SELECTION OF SURFACE FACILITY REACTIVATION STRATEGY BY USING ANALYTIC HIERARCHY PROCESS (AHP)

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1 SELECTION OF SURFACE FACILITY REACTIVATION STRATEGY BY USING ANALYTIC HIERARCHY PROCESS (AHP) Lukman Rasyidi 1) and Udisubakti Ciptomulyono 2) 1) Program Studi Magister Manajemen Teknologi, Institut Teknologi Sepuluh Nopember Jl. Cokroaminoto 12A, Surabaya, 60264, Indonesia 1) 2) Jurusan Teknik Industri, Institut Teknologi Sepuluh Nopember ABSTRACT TEPIM has been operating MH block since Currently, TEPIM production is declining. Therefore, several equipments/facilities are unnecessary to be operated anymore. However, due to operational optimization, there is a deactivated facility (GTS -J) that is considered to be reactivated. There are three alternatives for GTS-J reactivation, i.e. complete reinstatement, minimum reinstatement, or no reinstatement. Technical and non-technical aspects need to be incorporated in the decision making in order to ensure a thorough assessment. Focus Groups Discussion (FGD) is used to validate criteria to be considered during the selection process. While the Analytic Hierarchy Process (AHP) are selected as the tools for this multiple criteria decision making research following qualitative nature of the criteria and independence relation between the criteria. From the FGD exercise, there are 4 main criteria that are considered to select the best alternative, i.e. Economical, Technical, Safety & Environment, and Social. Then after AHP exercise, it was found that partial reinstatement is the best alternative for GTS-J reactivation. Keywords: Facility Reactivation, Multiple Criteria Decision Making, AHP. INTRODUCTION TEPIM is one of subsidiaries of TSA, one of 5 largest oil and gas producers in the world. Located in Indonesia, it has been operating MH block since It peaks its production figure in Since then, its production has been declining. Equipment s capacity which is installed at each site are designed to process hydrocarbon at its peak production. This condition makes current equipment over capacity compared to current production, resulting several equipments/facilities to be deactivated. Since 2011, GTS-J has been shut-in (not producing) as the line is used for Sisi Nubi gas export to NMU. Currently, there is plan to re-route Sisi Nubi gas to CMU. With this configuration, GTS-J can be re-activated to produce hydrocarbons like its original design. Additional production of 2 bcf of gas (~16 MUSD) in 2 years can be obtained by reactivating GTS-J. Figure 1 illustrates current operation of GTS-J production network. The alternatives of GTS-J reactivation strategy has been defined by TEPIM management, i.e.: 1. Complete reinstatement Complete reinstatement means that all equipment to be restored back as per initial design. The cost will be the highest and reinstatement time will be the longest out of all alternatives. The operating philosophy will remain the same. There is additional manhour needed for the operation, though not as much as partial reinstatement. A-13-1

2 2. Partial reinstatement Only essential equipment to be restored in partial reinstatement. The cost will be lower and the reinstatement time will be shorter than complete reinstatement. The operating philosophy will be changed, so risk assessment need to be reviewed. More manhour needed compared to complete reinstatement due to the operation will be only in pneumatic mode, without electrical power. Thus the operation cannot be monitored from control room. Operator must frequently present on the GTS-J. 3. No reinstatement Everything will remain the same as it is now if no reinstatement alternative is chosen. No additional manhour needed. No cost spent. No production gained either. The objectives of this research are to define criteria and sub criteria to be considered to decide GTS-J reactivation strategy and to assist management to select reactivation strategy of GTS-J based on the defined criteria. Figure 1. Pipeline network around GTS-J Multi Criteria Decision Making MCDM is a process of selecting alternative to obtain optimal solution from several alternatives by considering more than one criteria or objective in a conflicting situation (Ciptomulyono, 2010). The goal of this process is to provide the decision maker with sufficient information in order to choose an alternative that results in the most feasible and optimal outcome (Virine & Murphy, 2007). Analytic Hierarchy Process (AHP) Analytical Hierarchy Process (AHP) is based on sets pair wise comparison of decision maker which represent human being s intrinsic ability to structure his/her perceptions hierarchically, compare pairs of similar things against a given criteria or a common property, and judge the intensity of the importance of one thing over the other (Ciptomulyono, 2008). Basically, AHP is a method of breaking down a complex, unstructured situation into its component parts; arranging these parts, or variables, into a hierarchic order; assigning numerical values to subjective judgments on the relative importance of each variable; and synthesizing the judgments to determine which variables have the highest priority and should be acted upon to influence the outcome of the situation (Saaty, 2012). Basically, AHP is a method of breaking down a complex, unstructured situation into its component parts; A-13-2

