Representatives of exploration and production (E&P) owner companies who are committed to improving the performance of their capital project systems gathered November 13-15, 2017, in Northern Virginia for the 21st meeting of the Upstream Industry Benchmarking Consortium (UIBC).
A chartered voluntary association facilitated by IPA, UIBC brings together oil and gas companies to review capital project system performance metrics and trends. Companies belonging to the UIBC are able to strengthen their project systems through capital project research and knowledge sharing. During UIBC meetings held annually, member companies find out how their project delivery systems stack up against industry average system performance outcomes for safety, cost, duration, and production performance. Companies are recognized for delivering capital projects with the best safety outcomes and the highest rankings for cost and schedule competitiveness.
Five new research studies were unveiled at UIBC 2017. A study aimed at helping Industry become more efficient in the front-end of the asset development process garnered particular attention. According to IPA researchers Toba Oyewunmi and Thomas Mead, E&P project teams are taking too long to complete pre-front-end engineering design (FEED) work. Pre-FEED work is, on average, 40 percent or more of a project’s total asset delivery cycle time. “The way to go faster is ensuring work along the critical path is actually moving projects forward,” said Neeraj Nandurdikar, director, IPA’s E&P business. He added that building strong project centric teams allows for quick decision making, which makes the asset development process smoother.
Another study that generated considerable buzz at the meeting focused on the industry’s continued difficulties at achieving project plans for production performance. The Industry’s perception that long-term production improves in the out years has been proven wrong in this study. In fact, companies are getting about half of the value they expect at the time the full investment decision is made, according to IPA researchers Shubham Galav and David Roberts. The industry’s investment decision model is not working because the information being used to justify capital investment decisions is flawed, their research found.
The other new research studies presented at UIBC 2017 examined the neglected state of E&P site and sustaining capital projects, the “lean” scoping of projects to keep project costs low, and the right leadership traits for delivering successful E&P projects. The latter study is the subject of a new IPA book by Nandurdikar and IPA President Ed Merrow that is due out in mid-year 2018.
E&P Site and Sustaining Capital Projects Sessions
For the second year in a row at this UIBC, an entire day was dedicated to E&P site and sustaining capital projects development practices and performance. These smaller E&P projects represent a larger percentage of E&P project portfolios today. Metrics and performance outcomes for site and sustaining capital projects were discussed.
Systems Not Evolving for Long-Term Success
At the event, Nandurdikar said project performance outcomes and UIBC research conclusions reached in the wake of the latest E&P industry downturn suggest that companies have become adept at “optimizing” systems to achieve short-term gains. However, to deliver capital projects more effectively over the long term, companies should reconsider their asset development work processes, decision-making processes, and project team development approach.
Merrow told UIBC attendees that now is a good time for E&P companies to assess the strength of their asset delivery systems, given that many companies have recently restructured their project organizations to reflect smaller capital project portfolios. “Owners need to assess their situation and make changes now while there is still some give in the human resources market.”
For more information about the UIBC, please contact Neeraj Nandurdikar, IPA Director, Exploration & Production.