The document discusses the challenges of achieving world-class project delivery in the energy sector. It notes that energy sector capital expenditures are expected to reach $38 trillion by 2035 but that project performance is declining, with over 50% budget overruns increasing from 10% in 1997 to 28% in 2011. The key challenges for projects are resources, technical difficulties, governance, stakeholders, supply chain, and processes. It then outlines a model for world-class capital project delivery across six elements and sixteen sub-elements. Priorities for achieving world-class performance include standardization, focus on early project definition, effective resources and team engagement, supply chain and stakeholder management, planning and risk management, and governance.
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Predicting the future - increasing success
1. When good just isn’t good enough
- Raising the bar
APM North East of Scotland
AGM 25th
June 2013
Chris Bird – Operations Director for Endeavour Energy
2. Agenda
o The challenges of achieving world class delivery
- global trends, project model and predictive analytics
Christopher Bird
Endeavour Energy
o Background on delivering world class projects
o Challenges in the market place
o Creating a world class model
o Theory into practice – research program
o Conclusions
Agenda
4. F3-FA Self installation / re-useable platform
• Largest self installing
platform in the world
• Completely new design
with gas processing to
export specification
• Several new patents
• Benchmarked top 10%
cost base
YouTube – Mega rigs oil and gas UK
5. Global outlook and the challenges ahead (1)
Energy sector capex spend 2012 – 2035 *International Energy agency
– Estimated $38 trillion to meet security of supply
Oil and gas capex sector spend 2001 – 2012 *Schlumberger Business Consulting
– 2001 estimated spend $125 billion ( 50 - $1b+ projects per year )
– 2012 estimated spend $500 billion to $600 billion ( 200 - £1b+ projects per year )
– Fourfold increase in expenditure in last 10 years
– Forward expenditure $600 billion plus per year
Oil and gas capex increases from 2011 – 2012
– Independent Oil and Gas companies + 21% ( 15% of market spend )
– National Oil and Gas companies + 15% ( 50% of market spend )
– Integrated Oil and Gas companies + 8% ( 35% of market spend )
6. Global outlook and the challenges ahead (2)
Project performance ( % of large projects overruns > 50%)
– 1997 10%
– 2005 15%
– 2011 28%
– 2015 Predicted to be even worse
– Today only 30% of projects fully meet customers’ expectations
Key Issues to consider
– Global business environment is getting more challenging
– Projects are becoming more complex
– People are becoming the bottleneck rather than access to capital
– Supply chain is stretched in many areas
– Major change in businesses increases risk of failures
7. High level trends Capital Cost Inflation
Source:WoodmacUpstreamInsightNov2012
8. Report on causes of capital project issues
Share of projects with >50% budget overruns
E&P Capex projects have significant
overruns
Trends of projects with >50% budget overruns
Key causes of capital project issues:
(relative issue weight (%) given)
Key concern areas:
•Resources
•Technical Challenges
•Governance
Key concern areas:
•Resources
•Technical Challenges
•Governance
Schlumberger Business Consulting Report
Key causes of project issues
10. UKCS – Semisubmersible Rig Rates
UK semis broken $400k barrier – back at 2008 heights
Rates risen $150k/d since mid-2011
11. Global outlook / challenges
Business context
Project key issues
Closing the gap
Execution
The Key Challenges in Project Management
Small failures in projects are due to the engineers, big failures in projects are due to the
business
External environment
Internal Environment
Action
Communication
Risk
Mgt
Performance
Mgt
Resource
Mgt
Knowledge
Mgt
Review
• People
• Tech
challenges
• Governance
• Stakeholders
• Supply chain
• Processes
• People
• Tech
challenges
• Governance
• Stakeholders
• Supply chain
• Processes
Schlumberger Business Consulting Report
Booz, Allen and Hamilton Report
12. Project Definition 1
Kick –off
Framing
Alignment
FID decision
Clear definition
Adding value 6
Innovation / novel
solutions 4
Engineering
excellence 5
Learning
organisation 6
Controls
Preparation /Planning 7
Risk management 8
Interface management
9
Performance
management 10
Contractor
management 11
Organisation 2
Leadership 3
People
Accountability 3
Incentives
Capability across
the business
Governance 12
Key standards 13
Benchmarking 14
Independent
assurance 15
Clear framework
Outcomes 16
Cost / Time
Quality / Value
Expectations met
Reputation
HSE
World class capital project delivery model
To achieve world class
project performance,
excellence must be
achieved in each of the six
elements and 16 sub
elements
Fits with APM BoK
Fits with BS 6079
• Reduce base line estimate
• Reduce standard deviation
• Meet customer expectations
• Achieve operational excellence
• Externally benchmarked
• Minimise regret costs
• Maintain our reputation
13. Future priorities for World class performance
• A shared and systematic way of developing and
delivering projects.