3 arranging these parts, or variables, into a hierarchic order; assigning numerical values to subjective judgments on the relative importance of each variable; and synthesizing the judgments to determine which variables have the highest priority and should be acted upon to influence the outcome of the situation (Saaty, 2012). Focus Group Discussion The main purpose of focus group research is to draw upon respondents attitudes, feelings, beliefs, experiences and reactions in a way in which would not be feasible using other methods, for example observation, one-to-one interviewing, or questionnaire surveys. Compared to individual interviews, which aim to obtain individual attitudes, beliefs and feelings, focus groups elicit a multiplicity of views and emotional processes within a group context. Compared to observation, a focus group enables the researcher to gain a larger amount of information in a shorter period of time. Focus groups are particularly useful when there are power differences between the participants and decision-makers or professionals, when the everyday use of language and culture of particular groups is of interest, and when one wants to explore the degree of consensus on a given topic (Morgan & Krueger, 1993). METHODOLOGY As a case study in multi criteria decision making for upstream petroleum industry, this research used Analytic Hierarchy Process (AHP) as the method to solve the problem. This methodology is selected due to following reasons: 1. Complexity of the problem to be solved with many criteria to be considered. 2. Qualitative nature of the criteria used in this research, e.g. job security, safety, emergency response, etc. 3. Independent relation between the criteria used in this research. 4. The hierarchy structure provides a picture that is easily communicated and understood by decision makers, and captures the interactions among decision components. Define Fix Criteria Nominated criteria and sub criteria from literature study need to be validated by Head Division of NAM as the budget owner and decision taker. To obtain validation, Focus Group Discussion (FGD) me thod is selected to ensure management from each related division/department fully understand all the criteria and agree to the result. Head Division of NAM created a special team to perform brainstorming and preliminary study for this reinstatement. This team is also appointed to define the criteria and sub criteria to be considered in the decision by FGD method. The team consist of: a. Head of NAM Division b. Head of Production Method Service c. Head of Construction Department d. Head of Process & Safety Design e. Head of Engineering Studies Department Gather Data from AHP Questionnaire After all criteria and sub criteria has been defined. The next step is to gather data with AHP methodology. Questionnaires of pairwise comparison will be distributed and sent back via corporate to get the data. A-13-3

4 The weight of each criteria will be defined by Head of NAM Division as the decision taker. While pairwise comparison for each alternative related to sub criteria will be performed by each expert of sub criteria discipline. The expert who will perform the pairwise comparison will be those who are impacted in daily operation (Maintenance, Production, Community Officer, and Marine) and as executor (Engineering Study, Construction, and Finance). All gathered data will be processed through steps of AHP method. To assist AHP data processing, including calculating eigenvector and eigenvalue, Microsoft Excel is used. For sensitivity analysis, Expert Choice software is utilized.. The result of this process is the chosen options for GTS-J which will be presented to TEPIM management. Sensitivity analysis will be performed in order to know how stable it is to changes in the priorities of the criteria in the second level of hierarchy (Saaty, 1994). The priorities changing will be performed by shifting priority bar in Expert Choice software. RESULT AND DISCUSSION Criteria and Sub Criteria FGD were performed to get validation of criteria and sub criteria. Criteria and sub criteria to be validated are summarized from Wang et al. (2009) an d Rabbani et al. (2014). However, there are also criteria which are added outside the 2 references to accommodate specific condition of GTS-J. Based on the result of FGD, valid criteria and sub criteria are obtained. This allows hierarchical structure to be formed to ease the overview of the problem. The hierarchical structure consists of 4 levels. The first level is goal. The second level is criteria. The third level is sub criteria. The bottom one, the fourth level is alternatives. The complete hierarchical structure can be seen in Figure 2. Analysis from Criteria Weight Result Result of pairwise comparison between criteria is shown on Table 1. From the result, it is shown that Economic criteria by far has the highest weight. It means that it is considered the most important criteria than any other criteria. The 2 nd important criteria is Safety and Environment, followed by Technical and Social. It shows that while safety is priority, that all work shall be performed safely, company profit is still the main purpose of company operation. Result of pairwise comparison of sub criteria under criteria Technical, Economic, Safety & Environment, and Social are shown on Table 2, 3, 4, and 5 respectively. In Economic sub criteria (as the most important criteria), it is shown that Sales Income has the highest weight. It means that the amount of income from production sales is far higher than any other criteria, which are all expenditures. A-13-4

