 2030 Strategy. Its purpose is to maximise the company’s operational efficiency by enabling reliable and safe operation and engaging all employees in a culture of continuous improvement.

Key focus areas of operational transformation

A new approach to goal setting
Fostering an environment of continuous improvement
Implementation of the operational reliability management model (ORMM)

The company was able to bring about changes resulting in one-way operational transformation in each of these areas.

A new approach to goal setting

The shift in goal setting boils down to the fact that, rather than basing plans on previous achievements, the company will base its planning on potential, i.e. the limit of available resources. This will enable the company to:

  • define realistic expectations;
  • determine how ambitious its plans can be; and
  • prioritise the efforts of the whole organisation.

The main tool used for this purpose is comprehensive potential assessment (CPA). This is an example of a cross-functional effort. Any potential assessment should consider the specific aspects of each process and accurately estimate its potential for optimisation, thereby identifying an achievable target supported by adequate resources over the foreseeable future. As at year-end 2020, comprehensive potential assessment had been carried out at key assets accounting for over 75% of Gazprom Neft Group EBITDA.

Operational efficiency potential improvement has been made possible by deep and comprehensive examination of internal optimisation capabilities and international best practices for the entire range of production processes. The definition of achievable level also includes the expected impacts of the implementation and systematic use of performance improvement tools (OMS tools).

Consistent and systematic OMS tool development has been rolled out to 25 Group subsidiaries. The total impact of initiatives identified using the OMS tools in 2020 exceeded ₽12.7 billion.

900+ performance improvement hypothesesReviewed as part of CPA.
Plans for 2021
  • Make the goal-setting process an integral part of the business planning cycle.
  • Continue rollout to service subsidiaries and assets outside the scope of company divisions.
  • Achieve coverage of assets accounting for up to 90% of Group EBITDA.

Fostering an environment of continuous improvement

To foster the target production culture in 2020, the operational transformation programme’s efforts were focused on:

  • increasing engagement through corporate leadership model tools;
  • using routine management practices aimed at changing the existing leadership culture by developing effective leadership skills; and
  • improving the infrastructure handling ideas and problems across all levels of the company.

Gazprom Neft intends to have all its managers implement modern routine management practices. Established algorithms and principles of behaviour, which describe routine actions, such as meetings, feedback, performance dialogues, visual management and inspection rounds, build trust between employees and improve their willingness to solve any operational problems.

Best practice codification and rollout were also ongoing. Although the format of the traditional Successful Practices Roadshow was changed due to the pandemic, the number of successful practices selected and refined to comply with universal requirements grew to 156 in 2020. Based on previously selected successful practices, 34 practices were also rolled out to other subsidiaries, with 15 practices implemented outside their original implementation division.

Process improvement ideas proposed by employees
The consistent implementation of OMS Element 1 (Leadership and Culture) and Element 12 (Performance Management and Continuous Improvement) should foster a culture of continuous improvement and engage all company employees on the culture.
Improving productivity together

Gazprom Neft is a participating partner in the national project Labour Productivity and Employment Support, aimed at improving efficiency and labour productivity at Russian companies. This is the first-ever industrial government consultancy initiative in Russia. At its core is the idea is that practicing consultants will develop pilot solutions in industrial settings and transfer their skills to employees, who will then keep on optimising independently.

Under this national project, Gazprom Neft focused on cost cutting and operational risk mitigation in capital construction projects by implementing a continuous-improvement system. Company specialists and experts from the Federal Competency Centre train personnel in lean manufacturing. Improvements made to business processes help optimise construction and installation processes at Gazprom Neft and at participating contractors, with savings of between 10% and 30%.

A total of ten contractors of Gazprom Neft subsidiaries participate in the project, but the programme expansion planned for 2021 will bring it to new participants. A capital construction process factory will be established to train specialists.

10%–30% savings 10 contactors engaged

Implementation of the operational reliability management model

Despite 2020’s COVID restrictions, the company not only rapidly reorganised the implementation of its operational reliability management model by putting expert support online, but it also made significant progress on each of the four components (processes, structure, tools and key performance indicators).

Process optimisation:

  • Approval was granted for the Production Asset Reliability Management – Downstream processes.
  • Process Descriptions have been prepared and approved.
  • Standardisation of downstream reliability management processes is ongoing.
  • Development of a maintenance and repair management system based on SAP PM and 1C:EAM is ongoing.
  • Development of a system that can provide predictive analysis of dynamic equipment condition and comprehensive diagnostics of heat exchangers is underway.
  • A single end-to-end maintenance management business process has been developed, approved and is being implemented in the Upstream Division.

