How Ready Is Your Project for Delivering Production?

Abstract

Management In recent years, projects in upstream oil and gas have become more complex, remotely located, and, therefore, costly and difficult to deliver. Research shows that one of the key performance indicators—attainment of production as per the basis of design— is not achieved without significant further investment and significant delay (Merrow 2011). The findings are an industrywide phenomenon. Oil and gas companies have started to think about how to reduce the risk of costly remedial actions to meet original production targets. There are principally two activities that companies employ to optimize internal processes for better outcomes: (1) strengthening project assurance activities and (2) planning ahead for long-term operations. Recent experience in coal seam gas (CSG) to liquefied natural gas (LNG) projects on the east coast of Australia further enforces these principles. 1. Value assurance fostering system integration After the late 1990s trend to return to the roots of the E&P sector, after a period of diversification into other businesses, capital discipline was instituted in most large multinational oil and gas companies. The value assurance framework was principally employed to enhance the efficiency of capital invested by offering “more bang for the buck.” Because of the natural movement of employees and increased pressure from shareholders, capital allocation discipline and value assurance have found widespread application in the industry. Over the years, the same framework expanded to include technical and operational requirements that stipulate minimum standards for deliverables at various stages of project delivery such as concept selection, detailed design, construction, and commissioning. A key learning in applying these processes was to recognize the large degree of systems interaction that require higher levels of integration. The model developed by Shenhar and Dvir (2007) classifies projects by a number of key variables and attributes certain factors to overcome factors such as uncertainty, complexity, organizational knowledge, and urgency. These factors correlate with the observations in Merrow’s analysis of executed megaprojects (Merrow 2011). In identifying the key drivers for each project, a different approach, team composition, and organizational setup is required. A good example is the difference between a repeat project rolling out an existing widget in another location to a crisis management project as a response to a natural disaster or an external threat. The sponsors, available resources, and expectations of the two projects will be very different, thus leading to very different approaches and outcomes. In general, the more complex the project, the higher the level of integration required to achieve project objectives. The lower the level of integration, the more likely that project objectives such as production attainment, budget, or schedule are not achieved.