5 Figure 2. Hierarchical Structure of Reinstatement Strategy of GTS-J Table 1. Result of pairwise comparison between criteria Table 2. Result of pairwise comparison between Technical sub criteria Table 3. Result of pairwise comparison between Economic sub criteria A-13-5

6 Table 4. Result of pairwise comparison between Safety & Environment sub criteria Table 5. Result of pairwise comparison between Social sub criteria Table 6. Final alternative weight Alternative Weight Calculation Result Table 6 shows that Complete Reinstatement has the least weight in all the criteria. No Reinstatement lead in 3 criteria (Technical, Safety & Environment, and Social) but dominated by Partial Reinstatement in Economic Criteria. However, even though Partial Reinstatement only leads in 1 criteria, it leads in the criteria that matter the most with of weight. With that description, as shown by the calculation in Table 6, Partial Reinstatement is the preferred alternative for Reactivating GTS-J with just a slight dominance from No Reinstatement. Degree of its dominance will be discussed in the next chapter regarding Sensitivity Analysis. Sensitivity Analysis From previous chapter, it was understood that No Reinstatement lead in all the criteria except Economic Criteria. However, due to Economic Criteria has the highest weight, then No Reinstatement not become the preferred alternative, only slightly less weight than Partial Reinstatement. This conclusion is also supported by performance sensitivity from Expert Choice software shown in Figure 3. Therefore, the upcoming sensitivity analysis will only focus on Economic criteria. As shown on Table 6, the weight of Economic criteria is This result to Partial reinstatement as the preferred alternative. Then, using Expert Choice to lessen the weight of Economic criteria, it is found that when the Economic weight reach 0.621, the preferred alternative change to No Reinstatement. This simulation is shown in Figure 4. It would happen if the pairwise number of Economic criteria is decreased 1 or 2 number compared to other criteria. While other pairwise number remain unchanged. A-13-6

7 Figure 3. Performance Sensitivity of Criteria Figure 4. Simulation of Economic Criteria Weight Shift Figure 5. Performance sensitivity of Economic sub criteria A-13-7

8 Figure 6. Simulation of Sales income sub criteria weight shift The analysis then goes deeper into Economic sub criteria. As shown in Table 3, it was shown that No Reinstatement lead in all the sub criteria except Sales income. But due to Sales income has the highest weight, then No Reinstatement not become the preferred alternative. This conclusion is also supported by performance sensitivity shown in Figure 5. Then, Table 3 also shows the weight of Sales income, which is This result to Partial reinstatement as the preferred alternative. Then, using Expert Choice to lessen the weight of Sales income, it is found that when the Economic weight reach 0.572, the preferred alternative change to No Reinstatement. This simulation is shown in Figure 6. It would happen if the pairwise number of Sales Income sub criteria is decreased 1 or 2 number compared to other Economic sub criteria. While other pairwise number remain unchanged. By this analysis, it was concluded that Economic criteria along with its Sales income sub criteria are the most sensitive criteria and sub criteria. A small change in the weight by different rating (only 1 or 2 number) in pairwise comparison may change the result of the decision taken. Therefore, careful examination to define pairwise comparison on Economic criteria and Sales Income criteria need to be done. This finding shows that even though safety is priority, all company needs to gain profit, without exception in oil & gas company. Additionally technical and social matters must adapt to any decision taken. Discussion Compared to existing decision making methodology at TEPIM, methodology using FGD and AHP offer less meeting quantity which replaced by behind desk job to perform pairwise comparison. Criteria are also mapped in hierarchical structure to better understand the problem. Additionally, importance of each criteria and alternative are also quantified. Those advantages will bring more effective decision making process and give satisfaction to the decision maker. By choosing Partial Reinstatement, there will be no organizational change needed, as it will only need to add maximum 1 personnel or not at all to operate the GTS-J. The construction work will be performed by Construction Department using project contract service. Currently there are around 200 wells to be operated at SMU. Adding GTS-J operation is like adding 5 additional wells. Therefore, any other means to support the GTS-J operation can still be handled by existing organization. A-13-8

