Fossil Fuels to Hydrogen: Paradigm Shift in Capital Project Management? A Transitional Gas & Oil Eyeglass Review

Abstract

Abstract Energy producers are under tremendous pressure to abate GHG emissions earlier than previously thought. The call for action is driven by multiple factors such as climate activism, policy regulations, a global pandemic and geopolitical conflict. Hydrogen is widely considered the most important energy carrier in a decarbonized future. As organizations are revisiting their business models to evaluate the impact of a shift from fossil fuels to Hydrogen, terms such as "Energy Transition", "Carbon Management" and "Hydrogen Economy" are now making frequent appearances in business and project management plans. The global pandemic and cataclysmic geopolitical conflicts may have expedited this shift in strategies, and to some extent exacerbated capital risks faced by mega projects. As a result, a fundamental realignment in Project Management strategies seem inevitable. While managing the Energy Transition, the traditional Oil & Gas PM knowledge areas will require a "reframing" of sorts. This paper investigates the Project Management challenges and opportunities in a large, Joint Venture capital project in the Energy Transition context. The Paris Agreement, the international treaty on climate change, has intensified the discussions around low carbon energy sources. The transition to Hydrogen is sometimes envisaged to happen with cross-sectoral coupling (CO2 capture, Renewable Energy storage). Its long-term implications in terms of project complexity management, technological maturity and economic feasibility along with stakeholder influences will be reviewed. The high-level interface aspects from technology integration viewpoints and Project Human Resource Management challenges will also be addressed. Other important present-day change drivers include impacts of Covid-19 pandemic and geopolitical conflict in Europe, which have led to watershed policy changes such as Joint European action for secure energy (REPowerEU). Rejigging Risk Management, Contract Management, Supply Chain and Stakeholder alignment strategies in the post pandemic world are key execution strategy elements for Hydrogen projects and these will be reviewed on the basis of learnings from Oil & Gas Project execution management. The fundamental changes in Gas and Oil based Capital Project Management and learnings to be harvested for Hydrogen projects will be elaborated utilizing identified critical change drivers. Project Configuration, Integration and Risk management perspectives will be analyzed from Owners’ viewpoints. Additional Critical Success Factors, Project Definition Parameters or integrated Front End Loading (iFEL), Project assurance and leadership model will be identified and elaborated. An overall execution strategy focused on new project realities beyond the realm of triple project constraints will be outlined. The strategic redefinition of Project Management functions in the context of Energy Transition and their deployment will be administered via a competent Project Management Office (PMO) function. Authors identify the PMO's leading role in Change Management, harvesting learnings and synergies, stakeholder alignment and overall strategy definition.