• WP1 Standardisation / Eng. excellence
• Relentless focus at the development phase (pre-
FID)
• WP2 Definition phase
• A fully capable team engaged at the right time
• WP3 Organisation / resources
• Effective contractor, supplier and stakeholder
management
• WP4 Supply chain / partnerships
• Robust planning and risk management
• WP5 Planning and risk
• Benchmarking, reporting and assurance
• WP6 Governance / assurance
• A shared and systematic way of developing and
delivering projects.
• WP1 Standardisation / Eng. excellence
• Relentless focus at the development phase (pre-
FID)
• WP2 Definition phase
• A fully capable team engaged at the right time
• WP3 Organisation / resources
• Effective contractor, supplier and stakeholder
management
• WP4 Supply chain / partnerships
• Robust planning and risk management
• WP5 Planning and risk
• Benchmarking, reporting and assurance
• WP6 Governance / assurance
• Cost & time
• Quality & value
• Operability
• Expectations met
• Reputation
• Health, safety and environment
• Cost & time
• Quality & value
• Operability
• Expectations met
• Reputation
• Health, safety and environment
6 key priorities
“Excellence in each of these areas will enable delivery in world class
performance”
Outcomes
14. Team competency, capability and capacity
Competency assessment completed on 70
professionals with results validated
externally.
No significant inconsistency between level
of individual and role requirement.
Whilst development areas for Upstream
and Renewables differ, broad areas for
improvement are:
Technical
– Marketing and sales, handover and close out, value
management tools, EVM, value engineering
Contextual
– Governance, Sponsorship,
Behavioural
– Communication, Conflict management, Project
Leadership
Development plan being established.14
Upstream Renewables
Level A 3 1
Level B 7 4
Level C 12 11
Level D 15 12
Level E 5 0
Total 42 28
Output from Competency Assessment
15. Contractor and Supplier Management
Linepipe
Umbilicals
Pipelay, IRM
etc
Subsea
Engineering
Valves
Controls
Systems
key
Personnel
Managing
contractor
Trees
Wells
Supply Chain strategy
Focus on contractor management
Focus on relationship management
Focus on performance
Key Criteria
1. Beat the market
2. Commitment at top level
3. Relationships top to bottom
4. Trust both ways
5. Understanding of the business
Assist
Advice
Anticipation
16. Researching predictive analytics to improve future project success
Short term actions
Consultancy
Knowledge Transfer Partnerships (1-3 years): collaboration between a
university, industrial partners and a graduate working on a company
project
Long-term project plan
Commissioned Research
– Research projects
– Doctoral Research (EngD or PhD)
Engineering and Physical Sciences Research Council (EPSRC) responsive
mode or knowledge transfer proposals (priority needs to be raised)
Funds from Department of Energy and Climate Change or TSB (need to be
lobbied for)
Engage industrial partners
Research plan - way forward
17. P3L energy – Portfolio, program and project leadership
1.Benchmarking – WP6
2.Development, training and competency – WP3
3.Supply chain strategy and management – WP4
4.Knowledge management and data storage – WP2
5.Organisation development – WP3
6.Project Governance and verification – WP2 / WP6
7.Project management resources – WP3
8.IT/IS/IM development and support services – WP1
9.Research and development – best practices and new methods WP1 -6
Project Management partnership model
18. Conclusions
1. The business environment to get projects delivered within customers’ expectations is
going to become more challenging – we need a new approach
2. With 30% of large projects overrunning by over 50% and over 70% of all projects failing
to meet customers’ expectations we do need to take another look at how we deliver
capital projects in the wider sense, considering how we manage the business as well as
the project – Integrating with the business
3. The biggest issue is access to the right level of resources with the right competency,
capability and capacity to deliver effectively – Being an attractive employer
4. We need to look at potential future trends and ensure that we have the best strategy for
the supply chain from a contractor management and relationship management
perspective – Being an attractive buyer
5. Where it really counts is how we work together harnessing the power of teams to deliver
both pioneering spirit and high performance in the development phase