Developing the target organisational structure:

  • Production control centres (PCC) were further developed at refineries.
  • Role and responsibility matrices for production asset reliability management have been developed and implemented.
  • The organisational and functional structure of the Production Support Centre, a single cross-functional unit for subsidiaries, has been developed in the Upstream Division.
  • A pilot in-house team of coaches to build operational reliability capabilities has been selected and trained in practical skills.
  • The Production Efficiency Department of the Corporate University has developed and delivers courses on RCM Analysis Practice and RCFA Analysis Practice.

Operational and engineering staff have been equipped with the following reliability management tools:

  • Walkaround inspection maps have been developed and are in use.
  • Standard operating procedures have been developed.
  • The shift handover procedure has been updated.
  • Equipment criticality analysis and ranking, maintenance and condition management strategy development are ongoing

Key performance indicator management:

  • The analytics (KPI) reporting system has been upgraded.
  • Reliability KPI (including availability) calculation has been automated.
  • The functionality of production performance management information systems has been improved.
800+ employees trained to use reliability management tools
430 walkaround inspection maps developed
~1,000 technical systems covered by the condition monitoring process
Reliability tools
The Etalon OMS structure
Element 1 Leadership and culture Ensuring that managers play a leading role in creating an engaging environment to enable the company to achieve its strategic goals
Element 2 Reliability management Achieving the target level of production asset safety and cost-effectiveness throughout the entire life cycle through targeted risk-based maintenance, and reasonable extension of service life and technical equipment durability
Element 3 Process flow management Ensuring that production processes are safe, efficient and sustainable
Element 4 Organisational development and competency management Ensuring that organisational resources are effectively secured and allocated; assigning responsibility and developing staff competencies
Element 5 Operational risk management Ensuring that a uniform, risk-based approach to operations management has been adopted, in order to improve operational efficiency by minimising unplanned losses from operational risk through actions to reduce their likelihood and mitigate their consequences
Element 6 Contractor and supplier management Ensuring the efficiency and safety of work performed/services provided by contractors, and the efficiency of materials and equipment supplied
Element 7 Project management Ensuring that project goals are achieved efficiently
Element 8 Data, information and document management Making the best management decisions based on data, information, and documentation
Element 9 Environmental and social impact management Preventing unacceptable impacts on people and the environment
Element 10 Change management Ensuring that changes within the company are efficient and maintain operational continuity
Element 11 Stakeholder management Identifying stakeholders in operations, communicating with them and building constructive stakeholder relationships as part of operations
Element 12 Performance management and continuous improvement Improving operational efficiency by using continuous-improvement tools

The Etalon OMS is a structured set of interconnected practices, procedures and processes used by managers and employees at each organisational level in the course of operations.

Potential – annual total difference between the actual and maximum possible/benchmark indicators of an asset life cycle expressed in monetary terms.

Achievable level – target for EBITDA growth and CAPEX optimisation for a given business planning horizon based on the expected impact of approved and potential initiatives that can realise this potential.

Comprehensive potential assessment – an assessment of all strategic resources of subsidiaries/company assets, including operational, financial, and human resources.

Routine management practices – a set of actions taken by a manager to build a new relationship model with his/her subordinates, leading to higher productivity and process safety at the company.

Value-stream mapping to grow shipments

Value-stream mapping – an OMS tool – has helped Gazprom Neft increase daily shipments of light products from the Moscow Refinery. Value-stream maps can be used to create diagrams showing each step in material and data flow, identify waste and find the best solutions to improve efficiency in the production of goods and delivery of services.

Efficient cross-functional operation increased daily light product shipments through an automated fuel loading terminal at the Moscow Refinery by about a quarter. Keeping a focus on market demand, the whole process chain (from production to sale of light products) was analysed. Specialists used insights from this analysis to define a target, more complex operating model with minimised downtime and movements. This led to an increase in terminal throughput from 6,400 tpd to 8,000 tpd.

+27% to daily light product shipments
The successful practice contest at the Capital Construction function

Successful practice contest – a platform to share experience and best practices for continuous improvement at Gazprom Neft. In 2020, the Capital Construction function and the OMS Development Centre held a contest among 10 subsidiaries and contractors, and identified the most effective approaches to scheduling capital construction projects and optimising related costs.

Out of the 40 practices presented at the contest, a panel of expert judges recommended nine for rollout to other subsidiaries. One example is the EPC contracting model, whereby a single contract is made with one contractor responsible for all work, rather than contracting individual suppliers, builders and engineers. This approach enables cross-functional and integrated process optimisation.

40 practices presented at the contest 9 practices recommended for rollout across the company