9 CONCLUSION AND RECOMMENDATION Conclusion Based on discussion on precious chapters, this research can conclude below points: 1. The criteria (derived from FGD process) that is used for selecting reactivation strategy of GTS-J are Technical, Economic, Safety & Environment, and Social with all their sub criteria. 2. The selected alternative for reactivating GTS-J is Partial Reinstatement. 3. The most significant and sensitive criteria is Economic criteria. Any slight change on weighting the Economic criteria may change the decision result. Within Economic criteria, the most significant and sensitive sub criteria is Sales income which also can change the decision with slight change. 4. Compared to existing decision making methodology in TEPIM, FGD and AHP offer less meeting quantity, better understand the problem, and quantified importance of criteria and alternative. Those advantages will bring more effective decision making process and give satisfaction to the decision maker. Recommendation After going through all process of this research, the recommendation for future research is addition of fuzzy method with AHP may sharpen the result as it allows ambiguity into calculation. REFERENCES Bevilacqua, M., & Braglia, M. (1999). The Analytic Hierarchy Process Applied to Maintenance Strategy Selection. Reliability Engineering and System Safety, Borkhoche, R. (2010). Reactivation Project. SPE Annual Technical Conference and Exhibition. Florence: Society of Petroleum Engineers. Ciptomulyono, U. (2008). Fuzzy Goal Programming Approach for Deriving Priority Weights in the Analytical Hierarchy Process (AHP) Method. Journal of Applied Sciences Research, Ciptomulyono, U. (2010). Paradigma Pengambilan Keputusan Multikriteria Dalam Perspektif Pengembangan Proyek dan Industri Berwawasan Lingkungan. Pidato Pengukuhan Guru Besar FTI ITS. Surabaya, Indonesia. Gerbacia, W. E., & Al-Shammari, H. (2001). Multi -Criteria Decision Making in Strategic Reservoir Planning Using the Analytic Hierarchy Process. SPE Annual Technical Conference and Exhibition. New Orleans, Louisiana, USA: Society of Petroleum Engineers. Morgan, D., & Krueger, R. (1993). When to Use Focus Groups and Why. London: Sage. Nam, S. H., Back, M. G., Lee, S. M., Hwang, I. H., & Shin, J. G. (2015). Development of Production Plan Assessment System for Productivity Improvement Using AHP Method. The Twenty-fifth International Offshore and Polar Engineering Conference. Kona, Hawaii, USA: International Society of Offshore and Polar Engineers. Orunesu, R., & Hernandez, J. (1994). Reactivation of Marginal Fields. The Latin American/Carribean Petroleum Engineering Conference. Buenos Aires: Society of Petroleum Engineers. A-13-9

10 Pomerol, J.-C., & Adam, F. (2004). Practical Decision Making - From the Legacy of Herbert Simon to Decision Support Systems. Decision Support in an Uncertain and Complex World (págs ). Tuscany, Italy: Monash University. Rabbani, A., & Zamani, M. (2014). Proposing a New Integrated Model Based on Sustainability Balanced Scorecard (SBSC) and MCDM by Using Liguistic Variables for The Peformance Evaluation of Oil Producing Companies. Teheran, Iran: University of Teheran. Riahi-Belkaoui, A. (2002). Behavioral Management Accounting. Westport: Quorum Books. Saaty, T. L. (1994). Fundamentals of Decision Making and Priority Theory with the Analytical Hierarchy Process. Pittsburgh: RWS Publications. Saaty, T. L. (2012). Decision Making for Leaders, The Analytic Hierarchy Process for Decisions in a Complex World. Pittsburgh: RWS Publications. Simon, H. A. (1986). Decision Making and Problem Solving. Washington, DC: National Academy Press. Virine, L., & Murphy, D. (2007). Analysis of Multi Criteria Decision Making Methodologies for the Petroleum Industry. International Petroleum Technology Conference. Dubai, UAE: International Petroleum Technology Conference. Wang, J.-J., Jing, Y.-Y., Zhang, C.-F., & Zhao, J.-H. (2009). Review on Multi-Criteria Decision Analysis Aid in Sustainable energy Decision-Making. Baoding, China: School of Energy and Power Engineering, North China Electric Power University. A-13-10