Field/project development

Low Prices Trigger Much-Needed Change Through a Holistic Approach

A reason why projects are not completed on time is the disconnect between operators and contractors. An integrated asset approach tackles complex offshore jobs by being holistic and full field in nature and encompassing the planning, building, and operating phases of a project.

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Change in the oil and gas industry often comes slowly. However, as months of low oil prices turn into years, it is necessary now. Oil producers have taken to cutting billions of dollars in expenditure, which has forced providers and contractors to slash rates and delay and even cancel projects.

The upstream industry in particular needs to fundamentally transform the way it works to survive and thrive. While cost-cutting can be an effective plan in the short term, the industry needs to take a longer-term focus and change the fundamentals of the way it operates. To compound matters, the days of triple-digit oil prices appear well and truly over, with the World Bank estimating that a barrel of oil will only rise to USD 60 by 2020.

Regardless of the oil price, the sector needs to rethink established ways of working in order to better handle increasingly complex projects. The high crude price in recent years helped the industry gloss over inefficiencies and enjoy success in the short term. But the recent slump has fully exposed shortcomings, and shone a spotlight on the fact that the offshore industry was on an unsustainable path and in need of guidance to standardize processes to lead the industry through a turbulent time.

Taking a Holistic Approach

A reason why projects are not completed on time and on budget is the disconnect between operators and contractors. A recent report from Ernst & Young on oil and gas megaprojects showed that 21% of project failures came down to management processes and contracting and procurement strategies; 65% were due to people, organization, and governance; and 14% of failures were due to external factors such as government intervention and environment-related mandates.

The existing model of contracting is piecemeal with specialist designers, contractors, and projects managers coming on board one at a time, with no one group bringing the whole project together at the front end to deliver efficiencies and control that should be standard in the offshore sector.

Oil companies and contractors, therefore, need to work together better to understand the drivers and develop the best blueprint to take the project forward into execution with a common purpose. The benefits of a holistic approach mean that all aspects of a project are taken into consideration from the beginning to ensure that it can be delivered on time, on budget, and with certainty.

An offshore project is only as strong as its weakest link and developments today contain significant complexity owing to competing technical, commercial, and risk requirements. This means that altering one small variable can have a ripple effect on an entire operation. Failure to create robust and balanced synergies across a project can result in unintended consequences and uncertainty.

Understanding these components and developing a process for option evaluation and selection is integral to creating maximum return on investment for an offshore project. An integrated asset approach specifically tackles complex offshore jobs by being holistic and full field in nature and encompassing the planning, building, and operating phases of a project. The approach uses rapid comparison of concept options to form a deep understanding of different project variables and their interdependencies. This allows a focus on areas that have a genuinely significant impact on project commerciality.

Technology To Form the Future

As well as needing new ways of approaching projects, the industry knows that advancing technology can hold the key to enhancing recovery of remaining reserves in this environment. But producing new tools, technologies, and equipment and changing the industry’s way of doing things can prove challenging. Big data is being touted as one of the secrets to the future of oil and gas, as it allows the uncovering of invisible patterns and ­connections by linking ­disparate data sets. As such, there is the potential for operators to find ­efficiencies and improve the ­performance of components throughout their operations. Big data can also be used for sophisticated reservoir monitoring, allowing companies to optimize field depletion planning and maximize return on investment. As more cloud-based systems come online, management tools and remote working practices will become more common, leading to safety improvements and cost reductions.

The status quo is failing too often and new thinking is needed to deliver fresh engineering solutions for the next generation of offshore fields. One of the best things the industry can do when looking to embark on new projects is to start with the end in mind. This type of thinking is going to prove invaluable to the industry and will ensure that projects have built-in contingency plans, guaranteeing that time and money are not spent in vain.

Though the price downturn has cast a shadow over the industry, it has also created an opportunity to change standard ways of working as well as taking advantage of the improvements in technology such as big data can provide. The industry needs consultancies that can manage the intricacies of each part of a project by blending the right people with broad experience and domain expertise and deep commercial knowledge. Having access to industry and specialist expertise with end-to-end systems thinking and organizational insight will make significant efficiency savings and instill confidence at an uncertain time for the offshore oil and gas industry.

Dan Jackson is chief executive officer (CEO) of io oil & gas consulting, a consultancy backed by GE Oil & Gas and McDermott that combines industry expertise to deliver greater certainty into the design and planning of upstream oil and gas developments. Previously, he was senior director of global subsea engineering for McDermott and CEO of DeepSea Engineering. Jacksons holds a BSc degree in mechanical engineering, an MSc in ocean engineering, and an MBA from Cranfield University.