As the demand for rigs continues to build momentum and contract backlog increases, more rigs are getting back to work on longer-term contracts.
As highlighted in a previous ModuSpec technical article – Rise of the stranded rigs – there are multi-party models in the industry for drilling rig ownership and these include management contracts and arrangements to exclusively market rigs.
We are now seeing these multi-party models in the operational phase (rather than the reactivation phase) and some interesting questions arise around how to manage equipment spares.
We have experienced trends in our clients asking, “do we have spare spares?”. It’s an interesting question which needs rig and region-specific considerations to provide an accurate answer.
In any case, we wanted to share our experience on spares management, and raise some challenges, solutions and thoughts.
Importance of efficient stock management
Efficient management of spare parts can ensure that the value of the stock held in the rig warehouses onshore and offshore is not a financial burden on the company, in terms of the cost of the physical spares, costs of storage and the annual deprecation write down on the balance sheet for spares that are not likely needed.
It sounds easy in theory, but what about in practice? A rig owner needs to align a number of factors to achieve efficient stock management and put resources in place to correctly store, maintain and preserve spare parts so that they are available and ready to use straight out of stock.
Mission impossible – accurate list of spares
Firstly, a rig owner needs an up-to-date inventory. An accurate list of the spare parts that are stored in the rig warehouse, other storage areas onboard the rig and in onshore warehouses and storage yards must be compiled.
Sounds like mission impossible but it can be done and once cycle counts are up-to-date, it should be easier to keep track of the amount of each item in stock entered in the maintenance management system, including the condition and readiness for use.
Short lead times – effective supply chain management
We often see that a rig owner will use the supply chain to their advantage. Instead of having spares in stock, they liaise with the manufacturer to ensure stock is available with a short delivery lead time, all but ensuring that an order can be placed at short notice.
There is a clear risk with this strategy but if the spare is one that is readily available, rather than a unique or rare item, it’s a strategy that can support overall effectiveness of stock management.
Usage – minimum and maximum
We often find during our rig intake projects that a rig encounters issues using the wrong spare, i.e the older spare is left on the shelf and the newer one picked up. A regular review of the minimum / maximum stock amount assigned to parts and shelf life of rubber goods should be carried out to mitigate this issue.
Because of this issue we also see obsolete stock which should be removed and a procedure put in place to process this. Consider that they might be obsolete on one rig but could be utilised on another rig.
Fleet spares
It’s very common for rig owners to have fleet spares to reduce the amount of high-cost items stocked onboard rigs. Normally they are stored in a central location to be accessible and reduce the stock value kept onboard the individual rigs. Using this strategy means that the rig owner needs to align forward maintenance planning to ensure that the fleet spare is not demanded by several rigs at the same time.
If you believe your rig has spare spares, our advice is to consider the questions below and look at where improvements can be made.
Safety environmental and critical equipment spares (SECEs)
- Have all SECEs been identified?
- Are there too few or too many operational critical spares in stock?
- Do you still carry critical spares for obsolete equipment?
- Do you have the correct critical spares for new equipment?
Capital spares
- Have you identified capital spares that have a short lead time and do not need to be in stock?
- Do you have an OEM contract for provision of capital spares?
- Are capital spares stored and maintained to preserve them ready for use?
- Are capital fleet spares utilised to their full potential?
Operational spares
- Do the cycle counts capture all storage areas onboard and onshore and are they up-to-date and accurate?
- Have the maximum/minimum levels been reviewed so they match the expected consumption based on historical use?
- Is the minimum/maximum number of spares being adhered to?
- Are parts attached to work orders to allow more accurate stock level management based on planned maintenance requirements?
- Are unused parts returned to capture them back into stock?
Obsolete spares
- Are there obsolete spares still in stock in the warehouses?
- Is there a policy for identifying obsolete spares and is it being followed?
- Are obsolete spares removed from stock when equipment is removed from the rig?
- Is there a policy in place to process obsolete spares?
Conclusion
Whether spares are looked after by the primary rig owner or through a multiple party ownership model, an efficient stock management strategy can save millions of dollars and be the difference between making a profit or loss.
The size, specification and location of the rig fleet will influence which stock management strategy can be implemented and with rig owners deploying their rigs more globally than before, the issue of having too few spares or too many spares is a real issue.
We have extensive experience of this trend and offer our support to improve stock management in the industry.