Strategic Decision Making for Shop Optimization & Centralization at PT CVX Using SMART Method

Abstract

PT. CVX is a major oil producer in Indonesia and has operated Rokan block in Riau province with total oil production of more than 11.5 billion barrels since 1931. However, oil production has declined in the last few years and this condition became even worse by the plunge of oil price which began in mid-2014.With the low oil production and low oil price condition, PT.CVX is required to downsize its operation to reduce operational cost & make the organization more efficient in the future. This paper will focus on how the Company overcome this business issue through Shop optimization & centralization as part of cost leadership business strategy by developing a recommendation strategy for the optimum number & configuration for D&C Shops through selection criteria to select several alternatives and conduct decision making analysis using SMART (Simple Multi-Attribute Rating Technique) method. The recommendation consists of 4 alternatives strategy for future D&C Shop configuration and the selection criteria will be based on 4 main attributes which represent the value of the company: safety, operational reliability, asset security & ease of execution. The result from analysis using SMART method shows that ‘Optimized Working Hours’ alternative is the most preferred alternative. This alternative will have business implication of operational efficiency as part of cost leadership business strategy.

Keywords: Cost leadership strategy, drilling & completion, oil and gas industry, Simple Multi-Attribute Rating Technique (SMART), strategic decision making.