Industry Overruns and Overspending

It is reported that 15 years ago, only 10 percent of major oil and gas projects ran over budget by more than half. By 2013, that number had nearly tripled to 28 percent.

According to a Schlumberger Business Consulting report, this budget-draining trend is expected to not only continue, but worsen; the report states, the industry’s capacity to deliver these projects is not keeping pace, and as a result, significant overruns in budgets and schedules are rising in frequency.

Among the most effective ways to mitigate these risks, is to increase the effectiveness of project controls, enabling the capture and immediate reporting of accurate data regarding cost, resourcing and schedule; allowing quicker and more efficient decision making to head off delays and overspends.

Which Projects are at Risk?

Whilst these risks and challenges can affect most elements of a project; upstream or downstream, our experience shows that some of the greatest shortfalls in adequate project controls occurs during the construction and retrofit of assets such as Floating Production Vessels (FPSOs), and Rigs. Perhaps it’s the huge man hour spend which highlights the problem. It is not uncommon for an FPSO under refurbishment or fabrication to require a daily man-hour burn of 10,000 man hours. When actual productivity is below that estimated or budgeted, enormous additional costs can flow for the parties very quickly; hold ups and inefficiencies all accumulate to cause delays to sail-away and that is a problem for the asset owner, lessee operator and the yard.

Utilising Processes and Technology to Reduce Costs and Delays

With the typical project control methods adopted by even the largest companies involved in oil and gas projects, it’s just not possible (or just not done) to produce reports fast enough to provide timely insight into project performance; systems and processes are not in place to provide early warning of the impact on cost that a change in scope or a change in schedule will create; in these situations variations, disruption and delays become the silent monster which can financially cripple a project, for some or all of the participants.

Effective cost controls not only improve profitability, but they are the key to building accurate budgets, maintaining data integrity, measuring project expenditures, gathering data in a timely and accurate fashion and reporting in a clear, routine and understandable format.

Our Methods and Processes

Our cost saving processes and systems can provide a basis for our clients engaged on these projects, to ensure they do not end up paying for unproductive time that is the responsibility of others and beyond the allowable limits of the contract. For the shipyard, those same methods and techniques help ensure that additional hours spent due to changes and interruptions which others are responsible for. For all involved parties, the extra control gives early warning and can head off further delays before they develop and enables the parties to reach a correct and fair allocation and commercial resolution of quickly growing overspends.

What our process and service involves -

• Tracking of Burnt Hours
• Allocation between various project codes and sections
• Tracking Indirect hours and identification of excesses
• Allocation of coded non-productive hours
• Attribution of responsibility for down-time
• Earned Progress Vs Expended Hours Analysis
• Correlation between lost time and reported impacts on progress
• Exception reporting – Excessive shifts, aliases and duplicates

What the service achieves -

• Visibility of data dynamically, allowing commercial control at the time
• Enables identification of Progress impact causes immediately
• Allows responsibility to be identified, attributed and demonstrated
• Enables time and cost issues to be addressed and resolved
• Avoids a snowballing of issues which become claims and disputes
• Preserves entitlement under the contract
• Preserves margins and improves the bottom line